You've been working on a sale for 4 months and everything's going great. Your potential customer, the decision maker, is talking as if the deal is done. But before final sign off, you must meet with the CFO.
You get to the meeting.
The CFO is icy.
She opens by saying, "I have a hard stop in 45 minutes, and the only issue I have with the project is the price. I’m prepared to sign off on it, but things have been tough and I am going to need you to drop your fees by 15%. If you can do that, the deal is done."
Sellers who aren't prepared for this situation lose sales. Or maybe they win them, but they only do so after dropping their prices and cutting their margins.
Anyone who's been around in the world of sales has heard of win-win negotiation. The idea is to work collaboratively to develop creative solutions that expand the pie and create success on both sides. Some people go as far to say that win-win is the only approach you need to know for success.
Others take the opposite approach, saying they love negotiating with win-win negotiators because they can clobber them handily.
So who's right?
They both are.
And they're both wrong.
Defining Sales Negotiation
We define sales negotiation as: The process of parties working together to achieve the best possible agreement.
Note the definition does not say "reaching agreement." If you think about negotiation as reaching agreement, you'll put yourself at a disadvantage from the beginning. If someone has no choice—they must come to an agreement—they have no leverage and will likely be taken advantage of in a negotiation.
The fact is you always have alternatives.
As a seller, that means either coming to an agreement or not making the sale and moving on to the next opportunity. Taking this mindset is not only empowering, it builds confidence.
Also notice the definition does not include, "best possible mutual agreement."
It's best possible agreement.
The concepts of "best possible mutual agreement" and "win-win" are mindsets that you should take, but you need a win-win-focused dance partner to do it. If the other party is trying to take advantage, it might not be time to lay your cards down, share information freely, and trust they won't take you to the cleaners.
If you are working with someone who you believe has your best interests in mind, and is also working towards the best possible mutual agreement, then you can—and should—work with them under the "mutual" umbrella.
With our definition, you set yourself up for success by taking the right mindset at the right time, and applying the right approaches to achieve the best possible agreement.
2 Sales Negotiation Approaches
There are 2 fundamental approaches people take in negotiations:
- Partner (also known as integrative, interest-based, or win-win): This is when parties work collaboratively to maximize value. The thinking is, "let's not distribute the pie, let's expand it."
- Positional (also known as disruptive): This is when parties assume there is a fixed pie to split, and the focus is on splitting it. The thinking is, "get as much of the pie as possible."
Most of the writing and thinking about negotiation in the past several decades has been about win-win negotiation. In fact, many books and pundits tell negotiators to drop all thoughts of positional negotiation because it hurts the end outcome and to focus at all times on win-win.
Win-win negotiations are akin to collaborative problem solving. Both parties are freer when sharing information on objectives, limitations or requirements, idea generation for how to reach objectives, and so on. This works when both parties trust each other. But the reality is some buyers are looking to maximize their knowledge of the seller—what they want, and what they can and can't do—at the seller's expense.
In our experience, the best approach is to gear negotiations to the win-win approach, expanding the pie as you can, but when someone is trying to take advantage of you, shift your approach and protect your interests on the way to a solution.
Going back to our scenario at the beginning of the article: what's a seller to do? It’s likely the CFO is hoping the seller believes exclusively in win-win negotiation because she can play hardball and get the seller to drop the price. In this case, the seller must know how to dance the hardball dance in order to protect their interests and succeed.
The fact of the matter is that most negotiations have a mix of win-win and positional strategies. Being able to identify which approach is being used and knowing how to respond to both situations will set you up for negotiation success.
Find out if you have what it takes to negotiate a winning deal. Test out your negotiation skills by playing a sample of our RAIN Sales Negotiation Simulation. You’ll receive specific feedback on the choices you make as well as how your choices affected the overall outcome of the negotiation.