Sales negotiation is a delicate art. You can quote a price, send over a contract, bank on landing a deal, and start celebrating — only to receive the dreaded email: "I'd like to talk about some of the details of this contract before I sign."
Even if you've properly qualified a prospect and correctly managed their expectations through the sales process, the deal can still end in a negotiation. That's why every salesperson needs to have a solid grip on how to negotiate effectively.
Here, we'll cover what a sales negotiation is, review why they're important in sales, and go over the most critical skills every salesperson should incorporate into their negotiation repertoire.
What is a sales negotiation?
The term 'sales negotiation' generally refers to a conversation (or series of conversations) between a buyer and seller in the interest of arriving at a deal. Negotiations typically include some degree of back and forth — with both parties approaching the discussion with concessions they're willing to make.
The sales negotiation is one of the most stressful, potentially anxiety-inducing elements of sales. Each one involves significant preparation, empathy, perceptiveness, and willingness to compromise strategically.
You need to strike a balance between accommodating your prospect and bringing back a financially viable deal. That's a tricky line to toe. Arriving at a mutually beneficial outcome is much easier said than done, especially in an era where buyers are more empowered and well-informed than ever.
And the fact that negotiation is a staple in sales, as a practice, makes understanding having to navigate it as essential as it is potentially frustrating. Let's take a closer look at why negotiation is so important in sales.
Why is negotiation important in sales?
The value of negotiation in sales is multifaceted. For one — and perhaps most importantly — it helps buyers and sellers arrive at agreeable deals. Without it, salespeople and prospects are more prone to conflict and frustration when trying to determine appropriate prices and mutually beneficial outcomes.
It also helps salespeople build lasting relationships with their customers. Negotiations give both parties the space to communicate constructively.
If the sellers involved in a negotiation can remain composed, consultative, and compassionate throughout the discussion, they can frame themselves as invaluable resources their buyers can rely on for assistance and expertise — even after their sales processes are wrapped up.
Now that we've established why you need to know how to negotiate effectively, let's review some skills you can learn to help yourself get there.
Sales Negotiation Skills
- Come prepared.
- Clearly define concessions.
- Speak second.
- Steer clear of ranges.
- Refuse to 'split the difference.'
- Write terms at the right time.
- Speak with the decision-maker.
- Get for a give.
- Talk more than money.
- Keep the conversation light.
- Stay calm.
- Walk away if necessary.
1. Come prepared.
You never want to go into a negotiation blind — these aren't the kinds of discussions you can wing. You need to be thoroughly prepared with a solid grasp of some key elements of a deal.
For one, you have to have an intimate understanding of your prospect's business, their buying power, their pain points, and the other solutions they'll consider if your negotiation falls through.
That last point is crucial. You need to have a picture of both your and your prospect's BATNA — best alternative to negotiated agreement — the walkaway line that frames whether a negotiation is worth continuing.
If you don't understand where that line is for both parties, you're giving up considerable leverage and setting yourself up for potentially making a deal that isn't worth your time. As I said, you can't go into negotiations blindly — avoiding that starts with you conducting thorough research on your and your prospect's circumstances.
2. Clearly define concessions.
According to the RAIN Group, cost, as a negotiation success metric, is used 12 times more frequently than quality — so you need to have a feel for your position in that respect. Otherwise, you might give up too much too quickly.
In the heat of the moment, a 30% discount or additional six months of support might seem perfectly acceptable. It's only when you get back to your desk and start drafting up the contract that you realize you agreed to terms you can't or shouldn't accept.
Clearly defining the limits on price discounts, freebies, or other add-ons before you meet with your prospect will ensure you come to a mutually beneficial agreement.
3. Speak second.
You've presented the terms of the deal, and the prospect would like to negotiate them — so let them start the conversation. Salespeople are often tempted to immediately jump in and offer a discount or adjustment in the interest of being accommodating.
But there's a line between being accommodating and being overly eager. You want to give your prospect some room to air their thoughts and reveal more about their position before making concessions.
It pays to listen first and speak second during negotiations. You can't know what your prospect is thinking if you don't let them air their thoughts out. Stay composed, have them reveal where they stand in the conversation, and use silence to your advantage.
Awkwardness isn't necessarily the worst thing in the world when conducting negotiations. If you don't embrace it, you might wind up losing your footing and conceding more than you have to.
