Search Results for: negotiating

Top 10 Tips when Negotiating

Everybody needs to negotiate from time to time; at work, at home, as a leader, as sales person, and as a consumer. For some it seems easy, but others view the process of negotiation as a source of conflict to be resisted and avoided if possible. Negotiation is a process and a skill that can be developed. Negotiation can be described as a process that involves two or more people dealing with each other with the intention of forming an agreement and a commitment to a course of action where compromise needs to be reached in order to move forward. In a sales environment, not every sales situation needs negotiation however when a compromise needs to be reached negotiation often involves a series of communications between two parties to form an agreement about the details of a sales solution. In many cases, it is possible for a proposal to be generated that satisfies the needs of both parties this is called a Win:Win.

different types of negotiation outcomes

different types of negotiation outcomes

Win: Win – In this approach, both parties go into a negotiation or transaction with the intention that they will give something towards the transaction in order to receive what they want. This is the strategy that has the best formula for success. However, sometimes one or more parties may have to accept less than they had hoped for when they entered the negotiation process. This is when you come across the Win:Lose. Win: Lose – The second approach has a good opportunity for success given one party is open to giving in order to receive, therefore paving the way for the sale to proceed. Both parties are open to giving, although the second party will give only once they have received. However where this approach can fall down is when Party B waits too long, wanting to receive as much as possible. If they wait too long, Party A may decide they wish to reconsider and a stalemate could ensue. In the worst case scenario the fulfillment of one party’s wishes may come entirely at the expense of the other party’s. In a Lose: Lose situation both parties are unwilling to give before they receive. This approach is the least effective when it comes to negotiation, given that it is easy for a stalemate to arise. Unless one party is willing to take the risk of compromising, there is likely to be no negotiation. Therefore, negotiation is the process of navigating your way through each of these alternatives, ideally aiming to come to an agreement that is complimentary to both parties’ needs. So here are 10 tips to help you navigate you way through negotiations.

1. Develop ‘negotiation consciousness’: Successful negotiators are assertive and challenge everything. They know that everything is negotiable. 2. Become a good listener: Negotiators are detectives. They ask probing questions and then remain silent. The other negotiator will tell you everything you need to know – all you have to do is listen. 3. Be prepared: The boy (and girl) scouts were right. Gather as much pertinent information prior to the negotiation. What are their needs? What pressures do they feel? What options do they have? Doing your homework is vital to successful negotiation. 4. Aim high: People who aim higher do better. If you expect more, you’ll get more. Successful negotiators are optimists. A proven strategy for achieving higher results is opening with an extreme position. Sellers should ask for more than they expect to receive and buyers should offer less than they are prepared to pay. 5. Be patient: This is very difficult for some people. We want to get it over with. Whoever is more flexible about time has the advantage. Your patience can be devastating to the other negotiator if they are in a hurry. 6. Focus on satisfaction: Help the other negotiator feel satisfied. Satisfaction means that their basic interests have been fulfilled. Don’t confuse basic interests with positions. Their position is what they say they want. Their basic interest is what they really need to get 7. Don’t make the first move: The best way to find out if the other negotiator’s aspirations are low is to induce them to open first. They may ask for less than you think. If you open first, you may give away more than is necessary. 8. Don’t accept the first offer: If you do, the other negotiator will think they could have done better. They will be more satisfied if you reject the first offer because when you eventually say “Yes”, they will conclude that they have pushed you to your limit. 9. Don’t make unilateral concessions: Whenever you give something away, get something in return. Always tie a string “I’ll do this if you do that”. Otherwise, you are inviting the other negotiator to ask you for more. 10. Always be willing to walk away: Never negotiate without options. If you depend too much on the positive outcome of a negotiation, you lose your ability to say “No”. Remember everybody lives by selling something. Author: Sue Barrett, www.barrett.com.au

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The Difference Between Selling and Negotiating

Listening to the Needs of the Customer

Many people, especially sales people, often share the mistaken belief that Negotiation forms part of every sale which is not true. We often hear ‘my people need to be able to negotiate’ when upon further inspection they first need to learn how to sell. The reason many rely so much on negotiating is that their initial sales job was a poor effort. They neglected to properly establish the clients’ real priorities and needs and didn’t demonstrate how they can help the customer achieve results; financially as well as via their products, services, knowledge or intellectual property. Instead they find themselves in combative positions needing to negotiate over misunderstandings and limitations and the price rather than value.

So before you and your team head to attend a Negotiation skills course first check if all you need to do is learn how to sell first.

