Training : The 5 Stages Of The Negotiation Process

 

The 5 Stages Of The Negotiation Process

 
Masterful negotiation is a cornerstone for sales success. Calling a negotiation successful requires two things to occur in tandem. You need to get the other party to agree to your terms, and the other party should leave the table satisfied that they snagged an excellent bargain.

But this is easier said than done.

Your customer may not see eye to eye with you when negotiating. This may force you or them or both into making too many compromises or giving too few concessions, bringing the efficacy of the entire negotiation into question.

If you did not get what you wanted and neither did they, there is every possibility of the deal falling through. You will find yourself facing another undesirable outcome: loss of business.

But negotiations do not have to be daunting. There is a science behind successful negotiations, an art to how they are done, and the skill to combine the two and make it happen.

And in this article, we will show you how to do precisely that by understanding what negotiation actually is and then I’ll walk you through the 5 stages of the negotiation process.

 

What Is A Negotiation Process?

Any discussion or a meeting involving two or more parties to reach an agreement through compromise is called negotiation. The agreement can be in various forms. It can be a sales contract, a settlement agreement, or a service agreement, among several other things.

The parties involved in the negotiation process always attempt to achieve the best outcomes for themselves. They engage in a game of tug of war and slug it out until either of them relents.

The process of negotiation in sales is no different.

A salesperson attempts to convince the prospective buyer to agree to their terms and conditions, while the buyer would try to convince the salesperson to adjust their terms and conditions. In the end, both the salesperson and the buyer modify their positions to reach an agreement that satisfies them both.

The modification that the involved parties make to reach a satisfying agreement, ‘a win-win situation’ in business parlance—is called negotiation.

It’s not the same as bargaining

Bargaining is simply the process of haggling over the prices of products and services. But negotiation is far broader than that. It includes bargaining, but it also involves re-aligning expectations and compromises in terms and conditions.
Negotiations are also markedly different from the process of settling differences, arguments, or disagreements—all of which fall under dispute resolution.

 

Different Types Of Negotiation

Before we get into the meat of the article and explain the negotiation process, you must first get acquainted with the two major types of negotiations.

1. Integrative Negotiations

They are otherwise known popularly as win-win negotiations. As its layman moniker suggests, integrative negotiations end in a win for all the parties on the negotiation table. When the parties set out on negotiations, their first attempt is always to get a win-win resolution.

Rather than haggling endlessly until one of them caves in, the parties focus on persuasive arguments that bring additional value to the discussions. Parties spell out what they want from the negotiations and work together to reach an agreement. Because one party knows what the other party expects, it makes the process fruitful and satisfying for all of them. Integrative negotiations also ensure that neither party walks away dissatisfied with the outcome, but instead, they walk away with the feeling of ‘having won.’

Win-win negotiations are the most desired outcomes in sales. You have ensured that your customer or client has gone home satisfied—even overjoyed—with your product or service. They are more likely to return to you, and you are now firmly on the path to turning them into your loyal customer. Integrative negotiations are a topic that we cover not only on our sales negotiation courses but also our Account Management Training because we’re looking to maximise the profitability of the account over the long term.

2. Distributive Negotiations

When one or both parties involved in discussions take an extreme position, it becomes a distributive negotiation, also called a “hard bargain”. When either or all the parties remain steadfast in their demands, the entire negotiation process stalls, one of them must relent for the negotiation to have an outcome. But the party that concedes often walks away disappointed and with the feeling of having lost. The negotiation—although successful for you—has ended in a win-lose outcome.

In the sales business, win-lose outcomes put you in a precarious position. Sure, you got this win; sure, you got the customer to agree to your demands this time. But it would be highly unlikely that they will return to you in the future. Driving a hard bargain rewards you with a victory now, but it punishes you in the long run and is not something we would ever promote or teach within our Sales Training Courses.

 

What Are The 5 Stages of the Negotiation Process?

This brings us to the negotiation process. It is crucial for salespersons and sales executives to ace their negotiations.

The whole negotiation process takes just five steps. That is it! If you can master the process, you will be able to create win-win outcomes with your clients.

Negotiation is an art and a science. Many salespeople are good at selling, but they have poor negotiation skills.

Let us look at the five stages of the negotiation process and identify and explain them all.

1. Preparation and Planning

Many people underestimate the importance of good preparation, and this applies to salespeople too. Preparing for a negotiation and planning your strategy is vital for a successful negotiation. You must attack the issue from your prospect’s perspective and anticipate all their objections. It would also be best if you could think of a way out if your prospect refuses to budge.

You must put in efforts to understand the market and buyers’ preferences. This will put you in a better position to anticipate your prospect’s demands. For instance, if there are cheaper alternatives available for the product or the service you are offering, make a list of all the unique selling points your offering has and which the cheaper alternatives do not.

Always know your product or your service inside out. The better informed you are, the more likely you are to convince your prospect. Customers today are savvy and well-informed, and it is also always best to assume that the prospect you are meeting knows just as much about the product as you, if not more.

If they get the notion that you may not know your product all that well, they might try to skew the negotiation in their favour by misleading you. When preparing and planning for a negotiation, it is imperative that you consider all eventualities to effectively dodge any curveballs your prospect might throw at you.

Not all negotiations are the same. Different negotiations will require different preparation strategies. But if you include these elements, it will help you build a firm foundation on which to build:

• Understand what the prospect values most in the negotiation.
• Identify the interests, not just the positions, of the prospect.
• Identify the facts, rather than just opinions.
• Prepare for the possible options and scenarios that the prospect may bring up.
• Make a list of all the objections or counter offers the other party can make.
• Identify which concessions you can make against which of their offers.
• Make a list of possible trade-offs that you may have to make.
• It would also be best to keep your BATNA (best alternative to a negotiated agreement) ready.