4. Steer clear of ranges.
If the customer would like money knocked off your product's price tag, don't offer a range of options. If you say something like, "Well, I could probably reduce the cost by 15 or 20%," you're setting yourself up to make an overly aggressive concession.
After all, who would accept 15% when 20% has been offered? Always quote one specific number or figure and then go higher or lower as necessary. The word "between" should be avoided at all costs.
5. Refuse to "split the difference."
Offering to "split the difference" on pricing can seem like a clean, easy way to arrive at an agreeable deal, but it usually does more harm than good.
For example, if your product or service costs $10,000 and the prospect wants a 50% discount, you wouldn't want to counter with $7,500 and be done with it. That might seem fair and mutually beneficial, but those kinds of discounts are often rash and over the top.
If you offer a slight discount but still keep the number in the neighborhood of the original price, the prospect will likely accept — and the margin takes less of a hit.
6. Write terms at the right time.
Negotiations are complicated and can go back and forth for a while. They generally require both parties to bounce ideas off one another and hash out potential terms piece by piece.
Several options will likely be proposed, and while some will be accepted, others will be shot down. That's why you don't want to commit anything to writing until the meeting has ended — wait until all parties have verbally agreed to terms before you write any sort of legally binding contract.
7. Speak with the decision-maker.
This tip might seem obvious, but many salespeople make the mistake of negotiating with the wrong person. A company can have several people who might come to the negotiating table without the authority to actually make business decisions.
If you negotiate multiple times up the chain of command, you might wind up coming into a discussion with a decision-maker at a disadvantage. That can lead to you coming to a conversation with a discounted price quoted in a previous meeting — making you negotiate uphill for the remaining conversations.
8. Get for a give.
Healthy salesperson-customer relationships are borne out of mutual respect and trust. They're not a matter of salespeople bending over backward to accommodate buyers at every turn.
That's why salespeople shouldn't accept every single one of a prospect's demands without making some requests of their own. By keeping the negotiation a win-win for both sides, salesperson and client remain on equal footing, which lays the groundwork for a productive relationship.
9. Talk more than money.
The most commonly negotiated aspect of a sales deal is price, so salespeople should be prepared to talk about discounts — but discounts aren't the only way sellers can sweeten the pot.
Price is tied to value, and value is tied to a customer's perception of and satisfaction with a product. That's why you might want to consider offering other add-ons or freebies to a deal in lieu of a smaller price tag.
That being said, this isn't a hard and fast rule. It's all situational. Sometimes a discount is the best course of action. If you make concessions, you need to consider the circumstances of the deal holistically — additional perks won't always be more appropriate than hard financial concessions.
10. Keep the conversation light.
Negotiations can get intense — that much is natural — but you need to do everything you can to keep them from being hostile. These conversations are meant to lead to agreeable, productive partnerships.
Like any other relationship, you don't want your arrangement with your prospect to have any sort of bad blood or resentment. Avoiding that kind of aggression or negative conflict starts with you keeping the talk light and jovial throughout the discussion.
11. Stay calm.
Composure is key when participating in negotiations. Getting flustered or frustrated can turn your prospects off and undermine your ability to frame yourself as a helpful, agreeable, consultative resource for them.
Remember, negotiation is, in large part, a relationship-building process. If you lose your cool, your prospects will be less inclined to form a long-term, productive partnership with you. Always keep your cool — for everyone's sake.
12. Walk away if necessary.
Salespeople shouldn't be willing to accept any curveball a prospect throws at them. If demands become unreasonable or unprofitable for the company, don't be afraid to walk away from the deal.
A customer who only agreed to sign if the contract was radically amended or the price was drastically dropped is bound to cause problems down the road.
Those kinds of changes also tend to mean that the prospect doesn't see much value in your offering. That means it's probably a matter of time before they become dissatisfied. If it comes to that, make sure you get out — all parties involved will benefit from it.
As I mentioned towards the beginning of this article, negotiating skills are every bit as essential to have as they are tricky to develop. Still, if you know how to maintain composure, lead with empathy, understand your offering's utility, and have a feel for how to communicate its value, you'll set yourself up to thrive in any negotiation you engage in.
Editor's note: This post was originally published in March 2015 and has been updated for accuracy and comprehensiveness.