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The Winning Business Academy®

7 Steps to Successful Negotiation

 The Winning Business Academy®
7 Steps to Successful Negotiation

7 Steps to Successful Negotiation

Negotiation is an essential skill in getting more from your relationships with customers and suppliers.
Good sales negotiation skills might add 5 to 10% to your sales revenues. Good buying negotiation
might save 5 to 10% from bought-in products and services. All of these add directly to your bottom line.

Despite its vital importance, Cranfield University’s research has shown that negotiation is one area in
which UK’s sales people are weak.

The most important aspect of negotiation is your (and your counterpart’s) position. The way that the
negotiation is approached and the timing are a bigger influence on success than anything else.

Four major tips

Tip 1 - Have an alternative so that you can walk away.
You can’t afford to be desperate for the sale or purchase; you need to have freedom of choice. If
selling this means many alternative prospects and customers that you can sell to. If buying many
alternative suppliers.

When in the middle of negotiating you must know your BATNA (Best Alternative To a Negotiated
Agreement).

Successful negotiations invariable lead to everyone winning and the potential for a long-term
relationship. The lack of understanding of your and your counterpart’s positions (and, ultimately,
BATNA) leads to win / lose negotiations and the destruction of a relationship.

Tip 2 - Start negotiating when you start to get commitment

Many buyers will try to negotiate before they have given any commitment and this puts the seller in a
weak position. By “commitment” we mean an agreement in principle to do business. The negotiation is
“If we can agree details will you go ahead?” element of the relationship.

Tip 3 - Summarise regularly and frequently

It’s advisable to summarise and confirm understanding all the way through the process. Getting the
positive agreement throughout the process is also extremely important psychologically and in building
trust and commitment. You are both thinking like winners and, hopefully, by the end you won’t be
disappointed.

Tip 4 - Use silences

Silence is really important as it puts the impetus onto your counterpart. Your counterpart will want to fill
the gap and talk. During the bargaining stage they often react with another concession. It has to be
used wisely, used in excess can be seen as a trick.

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 The Winning Business Academy®
7 Steps to Successful Negotiation

7 Steps to Successful Negotiation

The process of negotiation can be broken down into 7 steps.

PREPARATION is everything. You can’t “wing” negotiations. You need to know your counterparts,
their needs, issues and attitudes, so that you can tailor your responses. So, the first 3 steps all refer to
the most important part of negotiation – BEFORE YOU MEET FACE-TO-FACE.

PREPARATION FACE-TO-FACE
1 Identify the problem 3 Get to know each other
2 Information & objectives 4 Question & listen
5 Propose
6 Bargain & trade
7 Summarise, close & agree

Stage 1 – Preparation
Successful negotiation doesn’t result from luck, or even good sales skills, but from implementation of a
well thought-out plan.

The Negotiation Team

Negotiating as a team isn’t just a free-for-all. There are 4 different roles, which will be combined in
smaller groups:

2 Negotiators. Negotiators take the active role. Usually one is responsible for technical aspects and
the other has a commercial role. Each listens whilst the other speaks (on the basis that few of us can
speak and deeply listen at the same time).

Chair. The chair of the team manages the negotiation and directs questions at the appropriate team
member. It’s important that the chair doesn’t get involved in tactical negotiation so that they can focus
on the strategy and achieving key objectives. The chair doesn’t need to be the most senior person.

Observer. The observer watches, listens and records. They shouldn’t speak. Their role is to spot
buying signals and the behaviour of the other team.

Step 1 - Identify the problem

For the seller’s point of view, before you can begin to develop any proposal you need to have a deep
understanding of your negotiating counterpart’s real problems, especially those problems that you and
your company can solve.

It is important too for the buyer to have a full understanding of particular problems that ideally need to
be addressed by the seller’s proposal.

Research, surveys, asking similar customers, detailed specifications and prior meetings will all give
indications of the true problems sellers need to address. The easiest way though is to ask the buyer –
frequently they will answer!

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7 Steps to Successful Negotiation

To fully appreciate the buyer’s problem, the seller needs to see things from your counterpart’s point of
view. This doesn’t mean that you totally surrender. Any fool can do that. By LIVING IN YOUR
CUSTOMER’S WORLD you have a significant advantage in negotiation – you know what they are
thinking – you know how they’ll react - and you can take advantage.

