David Marshall from SalesGRID interviewed Simon Dethridge, Managing Director at BIG Consulting in August 2021. Simon is an expert in B2B sales and has developed a special capability in advising sales teams on how to become more effective negotiators.
Watch the interview here or read an edited transcript
Simon, tell us a bit about yourself and your expertise in negotiation skills
I love negotiation because it’s a key part of what we do in our sales performance consultancy. We’ve been helping clients around the globe for 25 years. We’re based in Melbourne, Australia but we do work with a number of global clients in FMCG, and the liquor business, and we’ve been working out of Melbourne for that full 25 years.
Typically, we’ll work with a sales director, and sales managers to put in place a customised way of selling. So the use of a tailored sales process and by extension, the negotiation approach is something we’ve been doing for two decades or more now.
When I think of sales, I tend to think of negotiation as it’s almost a dirty part of the process. Is there any particular reason why you honed in on negotiation as a key part of your offering?
Well, I think let’s understand where it fits in. Because sales and negotiation are bedfellows, but the selling bit comes first, you need to get a customer qualified for WHETHER OR NOT we’re going to do business.
And negotiation then comes later in deciding HOW; what are the terms and conditions upon which we’re going to do business.
And one of the things we’ll talk about today, in terms of a takeaway for our audience, is don’t confuse the two things; we don’t want to be selling and reverting to selling when we’re in the negotiation phase. It’s a sign of weakness, right?
So when I think of a sales process, there’s a proposal stage and then there’s a negotiation phase. I think of negotiation as a part of the sales process. Are you saying that negotiation is very much a distinct activity that is separate to the sales process?
Well, it’s linked, you know. Let’s go back to a definition.
Selling decides whether or not we’re going to do business. So depending on how complex or simple your sales process is, you firstly want to get in rapport with the customer. You want to earn the right to ask some questions to explore what’s important to the customer, you then frame the solution, and you check whether that solution is going to meet their needs.
So that’s typically the selling point.
And then they decide whether it’s good value or not, whether they like what’s being said, whether it makes sense to them commercially. And if they’re generally astute, they’ll push back and see if they can get a better deal. Or there might be something that they want to reframe.
So from selling, we then move out to the negotiation phase, and good salespeople will recognise it’s part and parcel of what we do. And my job is helping the customer to complete their buying decision and to help them navigate any of the commercial problems.
Therefore, negotiation is a bedfellow and once we’ve confirmed what the terms and conditions are … we can complete the sale by going to a conclusion and we move into the contracting phase.
So what sort of mindset should a salesperson take into a negotiation?
Well, the first mindset is that “this is part of the territory” and therefore there’s an acceptance that it’s probably going to come at some stage. You may make a sale with no negotiation or no objections. That would be ideal. You get everything on your terms.
So the first mindset that I would take in is: “I want to get everything!”
I don’t want to have to trade at all. That would be my ideal. So having an “aim high” mindset, in the way I plan and in the way I open and in the way I deal with any trading that might have to take place all the way through to conclusion.
I’m always looking to get as much of the pie as possible.
Now, there are two types of negotiation. I’m sure we can explore that today.
There’s a distributive one where we argue over the slice. For example, I want 70% and you can have 30. And then it gets to 65/35. And we’re arguing over a fixed amount of value.
That’s one style of negotiation.
And those that haven’t done a lot of negotiation work tend to default into that, you know, that competitive style.
The alternative is when a skilled salesperson realises if we explore a bit further, and what if we were to bake a bigger pie and bring more value to the table that we can both explore together. Even if I’ve still got a 35% slice of a much larger pie, I might do really well out of the negotiation, and both sides can win.
We call that integrative or a collaborative negotiation.
So knowing what style and what’s appropriate in the situation is, again, another call to be made by an experienced salesperson.
So there are a lot of variables.
- Is there a lot of trust?
- Is there value in the relationship long term?
These are some of the questions that you would need to consider. So let me return to the question which was about mindset.
It’s about recognising what’s on offer. And having an objective to get as much of it as you can. But in doing so, and this is a key key thing for anyone to take away from listening and watching today is that negotiation doesn’t take place in your mind, it takes place in the mind of the other party.