Negotiation with Customer

Negotiation with Customer

Here are some tips that help you know when to sell and when to negotiate.

  1. If the customer expresses needs – you should SELL – by addressing and satisfying these needs.
  2. If the customer expresses objections – you should SELL – by correcting any misunderstandings, managing any limitations which outweigh the objection and providing documentation, if needed.
  3. If the customer expresses interest – you should SELL – by closing the sale and taking the order.
  4. If the customer rejects the deal and makes demands – you should NEGOTIATE – by Buying time if needed; Analysing the proposal from the perspective of the Customer, Competition & Priorities; Analysing the proposal based on your objective, the negotiable points and non-negotiable points; added or equivalent value.
  5. If the customer considers your proposal – you should NEGOTIATE – by presenting the best two options given the client choice and correctly positioning your offering from a Value and Functional perspective.
  6. If the customer accepts the best proposal option – you should SELL – by closing the sale.
  7. If the customer rejects the best proposal – you should NEGOTIATE – by having fallback position proposal offer.
  8. If the customer accepts 2nd fall back proposal – you should SELL – by closing the sale.

Make sure that your sales people know the difference between selling and negotiating by initially training them in good consultative selling process. When they have that mastered, move to training in negotiation skills. Good selling should never need to be combative nor should good negotiations. If done well on every level there should be a win:win for all.

Remember everybody lives by selling something.

Author: Sue Barrett, www.barrett.com.au

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Influencing vs Negotiating

It has often been said that very strong negotiation skills are critical to being a high performing sales person. However, findings from our “sales force fitness” profiling work, where we profile critical qualities for successful sales performance in many businesses, large and small, is telling a very different story.

Before you invest your training dollars into negotiating skills training for your sales team, you might like to think about investing it into influencing skills training instead.

Why? The ability to positively influence prospects or clients towards your brand and product offering – more so than negotiation – is what is needed in today’s market.

Products/solutions are often quite clearly defined and a salesperson’s ability to negotiate price and value-added services is limited in today’s market.

We are now finding some companies are setting prices for their sales teams with no room for negotiation, thus eliminating price negotiations altogether.

(Not always a bad thing if you ask me, given all the pricing discounts I have seen sales people giving away unnecessarily over the years.)

So what is a sales person to do now?

We are consistently hearing in interviews with high performing sales managers and sales people that the ability to positively influence the client is a more critical competency than the skill of negotiating. This has direct relevance to the emotional intelligence (EI) area of managing others emotions.

The emotional management of others is the skill of influencing the moods and emotions of others. A sales person’s ability to:

  • Influence a prospective customer to say ‘yes’.
  • Overcome a customer’s reservation towards a new product.
  • Help a client feel enthusiastic about a product they recently purchased.
  • Plan with a client how to best engage their ‘economic buyer’.

These are critical to success in business today.

In addition, we are finding that:

  • Accurately reading the client, gauging their reactions and then adjusting your own style is also being highlighted as a key competency of high performing sales people. This is relevant to the EI competency of recognising emotions of others, emotional reasoning and managing others emotions.
  • Building relationships and trust is also critical. For the past three of our major corporate projects in assessing “sales force fitness”, it has been cited as a key point of competitive difference. The ability to build trust-based relationships is influenced by a number of EI competencies – emotional self awareness, emotional awareness of others, ability to influence others’ emotions and emotional control.

Ask yourself: “How effectively are my sales people perceiving, understanding, reasoning with and manage their own and others’ feelings.” These skills are cornerstones to successful selling, as emotions are an inherent part of why people buy and why they do not.


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Rethinking our economy… How do we sell in a Circular Economy with Doughnut Economics?

achieving doughnut economics

Go out on a limb

It’s hard not to notice that we all have quite a bit on our agendas; lots of things competing for our time and attention; too many things that are likely to leave us feeling overwhelmed, overloaded and often confused.

People are asking lots of questions, e.g.:  Which way to turn? Which way to look? What to do? What is right? What is wrong? Who should we believe? Where do we go?

But, as we always say ‘It all starts with OPPORTUNITY’. So I invite you to go out on a limb with this article. I need you to be a bit adventurous. We are taking a look into the future. Why?

Because any good business and sales strategist will take time to look into the future to pick up on trends, signs, information and ideas that are signalling change. They will pick up on themes that are relevant and even those that appear not to be.

