"Leadership is the capacity to translate vision into reality."
Warren Bennis, Author, On Becoming a Leader
When it comes to sales negotiations, all too often sellers:
- Don't plan for successful negotiated outcomes
- Let the buyer define the negotiation process and venue
- Allow the buyer to set the agenda for negotiation-focused meetings
- Allow the buyer to open meetings, set the tone, and facilitate
- Let the buyer go first with defining price ranges for goods and services
- Leave it to the buyer to close negotiations and set next steps
Sellers are too often reactive to buyers during negotiations when they should be the opposite. They should be proactive.
Sellers need to lead the negotiation.
Now, don't take this to mean that sellers should be overbearing and do all the talking. That's not what leaders do. They do, however translate a vision (which, in most cases for sellers, is winning an opportunity at favorable terms) into reality.
Essential Rule of Sales Negotiation #3: Lead the Negotiation
Set the agenda. Go first. Don't let the other party take control.
Leadership requires planning. Proper planning allows you to answer critical questions that will guide the negotiation.
Think of it like this: if the buyer plans and you don't, who is likely to have a better outcome? If the buyer plans and you don't, can you even lead?
Planning is essential to changing your negotiation disposition from reactive to proactive, taking charge of the negotiation process from start to finish, designing what the dance should look like when it's done, and architecting how it will open, evolve, and close. To lead the negotiation, sellers must be the choreographer of the show.
The Negotiation Process
There are 4 stages to any negotiation:
Planning, as we've already noted, is essential in the cascade. If you don't prepare, you may open the negotiation, but you won't know what you want! Or what the buyer wants. Or what challenges and obstacles you might face. You won't know what tone you want to set or how to set it. You'll be winging it, not able to set a purposeful agenda for negotiation success.
Not only must the seller be the choreographer of the show, they must also be the conductor of the band.
Let's assume you are negotiating in a meeting. You've made your plan and you know what you want for outcomes. You know who is at the meeting and their objectives, desires, challenges, skepticisms, requirements, and so forth. You also know the buyer's buying process.
Before the meeting, set the agenda via email. For example, you might say something like:
Jim and Amy,
Looking forward to our discussion on the 14th. It seems to us that the current status is that we've agreed on the overall solution set that will best help you enter the Asia Pacific market. Still on the table for discussion is:
- The timing of pilots and roll out
- The success milestones we need to achieve to move from pilot to roll out
- The team on your side and our side for implementation, including specific roles and responsibilities
- Whether or not we should lead the engagement with our staff, or if we should in part or in whole license and train your team to execute
- Agreement terms
Assuming this is the case, we'd like to suggest the following meeting agenda:
- Meeting kickoff, including review of agenda and confirmation of expectations (5 minutes)
- Discussion and review of your objectives (5 minutes)
- Facilitated discussion of options and possibilities, including implications of each (30 mins)
- Discussion of best path forward (10 mins)
- Open discussion and wrap (10 mins)
Please let us know if this makes sense or if you'd like to suggest any additions, deletions, or changes to the discussion.
- Name -
Set the agenda and you can focus on getting the best outcome. Don't set the agenda and there may not be one. Or perhaps if you leave setting the agenda to the buyer, they may want to talk immediately about price and concessions they'd like you to make. If they do, you'll need to back up and reframe the discussion, which isn't a good place to start.
Engaging the buyer means taking the lead and setting the tone. It means collaborating with confidence and maintaining a peer-to-peer dynamic. It also means opening the discussion yourself whenever possible.
For example, let's say it is time to talk about pricing. Common advice for sellers is to ask buyers for a budget, or to let the buyers go first with setting a price range for what they plan to spend on your offerings.
This isn't typically good advice.
Most often sellers can feel their stomach drop when a buyer first mentions a budget. It's rarely enough, leaving the seller to backtrack and explain why, if the buyer wants to achieve their desired objectives, it will need to be higher.
The power of first offers is in the anchor effect.
Anchoring is an irrational part of human decision making, what's called a cognitive bias (as are loss aversion and the sunk cost fallacy.) When making a decision, people strongly favor the first piece of information they see. Every evaluation afterwards is based on this information and it anchors how far their final decision can go.
