The Answer to Why Your Deals are Bleeding Margin

July 25, 2012 at 7:00 AM

Profit Tug of WarThis blog post is for those who sometimes find their sales teams negotiating against themselves, closing dirty deals to make quota, or finding their margin-rich transactions disintegrate at the end of quarter. Learn more about these sales process flaws - read this story about Phil and Stan.

When it came time to close a deal, one of our clients was faced with a difficult dilemma. The solution had to be purchased within the next five days in order for Stan, the sales leader, and one of his reps to make quota. The prospect, Phil, had agreed to the solution details and was bought in. There was a compelling event within 45 days but that was after quarter-end. To close the deal quickly, Stan dropped the price several times over the course of 2 weeks and lost 8% on the transaction. Stan had to go two layers up in the organization to get approval for pricing discounts. To make matters worse, Phil felt rushed and ended up signing a purchase order that left him wondering if he selected the right supplier. A great sales campaign went from picture perfect to perfectly pathetic.

If this sounds like something that happens to your sales team, read on to find out about the Give-Get Framework, a powerful negotiation tool.

Why Stan Lost His Deal Margin

Stan and his sales team followed their buyer-centric selling process. They provided value at every step, helping Phil’s organization recognize their problem, identify requirements and evaluate options. The product demonstration was nearly flawless and the solution pricing proposal gave Phil’s team the choices they needed. However, Stan’s team was unprepared to negotiate. A simple framework called “Give-Get” would have made a big difference.

Negotiation Training: Money Wasted 

Many sales leaders spend good money to improve their sales teams' negotiation skills. Consider this sample from the vast array of resources designed to teach negotiation strategy:

  • The Institute of Supply Management (formerly the National Association of Purchasing Managers) offers nearly a dozen courses to help professional buyers win negotiation battles
  • The #3 all-time best selling business book is Getting to Yes – the definitive textbook on negotiation by Roger Fisher, William Ury and Bruce Patton.
  • The Amazon category called “negotiation skills and strategies” lists 237 titles including the usual suspects: The One Minute Negotiator and Negotiating for Dummies.
  • YouTube returns 3,290 videos with instruction and advice on “negotiation skills."

 In spite of the resources at hand, negotiation results are paltry…at best.

Changing the Behavior of your Sales Teams – the Road to Better Margin

The most important part of a successful negotiation comes before the first meeting. It's all about how you prepare.

Too often sales people have done no planning prior to walking into a negotiation meeting. Like Stan, they lay the final proposal on the table and wait to find out what is important to the buyer. They fail to take the time to consider what the buyer will ask for in advance and to prepare the best possible response.

Planning for negotiations does not have to be time-consuming or complicated. But it must be organized. The Give-Get Framework is a simple and effective way to prepare. It is a negotiation aid used before the explicit negotiation with the buyer takes place. 

  • What are you willing to Give?
  • What is the customer expecting to Get?
  • What is the value of each concession?
  • What is the Priority for each side?

Preparing for negotiations requires recall and imagination. Consider comments by the prospect during the sales cycle. What have they said is important to them? Consider what has happened in comparable past situations. The buyer is likely to ask for similar concessions. Ask questions during the sales cycle to uncover what will be important during the final negotiations. What the Buyer wants to Get should be no mystery.

Get Ready to Get Ready

With a good idea of what will happen at the bargaining table, the sales team can plan ahead. For each 'Get,' consider what you are willing to 'Give' in exchange. The Give-Get Framework keeps the value of the deal intact and allows you to balance concessions. It isn’t perfect, but it can preserve the most precious part of the deal – the profit margin. Every dollar saved here goes to the bottom line.

Stan's team was able to dramatically improve their negotiation results (and self-esteem) after adopting the Give-Get framework. The sales team practiced with role-play exercises:

  • “What do I have that the customer wants, that has value to them but does not take away points from the deal?”

Benefits like membership on the product roadmap committee, preferred delivery conditions, or free “advice” from another department could all be successfully exchanged.  

The sales team practiced the other side of the negotiation process, too.  

  • “What do I want from the customer that is not more money but is valuable to me that they might give up?”

Examples include: an agreement to serve as an on-site reference, early payment, or the promise to deliver 4-6 “hot leads” from their personal network.  

If you have experienced the ups and downs of negotiations, please comment below on your successes - or ideas that you wish you had tried. Your insights are always welcome.

You can start to protect your profit margins today by adding a negotiation planning step to your sales process and by arming your sales team with this powerful sales aid. A free copy of the Give-Get Framework is included in this post by clicking here.

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Topics: Sales Process

Posted by John Kenney

John Kenney
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