So one of the things you really want to have at the forefront of your thinking is how does the other side perceive the situation? And if I can take a mindset of helping the other side to be successful, and seeing it through their eyes, and giving them options and alternatives that work for them, I can achieve my objectives most successfully.
Yeah, good point. There’s this thing with negotiation is that the moment we get a whiff that now the customer is trying to negotiate that we need to drop the price. So you’re saying that you’ve just got to be prepared and you’ve got to come in with this different mindset.
Don’t be too quick.
“Price is what you pay. Value is what you get!” This is a great retort to anyone who wants to narrow the conversation down to price. And if the conversation can swing from one variable, which is price, and go exploring on value, you know what, there might be some arguments that are very logical and beneficial for both parties.
If in fact, they paid a little bit more and got a whole lot more in return, the value goes up, the margin gets protected and the customer gets a better outcome.
I’ve seen many examples where people have bought on price, and they’ve ended up with far worse outcomes. The product doesn’t perform. There’s no backup service, there’s a hell of a lot of risks. It’s often not the number one requirement in the hierarchy of needs for customers.
Typically, if they really explore it, even a hard-nosed procurement person knows the price is just one part of the value equation. What’re the specs? Ethics these days is very valuable. Is it responsibly sourced? These are some of the business to business dilemmas that buyers are facing that a good salesperson can explore with a decision-maker and take the conversation away from price.
Ok. Before we move on, there is a thing about … a very formal point where “we are now going into the negotiation” for example literally going into a negotiation room and there are parties on both sides. And so it is very obvious when to get that mindset on.
Do you have any advice for salespeople where they might get ambushed, like, I think all of a sudden they’re getting hit up with negotiation tactics?
Well, let’s recognise it’s a “dance”. And you know, to be good at dancing, you got to know a little bit about the rules. And there are lots of games that are played.
Negotiation is not logical. It’s often emotional. And if you take the mindset again, back to what we discussed earlier, that the negotiation is taking place in their mind, not in mine, you probably need to think about controlling yourself, controlling the environment controlling the agenda and if you can, controlling the other party and I think that once you gain more skill and see what’s being employed by the other side, it’s less of a worry.
I just know that that’s a tactic. I know they’re trying to use “good cop, bad cop” or I know they’re trying to use, you know the threat of being delisted out of the supermarket or delisted listed out of the department store or dropped as a preferred supplier.
It’s a tactic, but there’s always more time. And I think if we can talk about some of the key things that make a difference in negotiation, one of those is being curious.
So if I’m getting hit up with somebody who wants to pressure me, Well, I’m not going to revert to buying my comfort by giving, because that’s easy to do, but can be very expensive!
What’s more resourceful is to get curious. For example, let me understand a little bit about your perspective. Let me understand your pressures. What does it look like long term, not just today?
How can I be more creative in bringing additional variables, opportunities, considerations into our discussion that will represent some value for you?
So kind of like the analogy in football, what you want to do is maintain your feet, you don’t want to get knocked over. Because if you’re on the ground, you can’t do as much as a player who’s on their feet!
So maintaining that agility, knowing what the rules are, knowing what the tactics are being employed against you, we can be more elegant and maintain a resourceful state that should work out best for both parties, and at least for your own outcome. It’s not being sucked into some of the tactics that are getting employed.
Right, so like, “we’ve only got budget for “x” amount …
Oh that old one
I like that idea of being curious, curious about their position … let’s expand on their position more, rather than just assuming their question is the only thing to focus on right now in the conversation.
And when they say they don’t have the budget to buy your complete solution. Your response could be, “If you’ve only got that much to invest, what would you like me to take off the table from my side?”
So if I’ve got a five-part package, and you’re telling me you’ve got 20% less to spend, well, which of the five things would you like to do without? “Oh, well, no, I want everything.” Okay, well, let’s go exploring.
And so I’ve maintained my feet, I’m not giving. What I am doing is being resourceful and exploring. So there’s a lot of psychology behind selling, I’m sure you understand. And of course, that turns up in negotiation as well. And what humans are wired for is harmony, we don’t like being offside.