Again, this isn't rational at all: to demonstrate the completely arbitrary nature of anchors, behavioral economist Dan Ariely asked people to write down the last two digits of their social security number.2
Then, he asked them to consider whether they would pay this amount for items—wine, chocolate, or computer equipment—of unknown value. Afterwards, participants bid for the items. Those with higher social security numbers submit bids that were 60-120% higher than those with lower numbers.
Like social security digits in the study, first offers in negotiations act as anchors. Whoever makes the first offer, whether seller or buyer, obtains a better outcome.
When to Ask for a Budget
You shouldn't always go first. There are situations where you might ask for a budget before making an offer, such as when you know they buy similar products/services and you're trying to displace a competitor. And there are ways to counteract the effects of a first offer, such as deliberately focusing on information inconsistent with the initial offer.
When it comes to facilitating, this is where you open the door as much as possible to collaborating. Collaboration, as we know from Essential Rule of Sales Negotiation #2: Build Value, deepens relationships and trust while creating a sense of psychological ownership in the buyer.
If you leave it to the buyer or anyone else to facilitate, they may engage in unhelpful tit-for-tat zero-sum bargaining or arguing about positions on pricing and terms. Facilitate the discussion to avoid getting derailed.
Like leading in general, facilitating doesn't mean doing all the talking. It's about guiding the discussion down the right paths. In fact, it's often better to talk less. Ask the right questions and you can guide the discussion properly while, at the same time, allowing buyers to feel connected and engaged. When they come up with ideas that are fruitful, you can allow them to own those ideas, showing them you think the ideas are productive and helpful. Then they will also feel respected and valued.
Discussions without a leader often run out of time. By taking control of the agenda and the meeting, you can make sure this doesn't happen. For example, you might say something like:
"Looking at the clock, we have 20 minutes left. It seems we are feeling good about points A, B, and C, but we still really need to address D. I'd suggest we do that, assuming you all agree this is where we are. Does anybody see anything else we need to address in order to be able to have the right data to make a decision to go forward or not?"
Don't do this, don't take the reins, and the meeting (and sometimes your opportunity) will not end with the right outcomes.
Finally, when it comes to commitment, it's up to you to close the discussion when it's time. We've seen too many sales where a verbal "yes" turns into a "no" over time because the agreement wasn't buttoned up, or it wasn't buttoned up fast enough.
To the first point, there's quite a bit of research on how to make sure the commitment that you gain is durable. For example, influence researcher Robert Cialdini found that commitments that are verbal, written, and public are much more likely to be kept than those that are verbal or verbal and written only. At the end of negotiations, sellers should get verbal agreement. Listen and confirm that buyers are ready to move forward.
Then the seller should summarize what they agreed to, and let buyers know they will write it up immediately and send to the buyer for confirmation which they'd appreciate a "yes" reply to make sure they didn't miss anything. And then, as possible, get the buyer to announce internally they are moving forward, even if a contract has not yet been signed.
Selling is a vision. You know what you're trying to achieve, and you work hard to achieve it. Sellers that lead the negotiation put themselves in the best position to turn their vision into reality.
Learn about the other Essential Rules of Sales Negotiation:
- Essential Rule of Sales Negotiation #1: Always be Willing to Walk
- Essential Rule of Sales Negotiation #2: Build Value
- Essential Rule of Sales Negotiation #4: Effect Emotions
- Essential Rule of Sales Negotiation #5: Trade, Don't Cave
- Essential Rule of Sales Negotiation #6: Plan to Win
1 First Offers as Anchors. The role of perspective-taking and negotiator focus. Galinsky and Mussweiler (2001) Journal of Personality and Social Psychology, 81, 657-669. http://psycnet.apa.org/index.cfm?fa=buy.optionToBuy&id=2001-18605-008
2 "Coherent Arbitrariness": Stable Demand Curves Without Stable Preferences. Ariely, Loewenstein, and Prelec. The Quarterly Journal of Economics, Volume 118, Issue 1, 1 February 2003, Pages 73–106, https://doi.org/10.1162/00335530360535153