Establishing the relationship between value and  negotiation   

“Where Do We Need to Be?” Any variation of that theme will suffice. Thinking about it makes me squeamish because we’ve just queued-up unnecessary concessions. Our willingness to do so indicates that we’ve raised the white flag of surrender. We’ve subjugated our negotiating position and acknowledged a willingness to forego some of our margin, and perhaps some of our dignity.

All of us have fallen on our swords at one time or another. The important thing is to learn from our mistakes. Once those words have been uttered to anyone within the buying organization by a seller, the buyer has been given carte blanche to have their way with you. Your engagement rules are now out the window - abandoned.

By acknowledging willingness towards unilateral concession, the selling entity has effectively commoditized itself. The buyer can then begin the vendor dance, playing the price point game.

This is why early in the buy/sell life cycle, the seller must negotiate some form of a Business Value Analysis (BVA) event. This is the forum that a potential buyer can use to determine the economic, and/or operational changes likely to occur from the usage of your offering. Think of this as a great qualification /disqualification tool. Why wouldn’t they want to explore the projected value of their investment?

The key to a successful BVA is that the output must be the buyers’ projection. The seller should negotiate a value event early in the buy/sell life cycle, before agreeing to commit resources. It’s an often successful tactic, because structuring a value event makes good business sense to an objective buyer - unless you’re being positioned as column fodder

Establishing value recognized by both sides is one of the most important early negotiating steps in the buy/sell life cycle. The buyer has a much better understanding of the impact of the sellers’ offering and is now able to justify the investment. The seller is empowered from the BVA. When it comes time for the negotiation, it is much easier for a salesperson to resist costly concessions if both sides understand value.

The Most Expensive Six Words in Business

"Where Do We Need To Be?"

Think About It...We'll Discuss in the Morning

Speaking in Tongues

It seems doubtful that a buyer will choose a particular solution or offering without understanding the economic or operational impact of a seller’s solution.  Just doesn’t make sense.  Most of our clients sell product, service or solution-based capabilities that if used properly, will impact multiple stakeholders on the buyer side.  Sellers tend to hamstring themselves by failing to reach those stakeholders in order to discuss usage of the sellers’ product.

A thought – if you’re going to commit your time and organizational resources on an opportunity, then it’s critical that everyone on the potential buyer side being impacted understands how, or what is likely to occur.  Ideally, each stakeholder should be capable of projecting what will change resultant from the sellers’ product or offerings.  That could be a tall order, but it must be done.

For discussion purposes, let’s assume your offering will significantly impact the directors of finance, operations, engineering, IT and sales/marketing organizations of a particular prospect.  Who will ensure that your sales team has had business conversations with these stakeholders? Where in the buy/sell life cycle are these conversations going to occur?

Here’s a thought. Prior to expending significant resources on the sales effort, attempt to negotiate a series of best practice events as part of the evaluation process. It’s an effective tactic because if an organization is seriously looking, it makes good business sense to thoroughly evaluate a potential vendor. The key is that the salesperson must ask for the events to occur. It’s a great time to exercise quid pro quo.  

One of the most important of the scheduled events should be some form of a business value analysis. Each stakeholder must be able to understand how usage of the sellers’ product will change the status quo.  The business value analysis should be conducted in the business language  of the stakeholder. This requires the seller to be skilled in multiple business languages. If a seller is speaking to finance, then the spoken tongue must be that of finance. If the conversation is conducted with operations, the seller needs to speak fluent ops. The same concept applies to engineering, IT, sales/marketing, etc.  

But wait! There’s more. It will likely become necessary that sellers understand and be able to converse in many of the sub-dialects impacted, i.e., purchasing, customer service, data processing, and so on.

So, for critical opportunities it’s important to ask good questions, and provide clear responses in the language of the stakeholders. Negotiated events in the buy/sell life cycle can ensure these conversations occur. Organizationally, sales or training leadership should provide the messaging and conversational tools that facilitate these events.