What are the market trends that affect your customer? What politics and corporate constraints are they
subject to? How do they make decisions? What is their formal role? What is their attitude to change?
LIVING IN YOUR CUSTOMER’S WORLD takes significant research.

We all have experiences of bad negotiation. Where do negotiators go wrong? Very often it’s because
they are not seen as adding value, not the experts or specialists. Often, they are motivated purely by
getting the sale and not understanding what the customer wants. It’s the IMPACT you, your company
and your proposals make that gets you business.

Step 2 - Information & objectives

Information & balance of power Where the balance of power lies:
 Evidence
You also should research thoroughly to understand as much  Competitive edge
as possible about your counterpart’s goals and objectives.
 Competence
It is also important to analyse the relative strengths and  Commitment
weaknesses of you and your counterparts. Who carries the  Risk-taking
balance of power? Ideally, for a WIN- WIN agreement power  Time
should be evenly balanced, with neither side having a  Money
particular advantage.

A customer will only buy if the value to them is higher than the cost. What can you offer to address the
other person’s needs and how valuable are these to your customer / counterpart? Identify concessions
& their value. These might include price, costs, design & service etc. Which of these are essential,
which just attractive, and which completely unimportant. Don’t underestimate the VALUE of your
concessions and variables. The best variables are those that are UNIMPORTANT TO YOU and are
VERY IMPORTANT TO YOUR CUSTOMER.

Negotiation isn’t just about price and discounts. Everything related to the deal has a cost to you and
your organisation and can be part of the bargain. Negotiation is about level & experience of people
used, working conditions, expenses, materials, specification, colour, size, consumables, contract length,
penalties, get-out clauses, delivery dates, stock-holding, re-order schedules, after-sales support,
technical support, training, call-out costs, parts, payment type, payment dates & schedules, payment
terms.

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7 Steps to Successful Negotiation

Importance Importance Let’s look at an example:

Variable
to customer to you
Price High High When we come to the bargaining & trade step it is
Payment terms High Medium important that there is a “give and take” mentality
Shipment size High Low from both parties. Each party should give things
Colour Low Low that are important to the other party but
unimportant to you.
Order size Low High

In the example above the seller should aim to trade shipment size or payment terms for concessions on
order size.

Price and product performance are both important to both parties. Trading in these areas will be very
difficult and should not be considered early in the negotiation, as it’s likely to lead to conflict.

Limits & Ideal Positions

The key aim in your preparation is to
understand positioning and the
“bargaining arena”.

The diagram opposite explains the

bargaining arena.

The seller has their ideal position –

best price, least cost, easiest to satisfy
customer’s problems and needs etc.

The buyer, too has their ideal position – least cost, satisfying most needs, easiest to implement etc.

Both of you have your limits, the point where it becomes impracticable to go ahead or impossible to
reach agreement. These are your respective BATNAs, the points beyond which you must not go. Is
your BATNA a particular size of discount, the addition of too many extra “free” services, a delivery
speeded up so it affects other customers, or something else?

Both of you too have your ideal positions - positions that you would wish to have in an ideal negotiation.

Objectives
1. What would you like to achieve from the negotiation. List each ISSUE.
2. How important is it to you? (High Medium Low)
3. How important is it to your counterpart? (High Medium Low)
4. Write your minimum acceptable position (LIMIT) against each ISSUE – this gives you things
that you MUST ACHIEVE and MUST AVOID. The LIMIT LIST should contain only those
positions that would cause the negotiation to fail if they are not achieved.
5. Create an IDEAL LIST of positions that you would wish to have in an ideal negotiation

Remember you are preparing for negotiating (WIN-WIN), not defending your position.

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7 Steps to Successful Negotiation

Information & objectives Template

Your ideal position
Your limit
your counterpart?
How important to

(HML)
How important
to you? (HML)
Issue

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7 Steps to Successful Negotiation

Stage 2 – Face-to-face
As we reach the point when you meet it is important to understand the place of price in your
negotiations. Don’t start any negotiation with price discussions. You must put off price discussions until
the prospect fully understands your offering and the IMPACT that it brings for them.

Even more vital, don’t start with discounted prices, start from the most sensible and optimum levels.

Step 3 - Get to know each other – Building & Maintaining Rapport

The process moves more smoothly when the parties take a little time to become acquainted. The aim is
create a certain level of comfort and acceptance by keeping initial interactions friendly and relaxed, yet
businesslike. You are beginning “on the same wavelength”, creating and building RAPPORT.

