Read an Excerpt
Secrets of Power Negotiating for Salespeople
Inside Secrets From a Master Negotiator
By Roger Dawson
Career PressCopyright © 1999 Roger Dawson
All rights reserved.
Selling in the New Millennium
Several years ago I recorded a tape cassette program called Secrets of Power Negotiating. To my delight and surprise, it became one of the best selling tape programs of all time. Because of that, sales managers across the country started calling me to come to their company and teach their salespeople how to use Power Sales Negotiating to raise their profit margins and close the sale even against lower-priced competition.
From the giants such as IBM, Xerox, Procter and Gamble, Merck Pharmaceuticals, Abbott Drugs, and General Foods to the smallest entrepreneurial startup companies, I've had a great time teaching, but what is more important, I've learned a great deal about salespeople, buyers, and the ongoing challenge of making the sale. In those years, salespeople have taught me volumes about the selling profession. They tell me that it's getting tougher out there. That only the best and brightest salespeople will grow and prosper in the 21st century. I think that the profession of selling is going to change a lot in the new millennium. Following are some of the challenges I see.
Trend 1: Buyers are becoming better negotiators
Every salesperson and sales manager whom I meet in my seminars tells me the same thing: Buyers are better negotiators than they were 10 or 20 years ago. That trend is going to continue.
I hate to put this bluntly, but here's what I think has happened. I think that the companies to whom you sell have figured out that the best and quickest way for them to put money on their bottom-line is to take it right off yours!
Think about it for a moment. Your customers have three ways to improve their profits:
1. The first way is to sell more. This means either going head to head with a competitor (to improve their market share by taking away some of their competitor's business), or creating new or different products and carving out a new market (something that is very risky and expensive to do).
2. The second way is for them to reduce their operating expenses. This is done by firing employees or buying expensive new equipment.
3. The third way is to do a better job negotiating with you and their other suppliers. This is far easier and it takes money right off your bottom-line and puts it directly onto theirs.
So, what's happening is that companies are upgrading the position of buyer. Whereas 10 years ago you may have been selling to a buyer who moved up through the ranks, now you're dealing with someone who may have a master's degree in business.
He or she may have just come back from a week-long negotiating course at Harvard University. These people know that doing a better job negotiating with you is a much easier way to improve their profits than increasing their market share or trying to shave more off their operating costs.
Trend 2: Your buyers are better informed than ever
Buyers used to need salespeople because they brought valuable in formation to the buyer. In the old days, the buyer first learned about new products and new trends in the industry from his regular visits with the salespeople who called on him. That knowledge was power and the salesperson could use it to his or her advantage. That advantage is gone. Buyers get their industry news by programming their computer to bring them news releases on topics that interest them.
In the old days, salespeople could get away with bluffing the buyer. For example, a salesperson who sold to a department store chain could say to the buyer, "If you carry the entire line of SKUs, you'll find that 32 percent of your sales will be in the top-of-the-line model, and your profit margin will go up three points." Nowadays if salespeople try that, they will likely have egg on their face because the buyer will turn to the computer and punch in a few numbers. "That hasn't been our experience," he will tell the salesperson. "We tested that in our Capitol City Mall store and found that only 12.8 percent of our sales came from the top of the line, and our profit margin only went up .8 percent. That didn't even offset our increased cost of carrying the extra merchandise."
Another problem with better informed buyers is that they know if you're offering a better deal to someone else. (It's called "diverting" in the food manufacturing industry.) Let's say that a cookie manufacturer wants to increase the share of market in the Denver area. The manufacturer offers special deals to the stores in Denver to encourage them to load up and promote this brand of cookie. Soon food stores and food wholesalers all over the country are ordering their cookies from Denver instead of from their local distributor to take advantage of the special deal. They don't even have to take delivery in Denver— they simply divert the shipment to their warehouse.
Trend 3: Salesperson role reversal
It used to be that a salesperson's role was highly defined—to sell the products of a manufacturer to the user or distributor. Now more and more salespeople find themselves going through a role reversal. They have become buyers rather than salespeople. This is very prevalent in industries that sell to retailers, but I believe that it will spread to other industries. Large food manufacturers, such as Procter and Gamble and General Foods, have hired me for just this reason. They want me to train their salespeople how to negotiate cooperative advertising programs with their retailers.
