Chapter 1: Why aProcess?

If you’ve been involved in sales long enough, you may remember a time when selling was considered by most of its practitioners to be more of an art than a science. True salespeople, it was thought, were born, not made. You either “had it,” or you didn’t. Curiously, despite this widespread belief in a genetic predisposition toward sales success, it was still believed that, because selling was ultimately a matter of people skills, anyone could become a successful salesperson by learning those skills. Training methods emphasizing them were accordingly devised to achieve that end. But all that changed in the early 1980s. Following the publication of a now-classic Harvard Business Review article by Thomas V. Bonoma titled “Major Sales: Who Really Does the Buying” (1 May 1982) and the book Strategic Selling by Stephen Heiman and Bob Miller, many consultants, salespeople, and individuals in sales management began looking at selling—particularly business-to-business selling—in a different way. They stopped thinking of it as a series of behaviors and started thinking about it as an analytical business process aligning the customer’s needs with the seller’s capabilities.

They recognized that devising a repeatable, measurable—and therefore improvable—sales process that enabled them to understand customer needs and present business solutions would increase revenues in a way that relying on the human relationship skills of individual salespeople could not. Rather than simply attributing a drop in sales in the previous year to its being a “bad year,” for example, having a process would make it possible for them to determine exactly what happened that made it a bad year. It would, in other words, allow them to determine what was causing problems and to do something about it. At the same time, it would enable them to understand their successes and, accordingly, be able to repeat them. In addition, having a process would mean that, rather than simply relying on increasing the number of sales calls to increase sales, they could increase the quality and effectiveness of those calls in a systematic way. Perhaps not surprisingly, as soon as sales and account management people recognized the benefits of such systems, they began to develop both sales processes and training programs to teach those processes to their sales forces. Today, the vast majority of salespeople use those very same processes.

WHAT A STRATEGIC NEGOTIATION PROCESS CAN DO FOR YOU

Despite the creation and implementation of these sales processes, there was still one area of sales that was considered, and is still considered, a tactical, reactive, and behavioral art: the art of negotiating. Because of the way business was conducted in the past, the fact that no established processes for sales negotiating existed didn’t present any particular problems. However, the same market forces that 20 years ago drove sales to shift from a personal relationship model to a more process-oriented and analytical one are now driving the need for a new approach to negotiating. In fact, the enormous changes that have taken place, both in business in general and in the negotiating environment in particular, have made a Strategic Negotiation Process essential.

To get a better understanding of exactly what those changes are, we recently conducted a survey among salespeople. Although we were, of course, already aware of some of the changes, we discovered, somewhat to our surprise, that they are even more dramatic than we had thought. Among those surveyed:

• 85 percent say negotiations have become increasingly more complex.

• 74 percent report having to face more professional buyers in the marketplace.

• 67 percent say they’re seeing increased irrational behavior among their competitors.

• 63 percent report that customer relationships are becoming increasingly long term rather than short term.

• 85 percent say that more internal negotiation is now taking place than in the past.

• 58 percent report seeing major consolidations on both the buyer and seller sides.

But what do all these numbers mean? Exactly how are they impacting sales negotiations, and in what way do they make the development and implementation of sales negotiation strategies so important? Let’s look at them one at a time.

Deals Are Becoming Enormously More Complex

Negotiation is no longer just about agreeing on price. Of course, price is still negotiated, but so are licensing agreements, services, coinvestments, legal clauses, risk sharing, intellectual property rights, and others. Introducing these factors into a negotiation makes the old behavioral approach ineffective because it’s reactive and focuses on the words and behaviors of the parties. Using a process in such situations enables those involved in both buying and selling to analyze not just surface behaviors—such as a buyer’s insistence on receiving more frequent service—but the underlying business “blueprint,” or “structure,” of the entire deal. That is, it makes it possible for them to consider and diagram all of the various aspects of an agreement rather than fall into the trap of concentrating on any one issue.

More Professional Buyers Are in the Marketplace

Even though salespeople, as well as sales and senior management, still see negotiation primarily in terms of behavioral techniques and tactical responses, buyers are increasingly being trained to see negotiation as a process. This enables them to analyze situations and develop appropriate data to deal with those situations, which in turn provides them with an advantage over the sellers who haven’t done such analyses and accordingly have no choice but to simply react to whatever they’re presented with. One of the ways buyers take advantage of this is to concentrate on price during negotiations. They do this because they know that salespeople, not having done the same kind of analyses, will be unable to counter their arguments regarding price with compelling arguments for the value of other elements of the deal.

Competitive Behavior Is Becoming Increasingly Irrational

Because of an inability—or unwillingness—to think long term, more and more salespeople are making concessions that are not in the best interests of either themselves or their companies in their efforts to “close the deal.” Compounding the problem, their competitors, who are equally unable to see beyond the current quarter, respond by making equally ill-advised concessions. Despite claims that “it’s just this one deal,” these concessions become the norm. This in turn leads to price wars that, because of the speed at which market data is communicated today, erupt more quickly, go deeper, and are more damaging than were those of the past. Instituting negotiation processes would enable these companies to think about these issues in advance and, if not able to avoid them entirely, be able to develop more effective and proactive responses to them.

Relationships Are Becoming Increasingly Long Term

Such relationships are, of course, beneficial to both sides, but the traditional “one-up” approach to negotiating is not conducive to either developing or maintaining them. When, for example, a salesperson “gets one-up” on a customer, or a customer beats a salesperson so badly that all the profit margin is taken out of a deal, neither side is likely to relish the idea of continuing to do business together. And even if they do continue, the next time both sides will be inclined to do whatever they can to “get even,” which, of course, makes an extended relationship even less likely. Using a negotiation process makes it possible to build long-term relationships by using tools other than discounting because, like most classic sales processes, a negotiation process focuses on creating and demonstrating long-term business value for both the customer and the seller.

