In this episode of the Strategic Insights podcast, Tim Deuitch and Bob Parks dive into the intricacies of negotiation, contrasting it with bargaining. They share strategies for understanding stakeholders, interests, and the need for preparation to achieve win-win outcomes. The discussion covers generating options, the significance of having a Best Alternative to a Negotiated Agreement (BATNA), and strategies for handling difficult situations during negotiations.
Tim Deuitch: 00:01 Welcome to the Strategic Insights podcast brought to you by Strategic Enhancement Group. I'm Tim Deitch, Vice President of Client Success, and today I'm joined by our managing partner, Bob Parks. Welcome, Bob.
Bob Parks: 00:14 Thank you, Tim. You know, today we're talking about one of my favorite subjects, and that is the process of negotiation. You know, it's really interesting, and as we've worked with clients for 40 years, we've discovered that most salespeople don't negotiate. In truth, they basically bargain. And let me explain that. Bargaining is a win-lose situation where both sides take a position usually around price. The results then are lower prices for the deal, smaller margins, and sometimes a damaged customer relationship. From a bottom line perspective, salespeople caving to a price is the number one challenge of most of our clients.
Contrast that to negotiation. At least understanding the process of negotiating if done correctly, it's a win-win. Everyone's interests are considered, the process is efficient, and the customer relationship is actually strengthened. And of course, all importantly, sales begin to increase.
Tim Deuitch: 01:29 Absolutely right, Bob. And let me give you an actual real case here. Recently, we spoke with a client that landed a multi-million dollar sale from an existing customer. And it was a sale that they would have lost in the past without using this negotiation process that we're speaking to.
We met with their sales leader and an account executive, and they identified for us the reasons for the win, the steps they took from a win-win negotiation process perspective versus bargaining. We'll point out these steps in the next few minutes, but before we do, I wanted to share a terrific negotiation mindset that our client uses and we do as well at SEG.
We liken the full path of discovery and the positioning of a solution as a baseball game. We think of it that way. The discovery is methodical and comprehensive with proposals not made until you know as much as possible, you know what you need to know. And that perhaps aligns with like the seventh inning of a nine inning game, right? Most games are not won in the seventh inning when a proposal is made, though they can certainly be lost to price at that point. Much more can happen after you submit the proposal and this is the key. As the prospect reacts to the offer, it's your chance to show your problem-solving skills to make it as easy for them to buy from you. When you plan to problem-solve, you're unlikely to reflexively drop the price.
Bob Parks: 03:04 Exactly, Tim. So it's important to reflect on the skills needed to be a good negotiator.
First and foremost, prepare ahead of time. Make sure that you understand the issues before you go into a negotiation. These skills were used by our client. So let's review each of them now. First and foremost, understand the players. Understand who are all the stakeholders in your negotiation. Okay, your stakeholders, the people that are in your company that affect your decisions and affect your proposal, the client, and then the client stakeholders, the people that work behind the scenes of your actual negotiating client. You know, what are his or her bosses saying? What is their corporate approach? Understand the client stakeholders. For each of these groups, it's important to ask and find out what influence do they have in this decision? What is their level of authority in this negotiation? And what questions would be important to ask each of them?
Of course, we all understand this information is best learned during the discovery process with the client, not after a proposal has been sent. The intent of asking these questions is to make it as easy as possible for the client to buy from you. If you don't know and can't address these unique issues, proposals easily dissolve into bargaining versus addressing their shared interest. Our client example worked hard to never submit a proposal without having this information as clear as possible. They have identified a strategic coach, someone whose trust they've earned and who is willing to offer advice on what issues to address and how to address them.
Tim Deuitch: 05:28 Well, and let's remember that the strategic coach that our client is seeking is a person who is within the customer, right? Where they can bounce off unique situations and gain some key advice from somebody who knows that business well.
So that moves us to the next skill, which is to separate the people from the problem. We want to deal with any people's issues. What we mean by that is unique emotions or egos before we get into the negotiation process and any problems. And what we mean by deal with is basically to prepare to not allow a particular style of a person to disrupt the negotiation process. And how we prepare for that is getting ready to understand the problems they are expressing, not necessarily the way they express them.
Okay, so what do we mean by problems? What we really mean is their interests. That's the word we like to use. We focus on the interests, theirs and yours, that are in play. What are the unique issues that must be satisfied for you to win their business? Price is going to be there, but it's often not the most important issue. We want to ask about factors beyond dollars. Identify which interests are opposed or differing or shared. In other words, where are you on the same page just a little bit off and where might you be really divergent? Either way, we avoid taking a position on an interest and we avoid it by stepping back. Those are the exact words used by our client that helps them stay in a problem solving mode. What's the opposite of stepping back? It is to point, counterpoint, consistently say, well, almost to the point of an argument or an exchange that isn't productive.
By stepping back, you want to clarify and understand what their interest is, so you can be in the best position possible to be in a problem solving mode. Once you understand the interest, you can address each issue one at a time.