Planning and preparing for your negotiation will arm you with insights and foresight, which you otherwise wouldn’t have had. With all the likely possible responses in your repertoire, you can adapt your sales pitches and modify your presentations as soon as you notice the discussions going off in a different direction than first thought.

 

2. Exchange of Facts and Information

It is vital that you create a pleasant atmosphere that is conducive to healthy discussions. This is the stage where you do it.

This stage of the negotiations starts immediately after both the parties sit down to negotiate. They exchange their initial positions and lay down all their cards. They let the other party know what they expect to get from the negotiation and their reasons for the same.

We recommend letting your prospect lead you into discussions. This will give you the perfect opportunity to size up your counterpart. Are they going to be a walk in the park, or are they going to be a tough nut to crack? If you have planned well for the negotiation, you will instantly know the approach you must take to close the deal.

Good negotiators have excellent listening skills. You must actively listen to your prospect—not to their words but to the subtext behind their words. This will help you get a better handle on their intentions and motivations.

Do not be apprehensive about asking questions. Asking the right questions is how you can come up with answers that will close the deal for you. People like the sound of their voice over everything else. The more you keep them talking, the more they will feel at ease and more receptive they will be to your conditions.

Besides, when you ask all the pertinent questions, the prospect opens up about their issues and concerns. They feel valued, that their issues and concerns are legitimate, and that they matter to you. This helps establish trust early in the negotiation process.

The parties also share any common concerns or interests between them if they feel that the other party must know. At this stage, you discuss the facts with your prospect openly and honestly. This means being clear (from your planning stage) of what your interests are and inviting the prospect to share their interests.

The facts you have considered in the first stage helps you build your information base, and as you communicate during the negotiation, you give yourself the chance to build a clear picture of the journey that you and your prospect will be going on.

This will help you to build rapport and trust with the other party too.

3. The Bargaining Stage

Now we reach the most critical stage of the negotiation process—the bargaining stage. These few moments can make or break your negotiations. By now, both parties have a clear picture of what the other needs from them. They weigh the positives and the negatives and try to determine which outweighs the other.

After one party makes the initial offer, the other party tells what is acceptable and what is not and then makes a counteroffer. They engage in a virtual tango of sorts with lots of give-and-take of offers and counteroffers. The negotiating parties try to determine the value of the compromise the other party asks of them while deliberating over what concessions they can afford.

This is when you get to the point where you are looking at the overall value that you can offer to the prospect.

You need to put the most attention on the interests of the client and decide where you can and can’t manage any concessions in the negotiation. While you’re bargaining, you can determine what is most valuable to the client.

If you feel that there are demands from the prospect that you don’t feel comfortable agreeing to, then your planning and exchanging of information in the previous stage will have brought those out.

You must also be vigilant of any information they accidentally drop—information you can use to influence the negotiation in your favour. This goes both ways. You must also be careful that you do not reveal anything that can give your prospect the upper hand and possibly damage your chances of closing the deal on your terms.

Tempers tend to run high at this stage, so it is crucial that you keep your emotions in check. You must remain calm and composed. If you find things getting out of hand, you must try to diffuse the situation before it derails the negotiation.

The end goal in bargaining is not one-upmanship but finding the middle ground acceptable to you and your prospect. Stay firm on your demands when they are crucial, but also be ready to give concessions wherever you can. Your prospect should genuinely feel like you are trying to help them get a good deal by accommodating their demands.

If you struggle with this step of the negotiation process then you might want to think about using an online sales coach to help you with the areas where you specifically need help with.

 

4. Gaining Commitment and Conclude

During this fourth stage, you’re in a position where you’re able to determine what is the most valuable position that you can take for the prospect’s interests and your own.

This stage of the negotiating process for some salespeople is fear-inducing. You need to have laid down the foundation very firmly with the previous stages for this stage to be a success.

If everything has gone according to your plan and you played your card rights, negotiations should reach a satisfactory conclusion—hopefully, one that is a win-win for all the negotiating parties. The sales close should be inevitable and you will not need to employ any closing tactics or phrases.

It would be best if you quickly go through all the points of the agreement to avoid any misunderstanding and keep confusion firmly at bay.

You should keep an eye out for your prospect’s body language. Paying attention to their subconscious cues will tell you how serious they are about the agreement that you have just reached with them.

When you’re able to confirm that everything has been agreed upon, you can start gaining commitment with the client and ask them what they see as the next stage in the development of the relationship with you as a company.

5. Take Action and Execute

In the final stage of the negotiation process, you will have identified and explained exactly what you have agreed and what will happen next.

The actions taken will solidify the relationship you expect to have and help them to see exactly what actions will be next in line.

You need to ensure at this point that the prospect understands which direction you will go, what paperwork needs to be signed and, if necessary, what agreements still need to be ratified.

You must ensure that you’ve expanded the value of the negotiation in the prospect’s mind and that you have understood, agreed, and developed their interests as well as their positions.

If this stage involves signing a legal contract, ensure that the terms set down in the contract are the same as your agreement. If you are scheduling the signing in the future, it also won’t hurt to get a written agreement signed by the other party. Doing this will reduce the risk of the other party reneging on their word.

Follow these five stages, and you will see that it makes negotiating to a conclusion a much straighter forward affair.

 

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