If we haven’t developed the muscle in negotiation, in playing the game, we tend to default into bad habits of giving too early, you know, because if I give, then they might feel more friendly towards me, and hopefully, they’ll drop these nasty, aggressive tactics and then I can get to the happy bit where we can shake hands!
But that might be a very expensive approach that costs you half of your margin. So what we need to do is recognise that it’s a process, it takes time.
One of the other things that I would highly recommend to everyone listening in today is to invest in planning.
If we think about planning for a second, a lot of the planning that’s done in negotiation is typically done in the car or the cab on the way out to the meeting at head office.
Well, that’s too late!
What we advise our clients in high stakes negotiations is that we should invest nine to one in our planning. That is, nine hours of planning if you consider that you’re going to be in a negotiation for an hour with a client.
So it’s that sort of investment upfront. And that frees you then to be able to have a number of options when you’re in the negotiation, and areas of opportunity to explore because that’s what negotiation is. It’s more than just the price, it’s terms and conditions. That short term, long term, it’s upside-down left to right, whichever way you want us to package it, we’ll find a solution that works for both sides.
Yeah, I like that. That nine to one rule sounds a bit extreme. But I guess if you are negotiating the biggest deal of your career, whether it’s a half a million-dollar deal, or $100 million contract.
If it’s of lower consequence, do two to one planning, because generally, we do about half! That can be very dangerous.
Yeah. Awesome advice. So what would be the critical steps in the negotiation process that you should be planning for?
We’ll start with planning, right?
So that’s a phase in itself, and that happens prior. You want to think about your “aim high”. What would be ideal?
You want to think about what your minimum is where you will walk away and then you want to do the same thing for the other side.
What are they likely to be happy with as a minimum, and what are they likely to hit me up with as requests?
So if you do those four things to start with, the fifth thing in planning would be, what am I prepared to trade? If I had to trade? What could I give that I’m prepared to give that doesn’t cost me a lot, but it’s really valuable to the other side.
And importantly, what am I going to seek in terms of commitments in return, and I want to work out what’s really valuable to me that doesn’t cost them as much? They’re more likely to give something that is lower on cost to them, but really high value to us.
So one of the words I use a lot with clients is asymmetry with where we find the asymmetry of costs versus values? So that’s the planning phase that’s done upfront, it frees you to then go into the negotiation and make a strong opening.
Now with opening again, we advise our clients to be the first ones to anchor, what is your opening position. Because it’s easier to trade down than it is to trade up.
Once we’ve anchored our position, we want to go into listening mode, we want to think about what’s the other side’s response? What are they hitting me up with? What do they like? What don’t they like? Where’re their sensitivities? Where’s their happiness? Where’s their exposure? Where can I go probing?
We call that trying to understand the customer’s shopping list. What’s important to them. That allows me to work out how far apart we are, what’s the gap. And in closing the gap, that’s done by trading, I’ve prepared those prior, but again, on my feet, listening to what’s come out in the negotiation.
I then want to frame how I’m going to close the gap through trading. Now in trading, we’ve got some very specific language to suggest, David. And that is an assertive style to use language such as “if you, then we”. So “if you were to offer me the volume from all the sites around Australia, then we could look at adding a rebate”. So “if you were to confirm all five parts of my deal, then we can give you the very best terms and conditions”.
So that’s an important part of being assertive. And part of being assertive is saying no, “that’s something I can’t do”. That’s “something I’m not prepared to do”. “Instead of what I can’t do, let’s talk about what I can do”. So the trading of concessions is the way in which we close the gap and move towards the final phase, which is confirmation.
Now the last thing to mention here in terms of process, once we’ve got to a “Yes”, the job isn’t done. We obviously need to formalise high-value high stakes negotiations with an agreement. If the stakes are lower, then an email might do it in terms of confirmation. But the other part that’s often ignored by salespeople is sustaining an agreement. What does execution look like? What are the standards post, the contract that we want both want to be held to? I’ve seen a lot of value leak because the negotiation wasn’t really the big game, the big game was compliance post. So you want to think about how to sustain the agreement.