There’s More Internal Negotiation within Companies

Salespeople are increasingly being asked to sell their company’s “total value proposition,” to bundle the company’s solution to its customers. Although this can obviously present substantial benefits to both the company and its customers, negotiating such sales can be extremely difficult for the salespeople involved. Rather than dealing internally with a single product or department manager, they now have to deal with several, each of whom has his or her own P&L (profit and loss), and is, accordingly, more interested in his or her bottom line than in working with the others to do what’s best for the company. In addition, because each department tends to have its own ideas of how to negotiate, as well as its own goals, salespeople frequently find that internal negotiations are more difficult than external ones. On the other hand, if a company has a negotiation process in place, the various departments have a common goal as well as a common way of negotiating, which, while not entirely eliminating internal negotiations, can reduce it substantially.

Buyers—and Sellers—Are Merging and Consolidating

As a result of consolidations, there is an increasingly smaller number of players. Because there are fewer players at the same time that the actual number of transactions has gone down, the size—as well as the strategic and financial importance—of those deals has gone up. As a result, buyers and sellers have become more dependent on each other—the seller because a larger percentage of its revenue is tied to one customer, and the buyer because the seller now controls a larger percentage of its supply chain. In other words, buyers and sellers have a different kind of relationship—a more symbiotic one—than they did in the past. Where the traditional approach has both sides negotiating over an ever-shrinking profit margin, a process-oriented approach enables buyers and sellers to address their new relationship by focusing first on creating value for both sides and then determining how to share that value so that both benefit.

But this trend affects buyers and sellers in another way as well. In the past, so many deals were being made that they were of necessity being made entirely independently of each other. Because of that, there was little consistency in either goals or approach on the seller’s part. Perhaps even more important, when different tactics were employed by different people in the same organization, buyers—and competitors—perceived the seller’s strategy to be something other than what was intended, resulting in a kind of “strategy by default.” Using a process by which to conduct negotiations enables companies to establish a common goal, strategy, and tactics. This, in turn, makes it possible for them to more systematically signal their true intent to both customers and competitors and, ultimately, achieve their business objectives.

Finally, not only are there fewer companies in any given industry, those that remain are becoming increasingly dependent on national and global accounts. Salespeople and account managers, who have moved from selling “price and product” to selling “value and solutions,” have instituted account management processes that have enabled them to develop consistent—and effective—approaches to these large, complex, and highly profitable customers. However, because no similar processes have been instituted for negotiations, few of these salespeople have been trained to negotiate “value and solutions.” Instead, they fall back on the same kinds of tactics they used when selling “price and product.” As a result, not only do they give up greater discounts than they should, they also make buyers distrustful of what they’d been told in the first place. Using a process enables them to avoid tactically reactive, price-only, value-dividing discussions and move toward more strategic, multiple-issue, value-creating negotiations.

Amazingly, despite the fact that, as our survey showed, so many people are aware of the need for a more professional approach to negotiation, corporate America continues to think of negotiation as an “elective” rather than a “required” course in sales training. And despite the numerous benefits of looking at negotiation as an analytical process, most negotiation texts and training still focus on long lists of tactics, countertactics, effective questions, effective responses, personality-type analyses, and the like. As a result, most individuals and organizations are essentially still operating under the “old” rules. In fact, among the salespeople we surveyed:

• 85 percent report that they still use a “reactive” approach to negotiation.

• 85 percent say they have no predetermined strategy for irrational competitor behavior.

• 71 percent report poor internal alignment on negotiation goals or processes.

• 81 percent say they have no formal negotiation process.

Some of the reason for these responses, beyond the lack of updated training, is no doubt simply that people have an apparently natural reluctance to do anything differently than they have done in the past. As Machiavelli wrote in The Prince:

It must be considered that there is nothing more difficult to carry out, nor more doubtful of success, nor dangerous to handle, than to initiate a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries . . . and partly from the incredulity of mankind, who do not truly believe in anything new until they have actual experience of it.

My colleagues and I recently had a taste of that kind of incredulity in a recent conversation with an editor at one of the premier sales magazines in the world. We were talking with her about the advantages of a repeatable, process-oriented approach to effective business negotiation when she said, “How can you have a consistent process? Aren’t negotiators like drunks?” When we probed further to find out exactly what she meant by this, she told us that, like a drunk, you can never tell what a negotiator is going to do from one minute to the next, not even in a single negotiation, much less from one negotiation to another. Unfortunately, a great many people share this misconception. And it’s because they do, that so much of today’s negotiation training still concentrates on developing long lists meant to cover every possible scenario that might ever come up in a negotiation.

But there’s also another reason that people continue to use this old style of negotiating. Although the highly tactical and behavioral approach is very difficult to remember, difficult to transfer to others, and inconsistent in terms of success, it does work, at least sometimes. That fact makes this approach to negotiating not unlike gambling—every now and then people win, so they keep going back, even though on average they lose. But as I’ve suggested, and as I’ll prove in this book, giving up that old way of looking at negotiation and embracing our Strategic Negotiation Process will greatly improve the odds of your conducting negotiations that are successful not only from your point of view but also from the point of view of those on the other side of the table.

I’ll show you that, although you don’t realize it, virtually every negotiation you’ve ever been, or ever will be, involved in follows a consistent pattern. I’ll show you that almost all the tactics that those on the other side of a negotiation throw at you fall into only three categories and that you can prepare for them in advance, whether you have five minutes or five days to prepare. In short, I’ll present you with a systematic and rational process that will enable you to establish practical and effective ways of dealing with all of these situations, and go beyond “win-win” to the creation of true, measurable business value.