Let's take a salad dressing manufacturer. This may have been an entrepreneur who started out making salad dressing for his own table. His dinner guests enjoyed it so much that he started making small batches for his friends. Then he started mixing up big batches of it for Christmas and birthday gifts. Everyone liked it so much that they encouraged him to put it on the market. So, he takes the plunge. He takes out a small business loan and starts making the rounds of supermarkets and food stores to sell his product to them. To his dismay, he finds that it is very expensive to get his product on a store's shelves. First, he has to negotiate a slotting allowance. "My shelf space is valuable," the store buyer tells him. "If you want us to carry your salad dressing, you must pay us a $20,000 slotting allowance." He may also find that if his salad dressing doesn't sell, he not only has to repurchase the inventory, he also has to pay the retailer a "failure allowance" to compensate the store for the loss of the productive use of the shelf space. When he wants the store to run a special display of his merchandise, he finds that he has to negotiate a payment for a special feature. He also finds that he constantly has to negotiate contributions to subsidize the advertising of his dressings in newspaper ads and flyers that the store mails out. He is spending more of his negotiating efforts buying the store's programs than he is selling his salad dressings.
This is a very typical role reversal for anyone selling to retailers, such as supermarkets, department stores, and specialty stores.
So, the role of the salesperson will change dramatically in the new millennium. Successful salespeople will be more intelligent, more versatile, and better trained than ever. Above all, he or she must be a better sales negotiator.CHAPTER 2
Win-Win Sales Negotiating
As a salesperson, you've probably heard that the aim of a negotiation is to create a win-win solution. A creative way that both you and the buyer walk away from the negotiating table feeling that you won. You may have had this demonstrated to you with the illustration of two people, both of whom want an orange, but are frustrated because they only have one orange between them. So, they talk about it for a while and decide that the best they can do is split the orange down the middle and each settle for half of what they really need. To be sure that it's fair, they decide that one will cut and the other will choose. However, as they talk about their underlying needs in the negotiation, they find that one wants the orange to make juice and the other needs it for the rind because he wants to bake a cake. They have magically found a way that both of them can win, and neither has to lose.
That could happen in the real world, but it doesn't happen enough to make it worthwhile. Let's face it, when you're sitting down in front of a buyer—if you're lucky enough and skillful enough to get to sit down with the buyer—he wants the same thing that you want. There's not going to be a magical win-win solution. He wants the lowest price and you want the highest price. He wants to take money off your bottom-line and put it right on to his.
Power Sales Negotiating takes a different position. Power Sales Negotiating teaches you how to win at the negotiating table, but leave the buyer thinking that he or she won. In fact, the skill to do this defines a Power Sales Negotiator. Two salespeople might go out to meet with two buyers who are in exactly the same circumstance. Both of the salespeople might close the sale at exactly the same price and terms, but the Power Sales Negotiator will leave the buyer feeling that he or she has won. The poor negotiator leaves the buyer feeling that he or she has lost.
I'll teach you how to do this and do it in such a way that your buyers permanently feel that they won. They won't wake up the next morning thinking, "Now I know what that salesperson did to me. Wait until I see him again." No! They'll be thinking what a great time they had negotiating with you and how they can't wait to see you again.
If you'll learn and apply the secrets of Power Sales Negotiation that I'll teach you in this program, you'll never again feel that you lost to a buyer. You'll always come away from the negotiating table knowing that you won and knowing that you have improved your relationship with the buyer.CHAPTER 3
Negotiating Is Played by a Set of Rules
You play Power Sales Negotiating by a set of rules, just like the game of chess. The big difference between negotiating and chess is that, with negotiating, the other side doesn't have to know the rules. The other side will respond predictably to the moves that you make. From tens of thousands of responses over the years, we know how the other side will react. Not every time, of course, but enough of the time to make negotiating more of a science than an art.
Let me illustrate this point with a little exercise:
Think of a number between 1 and 10.