That last point is really interesting. This might happen where you didn’t do much negotiation. Maybe you thought you had a great deal off the bat. Do customers do this on purpose?
Well, sometimes it suits them, and they take advantage of it. And you know, the more ethical we are talks to the style of negotiation. If we’re both going for win-win, then we will both want each side to follow through appropriately. But if someone’s only about gain and not the relationship, they may be more inclined to take a win-lose. And if someone hasn’t followed through and done their part, and it’s commercially advantageous, and they have a low moral compass, then they’re going to take advantage of you every day!
Yeah. I’m just thinking about, you got me thinking about some past situations. I think Simon I wish we had this conversation a while ago! But anyway,
I hope they’re not nightmares for you though because you’ve been very successful (David blushes)
I think this is really such an important topic and that preparation … the nine to one ratio. So let’s say you’ve done all your prep and you’re in the negotiation. What sort of behaviours or practices should people really consciously try to avoid in the negotiation.
Why don’t we talk about what you should do first, and then we’ll talk about tips for young players on what to avoid.
If I could boil down the value of our little time here today, I would give these three strong suggestions of what to do in negotiation, this will make you better.
The first thing is to be really good at is asking questions, right? And if you ask questions, it’s incumbent on you that you turn on your two ears and listen for their response, because information is still power in these situations.
And what we’re going to do if we’re going to go exploring if we’re going to find out what’s important to the other side, remember, it takes place inside their head, you want to ask great questions. That’s the number one skill to deploy…
Number two, we make proposals – concise and precise. What is it that you’re prepared to do? And again, that language is “if you……, then we…”
The third thing we do, and there’s only three things…
The third thing is that you shut the hell up!
And it’s tough, we let silence do the heavy lifting.
And you know you’re in the presence of a good negotiator if they have the awareness, and the discipline, to only do those three things, you know that you’re in negotiation with a star.
Now, the things you don’t want to do, I think I alluded to at the top of the call, is that what we don’t want to do is revert back into selling.
So if I go back to selling, and again, talking about features and benefits, it means I’m not confident in my proposal. So that would be something to avoid.
Don’t confuse selling and negotiation. We only do three things in negotiating and selling is definitely not one of them.
Another thought of what not to do in negotiation is use round numbers. See, round numbers are approximate. Non-round numbers are authorities. So if I’m selling an apartment, and I put $750,000 on it, that’s a sticker price. It’s a roundabout, if I’m trying to buy an apartment, I might put a bid in at $627,000. Now they go wow, where did that number come from? Well, that’s what I’m prepared to pay. That’s the market talking to you. It’s not round, it has authority.
Another thing to avoid are wafty words, “I was thinking that maybe…. perhaps…. would you be open to considering…” That’s hope. Whereas a more assertive approach is to say “I’m prepared to pay $627,000 for the apartment with 120 days settlement”.
When I’m delivering my proposal, it’s concise and precise. There are just a couple of things for them to consider.
And finally, the other suggestion, which I might add quickly, is that if you are going to trade, make sure it’s conditional on getting something in return. I see too often in the desire to be comfortable because we’re wired that way, we give and we give freely, we buy our comfort. And that can be very expensive.
Yeah, indeed I guess you talked a lot today about trading. There’s this theme here that you’re walking in their shoes as well. And it’s you know, the coming together of minds – it does not necessarily need to be this combative thing.
Doesn’t need to be – you’re right.
So, do all negotiations need to be a win-win in the modern world? Or is that not always the case?
Well, I think you’ve got a number of options.
So if we were to explore a four-box matrix from lose-lose to win-win, and the other two options in between, a lose-lose outcome would be where an agreement wasn’t met, or we didn’t even try.
And what we want to work out with negotiation is whether it’s worth doing business. Remember, it’s the terms and conditions. It’s HOW we want to do a deal, that might still be an outcome that’s positive because we should never do a deal that puts us in a worse position than if we didn’t.
So if I’m going to explore negotiation, it doesn’t mean I have to reach an agreement. It might confirm that this is someone whom we shouldn’t do business with. We’re misaligned. It doesn’t make commercial sense. So we go away. This might be seen as a win for one or both parties.