Bob Parks: 07:42 Well, you know, it's important, I think, to use this client as an example of some of the interests that they uncovered. You know, one of them that they uncovered was a regulatory issue. The client needed confidence that this solution was proven to comprehensively meet all required standards. The vice president, not the person negotiating, the vice president of the client back in the headquarters needed to make sure that the solution expense didn't exhaust his ability to address other costs over time. And of course, we all know procurement. Procurement had a price point in their minds based on known or and perceived competitor options and value. And that interest had to be explored.
And then finally, the client's own financial leaders, they needed assurance that the ultimate sale was valuable to their company and to their overarching examples.
Tim Deuitch: 08:58 And with all this in mind, the key is to generate options for the customer to consider. After you and the client have a shared understanding of the issues and the interests of both parties, you can generate options for an agreement that satisfies both sides. The creation or the co-creation of solutions gives you a competitive edge over a solution that comes solely from you.
Bob Parks: 09:29 You know, it's important to understand that even if you do all your homework, there's going to be, in most negotiations, some opposing interests. And you're going to need to address those interests. Maintaining a strong relationship with the client requires fairness. When you address opposing interests the fairest approach is to identify and use independent and I emphasize independent standards. Be clear on what independent standards apply to this negotiation. This is where our client partners and their strategic coach made a big difference. Tim, why don't you give us some examples?
Tim Deuitch: 10:20 Yeah, there's a number of different independent standards in place. The first, obviously, is competitive offers, right? You have things to bounce it off of in terms of relative value to your competition. You have history and tradition. You can reinforce your credibility with a customer or the industry. You have history within the industry and potential partnerships down the road. It's rarely just about one deal being struck.
There are laws and precedents absolutely that need to be in play. And often our clients are very good at assisting the people they work with by being completely clear on the laws and precedents. There's scientific research, same logic. There's costs and cost management ideas. And of course there's third party references, sharing a third party example of how other clients of yours have met with all the items above.
And so, you know, we've just listed a tremendous amount of information and things to consider, but overarchingly, the idea is to create a yesable offer for the customer, one that meets the interest of the other side and yours. So consider a range of offers or how, and sometimes it's called flexibility, but it's really more about different ways the customer can consider what you're trying to bring to them. Figure out which ones put you in the best position possible for both sides to feel comfortable. Focus on positioning your solution to demonstrate clearly how it addresses each of the client's interests.
Now, in case an acceptable agreement can't be reached, you'll need to have created a BATNA. Now, that's an acronym for the Best Alternative To a Negotiated Agreement.
Bob Parks: 12:23 Tim, I can't tell you how many times a BATNA has made a huge difference for me. A BATNA, the best alternative, and that's the key word to negotiating a negotiated agreement, it's not the best agreement, but it is the next best thing, the next best alternative to caving in on price.
Our client, in this example, used this approach by creating financing that was not in the original proposal. They met with the vice president and they understood that he needed to manage costs over time. And then they worked with their own financial team to ensure this approach worked for their own company. Having a BATNA increases your power. And sometimes salespeople feel like they have very, very little power in a negotiation.
But if you have an alternative already thought of, then you have created an alternative that might not be as good as your first proposal, but would be better than caving on price. You also need to identify BATNAs on their side to determine what their alternatives might be. That's the key to being a good negotiator.
Tim Deuitch: 13:52 It really is. And so let's speak to one other skill which is really important and that's handling difficult situations. The things that surprise us just might be a little bit awkward when a negotiation becomes challenging, right? When a client takes a hard position or tries what you might consider to be a dirty trick or says or does things that are difficult for you, almost untenable for you, and sometimes they just walk out, right? So what do you do then?
Bob Parks: 14:27 Great question. What do we do?
Tim Deuitch: 14:31 Ha ha ha.
Bob Parks: 14:32 Well, first of all, seriously, you need to focus on your self-management skills. You know, pause, consider the cause of any emotion that you might be feeling. Decide whether you will continue to negotiate or maybe even decide to take a short break. Remind yourself of the purpose of this negotiation. Remember your interest and the interest of your client. Don't make a decision on the spot. Ask, continue to ask clarifying questions to try to understand the source of their behavior.
Tim Deuitch: 15:17 Well, and listen, all that we've said up to this point, it can feel like an awful lot. And so that's why we come back to the key in that we know that if you're not as prepared as possible, you'll be likely to drop the price. So here's a summary of all that we've talked about.
Remember, as a negotiator, you have three goals.
1. Create a mutually satisfying optimal agreement.
2. Use an efficient process that's clear and not confusing.
3. Strengthen your relationship with your customer.
And the key to all three of those is preparation. Understanding who the players are and the roles they have in the process. Understanding their unique interests and then being prepared to offer options that satisfy their interests while also satisfying yours.
Remember, bargainers are first to drop the price, but the more prepared you are, the more likely you'll land a win-win sale for all parties.
If you have additional questions or thoughts, please contact us.
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