The best communicate to their customers in the way the customers naturally want to communicate –
RAPPORT. This is the basis of all good communication. It’s relevant to everyone who has contact with
a customer or potential customer. It’s relevant to everyone from the receptionist, through service
providers and not just sales people.

Some behaviours build rapport and some destroy it:

3 Good Builders 3 Bad Destroyers

 Summarising & checking understanding  Annoying phrases
 Seeking information  Defending your position
 Sharing your feelings  Immediate Counter proposal

Builders

Summarising & checking understanding. A great technique is for seller and buyer alike is to
SUMMARISE regularly. This really progresses the negotiation because each of you fully appreciates
the other party’s understanding of the issues and the problem. Misunderstandings can be catastrophic,
not just for commercial reasons of the deal, but they inevitably erode the rapport and trust that you
developed early on.

Many people think that misunderstandings affect the seller most of all, but the impact of “accidently
avoiding a good deal” is just as important to the buyer. They’ll have to spend time looking elsewhere for
another (possibly inferior) supplier.

Seeking information. By seeking information the obligation is on your counterpart to talk. You can
understand the other party’s position, and, usually increase your control over the negotiation process.
Step 2 goes into this is more depth.

Sharing your feelings. If things don’t seem to be going right try speaking out about how you feel. “I
think you might have misunderstood…” It helps calm the situation.

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7 Steps to Successful Negotiation

Destroyers

Annoying phrases. Your choice of words is really important in developing rapport. Please don’t use
phrases like “with respect”.

Defending your position. Flexibility is the key to good negotiation, always bearing in mind that you
should trade rather than give way concessions / variables.

Immediate counter proposal. The essential word here is “immediate”. Counter proposals are good,
but only when you have had time to consider the implications. Immediate counter proposals are
inevitable viewed as a rejection and break the rapport.

Through any negotiation it is important to recognise that 93% of our communication is non-verbal (55%
body language and 38% is via our tone of voice) and only 7% through the words we use.

Step 4 - Question & listen

If you are selling you should aim to get the other person’s full “shopping list” before you start to
negotiate. Incidentally, buyers love to do the opposite, because it means they can pick up concessions
by stealth one-by-one until you’ve exhausted everything you can offer – it’s what they are trained to do!

You need an understanding of the variables that might be important to your counterpart from a business
point of view. What do they value in the material sense? Also their personal, political and procedural
requirements are important. When you negotiating with someone in an organisation they are staking
their personal reputation and a full understanding of needs and concerns is vital.

This early part of the negotiation is to establish both parties’ goals and objectives. It’s important to get
this done early to ensure that all implications, costs and positions are considered.

The Question & Listen step is an opportunity to:

 Exchange information and objectives

 Discuss the “problem”
 Review the issues, assumptions, motives, priorities and interests
 Influence, persuade, inform and set expectations

During this step be constructive. It’s really valuable to listen carefully and avoid interruptions, so that
rapport is maintained. Unfortunately it is too easy to slip into a confrontational position – if this happens
a satisfactory agreement is less likely.

Take the approach that you are addressing the PROBLEM together. The seller’s value and trust is
particularly enhanced by this technique, as you will inevitably work together to a mutually agreeable
outcome.

Clearly, questioning and listening skills are key to this step.  Ask direct questions
 Shut up
 Listen to the answer

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7 Steps to Successful Negotiation

Great questions for you to ask yourself at this stage

 What are our and their issues, assumptions, motives, priorities and interests?
 Why are those important or unimportant?
 Why won’t they tell us their issues, assumptions, motives, priorities and interests?
 What are our and their strengths and weaknesses?
 What are the consequences of not coming to an agreement for them and us?
 What are the time constraints?
 What pressures are they under politically and corporately?
 Why do they need that specific information?
 Why won’t they give us the information we’ve requested?
 What’s the problem here?
 Why are they behaving like this?
 What have I missed?

Rambling

Obviously it’s rude to interrupt the other person. It is tempting, though, when they are rambling. It’s
important you don’t interrupt – you might miss something or upset them. It is also intrusive (and not to
your advantage) if you interrupt them whilst they are thinking or writing.

Whilst this is important at the questioning and listening step, it’s essential at the stage where you are
discussing your proposal.