My team and I have the privilege of working across many industries in the public and private, N4P and government sectors. This in itself keeps us open minded. In the last 3 weeks we have worked with companies who sell medical implants, high end stoves and fridges, online advertising and data analytics, tyres, apartments and houses, commercial kitchen exhaust cleaning services, fertiliser for farms, and capital equipment for beauty and hair salons. You can’t help pick up on the nuances and trends in each of these industries. If you pay attention.

One thing is for sure, we are being asked to rethink how we live, work, survive and prosper whether we like it or not.  So we are going to explore some very interesting concepts that are more than likely going to become our collective way and it’s better to be prepared.

That is why we want to introduce you to the Circular Economy and Doughnut Economics.

What is the Circular Economy?

circular economy diagramCircular economy is an alternative for the “Take, Make, Consume and Dispose” mindset and business model.

It is easiest to imagine first if we look at the living natural world where there is no landfill, no waste: in this biological cycle things live and die and are recycled and repurposed by nature in a circular manner. There is no waste.

Unlike the human world where we have adopted, for many years as part of the industrial revolution, a linear economic approach to growth where we end up with land fill, the Circular Economy is a restorative and regulative model by design. What used to be regarded as waste can be turned into a resource. Design and production are made with the end of the product lifecycle in mind and taking into account the materials involved.

The Circular Economy aims to keep products, components, and materials at their highest utility and value at all times. It preserves and enhances natural capital, optimises resource yields, and minimises systems risks, and it works at every scale.

Circular Economy Principles:

  1. Preserve and enhance natural capital
  2. Optimise resources yields
  3. Foster system effectiveness

Characteristics:

  1. Design out waste (with biological materials) non-toxic, so they can be simple composted; design out waste with in technical materials (man-made compounds) designed to be used again with minimal energy and highest quality retention
  2. Build resilience through diversity (modularity, versatility, and adaptability)
  3. Work towards energy from renewable sources
  4. Think in systems: Elements are considered in relation to their environmental and social context.
  5. Think in cascades – extract additional value from products and materials by cascading them through other applications.

The future of sales in the Circular Economy

Can you now imagine all of the business I mentioned above operating in a circular economy and not having any waste?

The circular economy will change how we view ownership: Return and Renew will become a real concept i.e. things will be licenced then returned to the owner/manufacturer when we have finished with them and then they will be reused in some way.

For instance, there is The Circular Economy Club (CEC) which is the global network of Circular Economy designers, engineers, economists and strategists who are resetting the world standards. 

There are many companies already somewhere down the road on the Circular Supply Chain:

  • Tesla of course is leading the charge (pardon the pun)
  • Dell is making some of the first inroads to a more “circular” supply chain. As part of its 2020 Legacy of Good Plan, Dell also has established two objectives tied to cutting down on e-waste: using 50 million pounds of recycled materials and recovering 2 billion pounds of e-waste by 2020.
  • Every Levi’s store accepts old clothes and shoes of any brand, which the company collects and repurposes or recycles with its partner, I:CO. The collected clothes are transformed into things such as insulation for buildings, cushioning material and new fibers for clothing. Earlier this year, the retailer partnered with textile technology startup Evrnu to create a pair of its iconic 511 jeans from post-consumer cotton waste.
  • In 1994, global carpet manufacturer Interface set a bold target: to eliminate its negative impact on the environment by 2020. This involved “designing and manufacturing sustainable closed loop products.” In 2007, it became the first carpet manufacturer to implement a process for the “clean separation” of carpet fiber from backing. The recycled Nylon fibers then return to Interface’s supply chain and become new products. A similar process dubbed Cool Blue allows for the closed-loop recycling of carpet backing. And the company also utilizes bio-based materials to clean up its supply chain.

The Circular Economy seeks to rebuild capital whether this is financial, manufacturing, human, social or natural.

Doughnut Economics

Now combine the Circular Economy (microeconomic model) with Doughnut Economics (as the macroeconomic model).

Doughnut Economics has been developed by Kate Raworth who has turned current economic thinking on its head.  And it makes sense.

Traditional economic theory promotes the ‘circular’ flow of goods and money but traditional economic thinking does not take into account the complex system of humanity, like unpaid work such as parenting and caring for family, social exchange – the collaborative commons, the essentials of life, and the 9 planetary boundaries (see Doughnut Economics diagram below).

With 60+ years of traditional economic growth now floundering, we need to rethink how we can progress.

Kate asks us to consider, what if economics didn’t start with money but with human well-being?

Kate challenges us to rethink our ideas of progress.

Doughnut EconomicsShe asks us to consider the doughnut model of economics where progress looks like the balance between using our resources and protecting life as an interconnected support system.