But a lose-win is where the salesperson cops it on the chin and the customer has a clear win. Now I wouldn’t recommend we aim for those, but as part of a longer-term strategy, you may choose to give a customer a win in the short term, in order to expand the share of wallet in the long term.
So there’s the rider that lose-win has a place, certainly not something you would go for in the moment. It’s something you may choose to plan for.
Let’s explore win-lose. And that’s where I’m putting an emphasis on the gain because I have low concern for the relationship. That’s something that’s quite tactical, it would be where there’s no need for longer-term relationship and trust has not been established.
The Win-Win is where both sides have a great outcome. And I think more is created when we work in a win-win. And it makes it a lot nicer when you’ve got to come back next month if you’ve got a long term relationship and you want to expand and do more together.
Actually, that last point that you made was interesting about the lose-win.
I guess the customer wins, but you’re looking, you’re trading off, I guess against longer-term increase, a potential increase in share of wallet. You can still trade on contractual assurances or some sort of longer term commitment from the customer.
Let me give you a story.
In the last half an hour before I joined you on this call, I had a client ring me, there was a couple of million dollars at stake. And the threat was made by the head of their procurement that if they didn’t concede they would be dropped as a supplier. And this came as a big shock to the account manager who I was dealing with and the managing director of my supplier who was in the meeting as well.
And what was interesting was that he said “You know, I found I had a strong emotional reaction – I was offended! And this is a long term client and I wanted to tell them how devalued I felt.”
And we discussed his reaction. And then he realised, “I’ve just been talking about me when you’ve advised me and guided me in the past Simon that negotiation takes place inside their head!”
I say great. Let’s go and explore what you could do if you had your time again.
Now this person was Head of Procurement, they needed a win. We’ve got a couple of million dollars at stake here. And I said to him, “you want to be really firm about what you’re not prepared to compromise on”. So we’re gonna ice what we can’t talk about, but be open up on what we can talk about.
And what we discussed was engineering a way in which we could give that buyer, that procurement person, a $10,000 victory to take back to her boss. Now in the scheme of things $10,000 is not big when we’re talking $1.8 million of revenue. So we were a bit clever in not being offended about the threats of being sacked or dropped.
What we got curious about was how could we find a way to help her to have a win, that was an example of losing in the short term as it was going to cost us $10,000. But hey, a pretty minor investment in a $1.8 million chunk of business that was ready to be rolled over. And it was a game. We knew it was a tactic. It was employed. It was a senior person who got brought in and they were playing the threat and instead of being offended, what we needed to be was more elegant in being curious about how we could help them to win because that was what was behind the threat.
Cool. It has been a great discussion Simon.
I think again, it has been incredibly valuable for people listening in because you know this is the pointy end. You can do all this work on the sales process, but if you can’t negotiate effectively, you can give away half your margin so easily if you’re not careful.
It can get very expensive very quickly!
Yeah, and it’s not just the financials as well it’s negotiating the terms of doing business. That impacts the partnership going forward – how you set the vendor and the customer up for success for the length of the contract. So it’s so important.
Just a final thing maybe to wrap it all up. What would be a golden rule, I guess, for people to become a better negotiators going forward from today?
Well, I want to reiterate, we do only three things in negotiation – which are:
- To ask great questions
- To make concise and precise proposals
- To employ judicious use of the power of silence.
So they’re the golden rules in negotiation, but I would stress it frees you up if you’ve invested in your planning upfront.
So I’d certainly put that into the golden rules or the takeaways from today. That is to really think about planning, not just for what you want to get, but to really see it through the eyes of the other party.
Because it’s not about us. It’s all about the way they view the opportunity. And if you can talk through that lens, and if you can be firm in your trading, “if you….. then we”, you’ll come away with a much better outcome for both parties.
That’s awesome. Thank you so much for participating today, Simon, I think it certainly is a modern approach with an emphasis on success. And yeah, Simon Dethridge from BIG Consulting, thanks again for contributing today and good luck in your future negotiations and to everyone else who has been listening in.
Great to be with you David, thank you very much for the opportunity to chat.
Thank you. Cheers.