The seller needs to remember to DISCUSS NOT SELL. High pressure selling doesn’t work as well as
good friendly negotiation.

Step 5 - Propose
Don’t forget that you can’t negotiate on arguments, principles and opinions, only proposals.

Presenting a proposal

Open with a realistic proposal:

 Is it supported by facts?
 Does it address the problem and all the issues?
 Is it at the other party’s LIMIT? This is very important. If it’s far above the limit you stand a
real chance of rejection. If it’s below the limit you are missing profit.
 Does it include EVERYTHING from your INTEND LIST and MUST LIST
The ideal presentation process is:
PROPOSE – EXPLAIN – SUMMARISE – INVITE A RESPONSE

Your initial proposal should be firm. If they accept it the deal is done.

Any query from the other party should be met with a positive attitude, not with a grumble. If you have to
modify your position during bargaining you can be tentative with questions like:

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7 Steps to Successful Negotiation

“What if we were to agree to do this…?”

After you have presented your proposal but before you start the bargaining & trading step you need to
be certain that there is a good chance of you reaching an acceptable deal.

Receiving a proposal

Interrupt the proposal only if your deliberate tactic is to disturb the seller’s flow and make them lose their
discipline. Otherwise it’s best not to interrupt if you want to achieve a win-win agreement.

The ideal receipt process is:

QUESTION – CLARIFY - SUMMARISE

As the buyer the main questions to ask yourself are:

 Does the proposal include EVERYTHING from your INTEND LIST and MUST LIST? If not
what are you willing bargain around?
 What do you need to agree for the proposal to be acceptable?
 If it isn’t acceptable what is your counter proposal?

Possible responses to the proposal include:

NO The other party has to do something or the negotiation

stalls

YES You might be missing an opportunity to add something from

your WISH LIST

ADJOURN Gives thinking time and allows you to involve others.

DETAILED RESPONSE Gives the other party a great opportunity to repackage their
proposal into something that is more acceptable to both of
you.

CONSIDERED COUNTER-PROPOSAL Possibly the best solution, but only after you have had time
to think through the other party’s proposal and consider the
implications of what you are counter-proposing.

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7 Steps to Successful Negotiation

Step 6 – Bargain, trade & silence

It’s easy to bargain on the basis of discounts. It’s what most of us think of as negotiation, but it can be
dangerous. Look at the following table:

Current Profit %
Reduction

10 15 20 25 30 35 40 50
%Price

Percentage that sales must increase to

maintain total profit
2.0 25 15 11 9 7 6 5 4
3.0 43 25 18 14 11 9 8 6
4.0 67 36 25 19 15 13 11 9
5.0 100 50 33 25 20 17 14 11
10.0 200 100 67 50 40 33 25
15.0 300 150 100 75 60 43

These are straightforward calculations, but you’re running your business on profit not sales and
therefore trading variables is the only way for sustainability.

The best way to approach bargaining is to take a COOPERATIVE APPROACH rather than conflict.
Cooperation is the big difference between negotiation and mere selling and is the difference between
successful and failed deals.

Non-cooperative SELLING Cooperative NEGOTIATING

 Wins orders over the short-term  Builds relationships over the long-term
 Makes you money  Makes you and the customer money
 Breeds suspicion  Builds trust
 WIN-LOSE  WIN-WIN

This is the step where you use the variables you prepared for in step 3. Always remember to TRADE
concessions and DON’T GIVE THEM AWAY. This is purely about discipline and control only if you
have adequately prepared for the negotiation. The best principle for both parties is GIVE-TO-GET.

Always look to value your concessions in the other party’s terms as well as your costs. Trade high
value to them / low cost to you variables first. This principle applies to sellers and buyers both.
Remember it’s PERCEIVED VALUE that is more important in negotiation that the REAL VALUE or
COST.

If you are selling keep the whole package in your mind during bargaining. Otherwise your offer will be
eroded bit-by-bit.

If you are buyer also keep the whole package in your mind. As a buyer though your tactic should be to
try to nibble at the package in small chunks, getting a concession each time. Try to get the seller to
lose their discipline.

For both parties assess the effect of a particular traded concession on the total package and explain
how the consequences to the other party.

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7 Steps to Successful Negotiation

At this stage don’t interrupt them when they are speaking, writing or reading your proposal. This is a
vital step and any interruption can easily distract them from make a favourable decision your way.