Kate asks us to rethink how we shop, eat, travel, earn a living, vote, volunteer and bank, and what we would do if we used the Doughnut Economic model in our daily decision making processes.

She goes on to say what if every business decided to be a Doughnut Economic business and brand?

What if every business decision we made was made by balancing out resources and protecting life?

What if every government used the Doughnut Economic model around their negotiating tables?

Based on the current degradation of the world’s resources, using the Doughnut Economic model would be called sanity.

I liken the Doughnut Economic Model to as if we were all living on a spaceship and had to keep ourselves alive for years without access to any outside means. Because that is what our world is – one giant spaceship with limited resources powered by the sun.

Human beings have demonstrated time and time again their ingenuity. We have amazing talent to deal with challenges and create new ideas, new services, new systems to deal with adversity.

There’s a world of opportunity to re-think and re-design the way we produce and consume.

There is so much opportunity here if we go out on a limb and rethink how we do business, rethink progress, rethink economics, and rethink society.

It all starts with Opportunity. Go out on a limb…

How can you get started?

We recommend:

Here is a great short video to explain the concept of The Circular Economy in about 3.48 minutes

Why it’s time for doughnut economics

 

*Sources

 

Remember everybody lives by selling something.
Author: Sue Barrett, www.barrett.com.au 

Image taken from Wrap showing a very good explanation why circular economy is important.

Sales Trend 7 – Buyer Behaviours in Transition

12-sales-trends-2016-trend-seven-Buyer-Behaviours-in-Transition

Sales Trend 7 from the Barrett 12 Sales Trends for 2016 Report is ‘Buyer Behaviours in Transition’.

For some time now we have seen many suppliers falling victim to the ‘race to the bottom’ mentality and tactics driven by various businesses and their procurement teams, especially from the oligopolies that exist here in Australia and the large international corporates.

As highlighted in 2015, our Sales Trend 1 was  ‘Race to the Bottom’ which showed the culmination of the disastrous effects of such short term thinking and tactics on business success, innovation and profitability.  While this 2015 sales trend will linger for some time, common sense seems to be prevailing with an alternative trend emerging from the chaos and bloodshed of the race to the bottom tactics.  

By way of background to this trend it helps to look at where Procurement has come from and what is driving their tactics, behaviours and actions. Since the early 1990s, the primary function of Procurement Teams has been to extract cost savings from bought-in goods and services. But as we are finding there is a limit to the number of times buyers can sip at the well of unit price reduction which is demonstrated in another one of our 2016 sales trends – Beyond Profit Erosion.  This reductionist approach to ‘single unit’ pricing takes things too far and falls into the point solution or silver bullet category as is doomed to fail.

This Sales Trend sees Buyers in Transition and highlights that more mature procurement professionals, who have been through the sourcing cycle several times, are now starting to seek new ways in which they can be relevant and valuable to their organisations. They are seeking innovation, ideas, collaborations because they have seen that taking prices lower would be detrimental to their business.  It’s early days but things are starting to shift, albeit slowly.

Specifically, the more mature and enlightened procurement teams are looking to derive advantage from the unique insights of their supplier base. They are becoming conscious of the potential for the external participants in their supply chains to deliver innovation, both as continuous improvement to operational processes and as new-stream value.
Supplier Relationship Management (“SRM”) is becoming the focus activity for more enlightened procurement functions and teams.

Supplier-Relationship-Management–SRM

What is SRM?

Supplier Relationship Management – SRM requires buyers to broaden their endeavour from negotiating the initial commercial transaction to establish a beneficial relationship with key suppliers / providers for the duration of the supply arrangement.

Until recently, research into how this can be achieved has been overwhelmingly buyer-centric and supplier perspectives have largely been ignored or limited to the “Voice of Supplier” interactions with a single sponsoring buyer. Preliminary Supplier Relationship Management research, currently being conducted by Catherine Thompson and Rebecca Varley, is highlighting that healthy buyer – supplier relationships have more than one side and by establishing an open and transparent dialogue with suppliers and highlighting shared values, experiences, ideas and strategies better, healthier and more sustainable relationships can be forged with buyers.