Multiply that number by 9.
Add the two digits together.
Take away 5.
Translate that into a letter of the alphabet—A, B, C, D, E, F, etc.
Now think of a country that starts with that letter.
Take the second letter of that country and think of an animal that starts with that letter.
Now tell me something: How do I know that you're thinking of an elephant in Denmark?
How do I know that if you live in the Northwest, from Oregon to the Dakotas, you're thinking of an elk in Denmark?
And how do I know that if you're distracted, you got lost on the math and are nowhere close! It's not because I'm a genius. It's because I've done this with thousands of people and I know how predictable the responses are. It's the same way with negotiating. The other side will respond predictably to the moves that you make.
If you play chess you know that players call the strategic moves of the game Gambits (a word that also suggests an element of risk). There are Beginning Gambits to get the game started in your direction. There are Middle Gambits to keep the game moving in your direction. And there are Ending Gambits to use when you get ready to checkmate the other person, or in sales parlance, close the sale.
In the first 22 chapters of this book, I'll teach you the Gambits of Power Sales Negotiating.
First, you'll learn the Beginning Gambits, the things that you do in the early stages of your contact with the buyer to be sure that you're setting the stage for a successful conclusion.
This is critical because as the negotiation progresses you'll find that every advance will be dependent on the atmosphere that you create in the early stages. The demands that you make and the attitude you present must be part of a carefully laid plan that encompasses all elements of the negotiation. Your Opening Gambits, based on a careful evaluation of the buyer, the market, and the buyer's company, will win or lose the game for you.
Then I'll teach you the Middle Gambits that keep the momentum going in your direction. During this phase, different things come into play. The moves made by each side create currents that swirl around the participants pushing them in different directions. You'll learn how to respond to these pressures and continue to master the game.
Finally, I'll teach you the Ending Gambits so you can close the sale after getting what you want while the buyer feels that he or she has won. The last few moments can make all the difference. Just as in a horse race, there's only one point in the contest that counts and that's the finish line. As a Power Sales Negotiator, you'll learn how to smoothly control the process right down to the wire.CHAPTER 4
Ask for More Than You Expect to Get
Let's start learning the Beginning Sales Negotiating Gambits.
Rule number one is: Ask the buyer for more than you expect to get. Henry Kissinger went so far as to say, "Effectiveness at the conference table depends upon overstating one's demands." Isn't that interesting? One of the world's great international negotiators openly says that if you're planning to negotiate with him, you should expect him to ask for more than he thinks he'll get from you. Remember that if you were thinking, "My buyers are not stupid. They'll know the minute I ask for more than I expect to get." Even if that were so, it's still an excellent negotiating principle.
Think of some reasons why you should ask for more than you expect to get.
* Why, if you're convinced that the buyer wants to spread the business around, should you still ask for it all?
* Why should you ask for full list price, even if you know it's higher than the buyer is paying now?
* Why should you ask buyers to invest in the top of the line even when you're convinced they're so budget conscious that they'll never spend that much?
* Why should you assume that they will want to buy your extended service warranty, even though you know they've never done that in the past?
If you thought about this, you probably came up with a couple of good reasons to ask for more than you expect to get.
The obvious reason is that it gives you some negotiating room. You can always come down, but you can never go up on price. (When we get to Ending Sales Negotiating Gambits, I'll show you how to Nibble for more. Some things are easier to get at the end of the negotiation than they are at the beginning.) What you should be asking for is your MPP—your maximum plausible position. This is the most that you can ask for and still have the buyer see some plausibility in your position.
The less you know about the other side, the higher your initial position should be, for two reasons. First, you may be off in your assumptions. If you don't know the buyer or his needs well, he may be willing to pay more than you think. The second reason is that, if this is a new relationship, you'll appear much more cooperative if you're able to make larger concessions. The better you know the buyer and his needs, the more you can modify your position. Conversely, if the people on the other side don't know you, their initial demands may also be more outrageous.
Excerpted from Secrets of Power Negotiating for Salespeople by Roger Dawson. Copyright © 1999 Roger Dawson. Excerpted by permission of Career Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.