Testing the Sales Hypothesis

There is a question we like to pose to clients in our sales and sales management workshops:

How often in your selling career have you been caught off guard by a loss involving an opportunity that you were convinced was yours?

You gave it your very highest degree of confidence on the forecast only to receive the crushing news that you've lost to a competitor or worse yet, no buying decision was made at all. Besides the obvious embarrassment, there are painful business ramifications to an inaccurate forecast. Senior executives have been known to slash their wrists when, after receiving profuse assurances from everyone, a critical account fails to materialize. Why were opportunity assessments so far off the mark?

The reason may be due in part, to that pervasive selling malaise known as Happy Ears. Nearly every salesperson (and often their managers) contracts the dreaded Happy Ears Syndrome at some point in their careers.

Known to gleefully infect salespeople of all ages, creeds and color, Happy Ears strikes without prejudice. If not treated early and aggressively early in the buy/sell lifecycle, the result can be crippling. There is no known inoculation to prevent it other than common sense. The resultant impact can generate searing consequences. Bad forecasts have caused stocks to tumble, earnings projections to be missed and left promising careers in shambles.

As an undergraduate, we were required by my university to prepare a senior thesis which was, by design, to be rigorously analyzed and challenged using the scientific method as a testing process.  As a graduation requirement, candidates had to form a hypothesis relative to a subject of interest within their area of academic concentration. Then, using meaningful statistical analysis, the student was expected to either prove or disprove the hypothesis, defending the findings before a committee consisting of departmental faculty. There is a concept here that if applied, could have a beneficial impact on a selling organization's ability to better predict closing at the opportunity level. 

As in school, this effort will requires diligence and occasionally, a degree of behavioral modification. Some say that the mantra of a salesperson is, “hope springs eternal”, bringing to mind the false hopes and illusions of Willie Loman in Arthur Miller's Death of a Salesman.  An unsettling concern is that many executives forecast sales revenues based mainly upon the gut reaction, or opinion of a salesperson. Revenue performance forecasting based solely on opinion or false hope, is as much of a tragedy as that portrayed in Miller's story. That the practice continues suggests that there may be some fundamental shortcomings relative to pipeline validation practices.

Salespeople love to present their offerings on management's altar with great panache. In order to add a veneer of credibility, they'll crunch their forecast through the appropriate CRM machinations and present it on PowerPoint or a spreadsheet for all to see. Managers and higher-ups shudder in delight and anticipation, sellers preen in the spotlight and onto the forecast it goes.  Ironically, many of today’s CRM and BI solutions really are effective, provided they capture valid data.

Many sales professionals struggle with the ability to properly qualify a potential lead - even more destructive is the lack of disqualification skills. Sales leadership should define exacting criteria when identifying forecast milestones.  Fine - sure, every organization does that, right? Wrong, they lose their way with their process integrity, by not adhering to their own rules.  Soon, the exception becomes the rule.  If sellers and managers would leverage testing rigors to examine and test their opportunities against their milestone criteria the way they did in school, they would be much more likely to disengage themselves from non-opportunities and spend their time on more productive pursuits.  Testing should occur throughout the life cycle of the opportunity.

Here’s the problem, instead of testing the veracity of the seller's opinion based upon agreed upon events, and/or completed milestones, managers in their rush to judgment often add their own spin, further enhancing the illusion of imminent closure. Sadly, the root information is still suspect at best, because it hasn't been truly validated or tested.  Salespeople, and often 1^st line managers, are seduced into a costly, resource intensive, web of calculated disinformation, designed for a single primary purpose: to create hope in the mind of a desperate salesperson. This seduction facilitates a virulent breeding ground for Happy Ears Syndrome within a sales organization because now (remember our CRM?) it has been reinforced with technology. What happens when this forecasted opportunity continues up the food chain in a sales organization? 

Enamored in the glow of that which is state of-the-art, someone forgot to test the sales hypothesis. The forecast is not worth the powder to blow it up.