However, there is still some way to go to achieving healthy buyer-supplier relationships

Some of the hurdles or road blocks that still exist include:

  • Ethics of Buyers in question: Preliminary findings from the Supplier Relationship Management research shows that over 50% of the suppliers surveyed in the past 12 months had encountered buyer behaviours they classified as unethical. Most commonly cited were re-negotiations of contracted arrangements to reduce pricing and to push out payment terms. These practices have received extensive publicity recently in relation to the supermarket giants, and we are aware that they are also prevalent in the stressed resources sector.  Suppliers also reported that buyers inflated volumes on which they relied for pricing, and expressed concerns about the probity of tendering processes.
    NB: What is very interesting is that a large majority of suppliers who identified unethical buyer behaviours had taken no action to correct them. Their main concerned was the ramifications on their revenue streams, and potential repercussions from the buyer, such that the supplier who just “reduced the price to keep the client” was representative of the population. Many cited the importance of the customer’s revenues as the reason for their inaction.
  • Ramifications of Contractual Frameworks on Supplier Relationships: The research also highlighted that much of the behavioural potential in the buyer/supplier relationship is crystallised at the formation of the contractual relationship, and this is where imbalances of power for relationship-building manifests. The reasons for the suppliers’ concerns were that the contract terms typically, and unsurprisingly, favoured the buyer’s position and shifted risk to the supplier. This is perfectly rational behaviour from a buyer looking to maximise the upfront value of a deal. However, from an SRM perspective, a relationship whose formal construct is not equitable, mutual, or balanced will find it more challenging to cultivate the trust and encourage the discretionary effort which may lead to enhanced long-term supplier contribution.
  • Contractual frameworks adversely affecting innovation: Most standard levels of performance (SLAs – service level agreements) in supply relationships centre around pricing, quality and delivery expectations, with penalties for failure to perform to the agreed standard or other negative incentives such as termination.  However, even though many SRM contracts may state that buying organisations value innovation, the majority of suppliers do not believe that buyers valued innovation given their current behaviours. The focus on meeting standards and the consequences of failure led one supplier to observe, representatively: ““all the incentives are penalties so focus is shifted to ensure we DON’T miss our SLAs rather than how to increase service levels”. This leads to an inevitable observation: that it may not be a realistic aim to tap into the innovation potential of suppliers from a relationship contractually structured to address dispute and non-performance. When asked for insights into their most positive buyer-supplier relationships, 70% of suppliers stated that these buyers focused on deploying measures such as ROI, market share, profitability and time to market, all of which implied a greater willingness to share internal data – some of which is considered corporate-in-confidence – and a more collaborative mindset.
  • Suppliers need to lift their game, too: The SRM research found that too many suppliers entered into unsustainable or unprofitable transactions over the preceding 12 months. Around 50% of these decisions were to lock out a competitor. However, the remainder were evenly split between entering a new market sector and offering lead-in pricing to customers with the hope of more profitable future business. Given the nature of contractual relationships that we have already explored, this latter strategy is a potentially risky one. Suppliers’ salespeople were also failing to maximise their face-time opportunities with buyers by not enforcing contractually agreed periodic review meetings that could potentially provide both business intelligence and a platform for their products and ideas.  

the-way-forward

The way forward: The Enterprise Impact of Better Business Relationships between Buyers and Suppliers
There is a rich upside in creating customer-of-choice status with buyers. Suppliers felt confident that they could positively impact a wide variety of measures within the buyer’s business if they were given the opportunity to do so. There is a desire from suppliers to be able to understand the real business priorities, issues, opportunities and strategy of their buyers moving forward.  However, to date the SRM research shows that only 15% supplier respondents are using alternative contracting methodologies (such as Vested or outcome based) that seek to identify common ground and purpose and provide a more collaborative counterpoint to traditional contracting.
The remainder were evenly split between the curious and those who felt these frameworks had no place in their industry. There is huge potential here for supplier-led innovation to create a new contracting environment with suppliers.
The primary catalyst for change, voiced by one supplier and echoed by others was “a paradigm shift in attitude of buyers and suppliers”, by which they meant that buyer(s) need to demonstrate a greater willingness to engage in dialogue and to listen to supplier perspectives and the suppliers need to take time to understand the buyer’s business better and then provide actionable insights to improve the buyer’s operating environment. Acknowledging that corporate resources are finite, it may still be to a buyers’ advantage to solicit the views of both large and smaller, more nimble providers in targeted projects such as re-engineering efforts.     
The SRM research revealed the Top 3 ingredients for a successful relationship. Trust topped the list, followed by open communication. Third was context, as the foundation for interpretation and helpful intervention.
This is a very simple, intuitive and almost obvious success recipe.
The challenge for building better business relationships is not identifying what a good relationship looks like. It is finding the way for both buyer and seller to create such a relationship from the beginning and that is able to remain a good relationship for both parties through time.
 

Remember everybody lives by selling something.

Authors: Catherine Thompson and Sue Barrett 

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