Great questions for you to ask yourself at this stage

 Why are they being so difficult? Or conversely…

 Why is this so easy?
 Why is our proposal unacceptable?
 Why is it taking so long?
 Should I agree to that or not?

The most important question might be “What are the alternatives?”

DO SAY…
 “Why is that important to you?”
 “Is there anything more that you feel I should know?”
 “Which aspects of the proposal are you unhappy with?” Then… “What if I could do this?”
 “What do I need to do to get a better deal?”
 If you give me Y then I will give you X”
DON’T SAY…
 “Are you listening to me or what?”
 “You must think I was born yesterday?”
 “Is that your final offer? What discount will you give me?”
 “If I give you X will you give me Y?” - “If you give me Y then I will give you X” is much more
powerful than “If I give you X will you give me Y?” because it makes a statement and sets up a
trade-off better.

Silence is really important as it puts the impetus onto your counterpart – they usually react with
another concession.

Step 7 – Summarise, close & agree

Summarising

It’s advisable to summarise and confirm understanding all the way through the process. Getting the
positive agreement throughout the process is also extremely important psychologically and in building
trust and commitment. You are both thinking like winners and, hopefully, by the end you won’t be
disappointed.

The final summary is to restate points of agreement reached earlier in the negotiation.

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7 Steps to Successful Negotiation

Closing

The great thing about good negotiation is that the close is easy. Closing (along with cold calling) is one
of the greatest fears non-sales people have in getting a good deal.

If you have worked through all the techniques up to this point closing should be easy. In fact, buyers
NEED to be ASKED for the order. Again, though, research has show that closing is a skill in which UK
sales people are weak. The biggest barriers to closing seem to be negative expectations from the seller
and the buyer’s lack of trust in the seller’s sincerity.

There are two big “rules” in closing.

Closing should feel comfortable. There is no mystique to closing - just ask for it! Did you spot the buying
signals? If so don’t keep selling through them: KNOW WHEN TO SHUT UP

Don’t close too early. If the buyer isn’t quite ready to buy trying to close too early will lose you the sale.
Try the following questions:

“How do you feel about it?”

“How does that strike you?”
“Do you have a date in mind?”
“Are you happy with everything we’ve discussed so far?”

Great buying signs are a mixture of what they say, the way they say it and body language. You are
really looking for changes. For example
 Customer asks about prices & terms, especially if you have avoided price discussions up till
now.
 Customer asks for more details about your product / service.
 Customer asks about delivery.
 Body language changes. They adopt a friendly stance, perhaps leaning towards you.
 Customer begins calculating numbers.
 They are suddenly very friendly, acting like host.
 The customer starts to talk more quickly
Once you spot the buying signs now’s the time to close.
Once you spot the buying signs the other party WANTS TO BUY FROM YOU
Once you spot the buying signs the other party wants to buy from you RIGHT NOW.

And RIGHT NOW is the RIGHT TIME TO CLOSE.

Agree what is agreed.

Confirm in writing and agree the action for implementation.
Most importantly both parties should feel happy with the deal agreed.

You will agree a great deal when:

 Customer wants what you are selling
 Customer believes in you and your company
 Customer needs your product / service
 Customer can use your product / service

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7 Steps to Successful Negotiation

 Customer can afford your product / service

 Customer understands full nature & scope of your offer
 You are eager to make the sale
…and…
 You have good negotiation skills

5 Actions for Today

Action By when By whom

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7 Steps to Successful Negotiation

Today’s Role Play Exercises

1 Focus for the day

 We will split you into 2 groups

 Group 1 will be the “Customer”
 Group 2 will work with a “Supplier

 What does the customer do?

 What products / services might the customer need?
 What is the customer trying to achieve?
 Why might they look to change suppliers?
 Who are the supplier’s competitors?

2 What are your objectives?

 Group into Customer & Suppliers

 In your role…
 What is important to you?
 What might be important to the other party?
 What other information do you need to find out?

 What are you prepared to negotiate on? Or not?

(IDEAL & LIMIT)

3 Questioning & Listening

 Supplier is meeting the for the first time

 Look at your conclusions from the objectives exercise?
 Set up your negotiation team and start the meeting.

 Post meeting – what did you learn?

4 Negotiation

 Start a negotiation
 Adjourn if you need to

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7 Steps to Successful Negotiation

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