Many sales organizations use a terrible approach to negotiation, one that harms salespeople and their companies. Concessions are at the heart of this approach because many salespeople mistake concessions for negotiation. But first, let’s look at sales definitions:
- Negotiation: The salesperson and their client work to agree on a deal, with each party asking something of the other.
- Concession: The client asks for a change that is valuable to them without the salesperson asking for something of equal or greater value to the salesperson’s company.
When Does a Negotiation Start?
Outside of large and complicated deals, you likely will not schedule a time to negotiate with your client. The everyday deals B2B salespeople pursue are not so formal, which is both good and bad for sales organizations. Let me explain why this is so.
A negotiation starts when the client asks the salesperson for something they want or need. This is common because the client is trying to ensure they do right by their company, with the most common ask being a reduction in the price. Once the ask is made, the salesperson is in a negotiation whether they like it or not. This is where our trouble begins.
What Salespeople Do When They Don’t Know What to Do
When a client asks for some change in the deal, the salesperson usually says something like, “I’ll see what we can do for you.” Your client will smile when they hear these words because they are certain they are getting a concession, even if they don’t know their discount.
This leads to many negative outcomes, including a salesperson’s tacit agreement with the client that their solution isn’t worth the investment they presented. This response teaches the client to ask for discounts in future deals, but this isn’t the worst outcome. This negotiation strategy damages the salesperson.
For a salesperson to be what we call One-Up, they need to be a peer, not a pawn. The concept of being One-Up is that the salesperson has the knowledge and experience to lead their clients. Having to run back to their sales manager to negotiate on behalf of their prospective client diminishes the salesperson in the eyes of the client.
The Sales Manager Is Compromised
The sales manager, under the pressure to win deals, needs the deal as much or more than the salesperson. The won deal is worth giving up some reasonable amount of net margin. As a sales leader, I know it is easier to get ink on paper and move on to the next deal than to haggle with a client and, sometimes, risk losing the deal altogether.
The sales manager looks at the client’s request and reduces the number to something they can live with. This is a concession, although I suppose you could also describe it as a hostage negotiation, with the client holding the deal hostage until they get what they want or need.
If you are a sales manager and your team negotiates with you instead of their prospective clients, you can improve your results by turning them around, pointing them toward their client, and making them truly negotiate.
A Personal Anecdote
In one deal I was pursuing, my client made what was an outrageous ask. The request fully shifted the risk to my company, even though we should have shared the risk. Agreeing to the request, I asked for something that would more than pay for the risk my company would take.
My leaders didn’t understand why I agreed to the terms until I showed them the math. After working in the industry for many years, I could calculate the value of my ask in my head. I avoided the downgrade in my status as a One-Up salesperson and a trusted advisor, and still won the deal.
How to Reverse the Damage of Concessions
The first way to reverse the damage of negotiating is to ensure your sales force knows that once the client asks for something, that there are only two possible responses. You can either say yes or no. You can say yes and negotiate with the client, or you can also say no and negotiate with them. But the last thing you should want is your salesperson to negotiate with the sales manager. (This rule, like all rules, has an exception. Sometimes, a salesperson is better off stalling when they are outgunned by a client or a purchasing agent.)
The next step is enabling your sales team to know what they can agree to and what they need to ask for in exchange—without having to run back to negotiate with their sales manager. You can easily match the salesperson’s ask to the ask the client makes of them in a negotiation.
In enterprise-level deals, there are good reasons for sales managers to insert themselves into the sales conversation early. Sales managers who participate in the sales conversation better understand the nature and shape of the deal. Employing this strategy, the sales manager should allow the salesperson to lead the conversations to avoid reducing their stature. Knowing the stakeholders and their needs can allow the sales manager to help their salesperson with their negotiation strategy, improving sales results.
Credibility at Risk
Do everything possible to ensure your sales force is credible. When a salesperson must disengage from the negotiation, they are no longer leading the client. Instead, they are doing the client’s bidding. It’s already difficult enough for salespeople to win deals in this environment without losing their credibility with their clients. You want your sales force to present as peers, not pawns.
Concessions vs. Negotiations
It’s important that you win deals, but it is equally important that you stop doing anything that might prevent your sales force from being One-Up, something you can learn about in Elite Sales Strategies: A Guide to Being One-Up, Creating Value, and Becoming Truly Consultative. More than ever, you need your sales force to guide and lead your clients. Ask yourself if your sales force is consultative enough to negotiate within certain boundaries without having to get permission.