B2B Street Fighting Blog

a grim fairy tale of margin and brand equity erosion

Posted by Brian Dietmeyer on Mon, Apr 15, 2013 @ 04:33 PM

Once upon a time there was a negotiating marketplace where the sellers were comprised of huge multinational companies. These sellers were distributed throughout 25 industries. All the sellers had massive sales forces, many of which were the cream of the crop, from national and global account managers to the leadership. These salespeople and their leaders focused on the largest and most profitable customers for their companies. 

Seller No. 1 noticed that the marketplace was being flooded by aggressive professional buyers. They demanded massive price discounts while simultaneously pushing hard for Seller No. 1 to provide valuable parts of its value proposition for free. To further complicate matters, the seller’s competitors were prone to irrational behavior, giving in to buyers’ demands and getting nothing in return. All the while, deals in the marketplace were becoming bigger, longer term, more strategic and fewer in numbers, making each one increasingly important. To combat this, the seller had a negotiation strategy/plan that featured:

  • a grim fairy tale of margin and brand equity erosionLimited internal cross-functional agreement on how to combat what was happening in the negotiation marketplace
  • Very little proactive planning to deal with the increasing irrational competitive behavior
  • Almost no consistent planning for the bigger, longer term and more strategic deals
  • Barely any consistent sales force practices or processes on how to negotiate with customers
  • Almost no integration of selling and negotiating
  • A tendency to accept customer demands for zero sum concession

Seller No. 1 looked at its peers and saw similar strategies. Recognizing that these strategies might be suboptimal, the seller reached out to traditional tactic-based negotiation training firms and put its sales team through negotiation training. 

After training, almost everything stayed the same.

The seller considered its negotiation performance in the marketplace. Like most of its competitors, it determined it was between somewhat effective and effective as a negotiator.

The above fable summarizes some research we gathered. Internally, corporations have little to no proactive cross-functional agreement on what negotiation success might look like or how to accomplish it one negotiation at a time.

For the most part, negotiation is considered a set of soft skills made up of reactive verbal tactics. No wonder it remains an elective in professional sales development. This mistake should no longer be made given the amount of margin and brand equity that negotiation puts at risk. We in the negotiation industry have set our standards too low. Sales professionals are ill-equipped to stand up to the professional negotiators and purchasing officers, so it’s natural for the marketplace to struggle with margin pressure. Our research finds that this trend can be easily reversed through redefining negotiation standards and setting new negotiation benchmarks consisting of:

Negotiation strategy best-practice standards

  • Internal agreement on negotiation strategy, which maps where we want to go
  • A common negotiation process and language that shows sales professionals how to get there
  • Placing more decision-making power in the hands of dealmakers
  • Completely integrated selling and negotiating processes 

Negotiation process best-practice standards

  • Regularly scheduled negotiation planning sessions
  • An established, repeatable negotiation process
  • Trading instead of conceding; never giving away something for nothing
  • Internal support for the sales team through corporate-wide agreement on what is and is not negotiable, so the team can confidently move forward at the negotiation table

In essence, sales professionals, their leaders and negotiation providers must transform their approach to negotiation. Kurt Lewin, a pioneer of social psychology, said changing behavior consists of three phases:

  1. Creating the motivation to change by unfreezing attitudes 
  2. Developing new attitudes and behaviors based on new information that shifts perspective
  3. Integrating and stabilizing those changes

Consider this: If you have a large cube of ice but prefer a cone of ice, what do you do? You melt the ice to make it amenable to change (unfreeze). Then you mold the ice water into the shape you want (change). Finally, you solidify the new shape (refreeze). 

Our research report explores each of these stages as they relate to establishing a new negotiation paradigm. However, success will happen only when we are motivated to change the way we think about business negotiation and the results we expect from it.

Request this research here.

 

Tags: negotiation strategies in business

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