Leaders: Do You Have A Negotiating System … Or A Discounting System?

Here’s a powerful question I urge senior leaders to ask sales managers: What is our negotiation system?

In other words: What is the process for negotiation that has been taught and trained to all your salespeople? If you get a clear answer, then rest assured you won’t be experiencing discounting on a regular basis, and you’ll see a lot of healthy high-margin deals emerging from the pipeline.  However, if the answer is indistinguishable from “give salespeople permission to discount,” then it is time to make some changes.

How much top-line revenue was lost over the last 3 years due to discounts off your list price?  Find this number and you’ll know right away whether you have a negotiating system – or a discounting system.

Very often, we see salespeople volunteering discounts to buyers, or asking sales leaders for discounts routinely, confident that they will be approved. This means there is no negotiating system in place. So what do you do if that is your situation?

First, acknowledge that this is a leadership issue. Sales leaders must set the tone here. In some instances, they are perpetuating a mindset that discounting the price is necessary in order to get a deal in certain situations – say, by the end of the month, in order for the team to hit their numbers.  Yes, we want them to hit the numbers … but is offering discounts really the way to do it?  I’ve heard many sales leaders say, “What kind of discount do you think we can offer them in order to get this deal in by the end of the month?”  This is a clear symptom of a dysfunctional discounting system mindset. This approach erodes any value that was built throughout the sales process. It  conditions your new customer to expect and ask for discounts on all future purchases.

Here is what poor selling sounds like: “I need to get this in by the end of the month and I think if I offer them X% off, then I bet I can close this.” Make no mistake. If the sales leader simply agrees to this, that is a failure of leadership. The salesperson approaches their customer with the discount, and gets nothing in return.  Very often, the salesperson loses the deal to a competitor the buyer has convinced to match your price – meaning the opportunity was never going to close in the first place! What a waste of time and resources.

If your sales team is consistently negotiating internally for better pricing on behalf of their prospects, you are looking at a sales leadership issue!  Ask yourself: Have we created an environment where the best negotiating happens internally … and the sales reps are negotiating against themselves?

A clear negotiation process leads to greater fidelity to the published list price, with concessions offered only in exchange for something from the other side. The concessions given have little or nothing to do with the amount of money that gets deposited in the bank. Discount-driven selling, on the other hand, relies on price cuts to move deals, erodes margins, and degrades your organization’s credibility in the marketplace.

Second, give them a process. Increase your team’s Negotiating Intelligence.  Start by giving them a system that can be trained, practiced, and applied under the pressure of a negotiation situation. Help them define what their first and second moves are when faced with the “asks” they are most likely to hear from a prospect. Identify a list of concessions they can offer that have zero to do with reducing the list price – and that can only be secured by a parallel concession from the other side. Sandler’s Negotiating Matrix can help with this process.

Having a system builds confidence and consistency!

Third, recognize the most common moves. As your sales team starts to learn about the negotiation process, they’ll find that there are a number or typical “gambits” used by prospects in your industry.  You have probably used some of these gambits yourself. For instance:  “Your competition is coming in cheaper.” “Your pricing is higher than the other bids.” “I have to take this to the boss, so give me your best and final offer.” Identifying such moves for what they are – moves — is an essential step, one that too many salespeople simply never take. Your sales leader’s job is to help the members of the team recognize these gambits when they arise, and then coach them, via private roleplays, on how to handle them when under the pressure of a meeting with a prospect.

Fourth, spot the black belts. Train your team to recognize those situations when they are going to be dealing with serious negotiators. Typically, the larger the company, the more time and energy the organization has put into a “buying process” that includes training their executives and procurement teams on how to secure pricing and terms concessions from you.  Surprise, surprise: These people have been taught to understand that a sales rep has a quota to meet, and they know your salesperson will have placed this opportunity into the pipeline and projected income from it. They also know how and when to “ghost” the salesperson to gain an emotional and strategic advantage.  Recognizing a solid negotiator early in the sales process is key to predicting their playbook later in the sales cycle.

The four steps I have shared here are a beginning, not the end of the journey. But they will help you to begin the task of transforming a dysfunctional culture of discounting into a viable sales process that incorporates a clear negotiating system. You have a right to defend your value and hold on to your price.  Start with the four steps I have shared here … and the results will show up in the top line!

Commentary by Clint Babcock. Here’s what you’ve missed?
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