Negotiation process

Negotiation is all about give and take with the aim of both the parties getting satisfied. In this process various issues are to be handled well. Negotiation process can be thought of as a three step process as shown below:-

Let‟s now discuss then in detail.

7.3.1 Pre-negotiation process

Before entering into the negotiation it is always advisable to be prepared for the negotiation. You should remember that if the negotiations are not handled properly you may lose the customer and also his referrals. Hence some of the steps which you need to follow in the pre-negotiation process involve the following:-

 Identify the customer group

 Collection as much customer data as possible

 Identify whom to involve in negotiation process

 Make a check-list of possible scenarios that may arise during the negotiation process

 Prepare for the scenarios and alternate ways to handle

 Make sure you and your team members are fully aware of the objectives of the negotiation process

Depending upon the type of sale, the team for the sales negotiation can be a single sales representative or many. Normally, in door-to-door sales like FMCG and consumer care products, only a single sales representative is involved. In such case, he/she must be fully aware about the customer details and preferences. The sales representative

Steps in negotiation

Pre-negotiation Process

Negotiation Process

Post-negotiation Process

should be prepared for scenarios where the customer might ask for a more discount or any add on benefits along with the product/service.

In Institutional and Industrial sales, there will be a team of members who will participate in the negotiation process. Once the presentation process is completed and the customer is willing to give an order but express is some concerns and want a negotiation to be done, it‟s time for the sales team to be prepared for the negotiation process. Company expects that nothing wrong would happen during the negotiation process in such big deals with the industrial or institutional sales. So, the first important step is to choose a team that is capable of handling the negotiation process effectively.

The sales representative team can involve not only the people from the sales team but may also include members from other departments like technical, testing, hardware, finance and HR. The team depends mainly on the type of product/service being sold in the negotiation process.

For example, if the sale is about a multi-million dollar CRM product is being sold, then the team for negotiations may include the technical, finance, testing and the sales team.

Every team member is associated in the creation of the CRM product. Hence his/her approval may be required when giving the discounts. One must understand that the customer may ask discount on some features of the CRM products like the cost for testing services, then it is important that the testing team member approval has to be taken to give such a discount.

Knowing about your customer is very important before entering the negotiation process.

This process can be very tedious in big industrial or institutional deals. If it‟s the previous customer, you may look into the existing past data of the customer and judge his buying behaviour and interests. Other ways of knowing more about the customer interests include looking at the financial status, knowing details from some referrals, browsing the past and present business activities of the customer etc. With the help of such information you can know whether the customer would be adamant about the price or choose the best features and cost is a secondary importance.

During the negotiation process, various scenarios may arise from the customer side such as the customer requesting to increase the warranty periods, decrease the cost, free add on products/services, and decrease the cost of extra warranty periods and so on. So it is always better to know about the possible situations that may arise in the negotiation process by looking at the previous experiences with the same or other customers in the similar deals. If the deal is new deal, it will be always better to prepare for all the situations that may arise during the negotiation process. Expert advises can be taken who may be the industry leaders for knowing the possible scenarios.

Finally, before going to the negotiation process, your objectives must be clear about the offer or agreement you do in the negotiation process. Let us now look at the negotiation process.

7.3.2 Negotiation process

Let us understand in this how the negotiation process will proceed in general. Flower (1996) described the pattern which is followed by most of the effective negotiations.

Let‟s understand the pattern in detail:-

a) Both the parties lay down their issues and decide what they are willing to negotiate in the process.

b) After the issues are set out then one of the party will set the claim which will be responded by the other party. Here both the parties will define their initial positions.

c) Then there would be the discussion in order to test the initial positions of both the parties.

d) During this discussion both the parties try to explore all other possible outcomes.

e) After analyzing all the possible alternatives, formal proposals are made which will be discussed and modified

f) After several modifications, the proposal will be treated as final and then an agreement will be made. This agreement phase can be thought of as the post-negotiation process

7.3.3 Post-Negotiation process

After the negotiation process the sales representative will use the closing technique to close the deal and prepare the agreement between the parties. It is always better to have the final proposal which is agreed by both the parties to be presented in a written format. This printed document is also known as service-level-agreements (SLA‟s).

Some of the issues have to be taken care of so that the agreement may not lead to an implementation failure. Those issues or concerns include:-

 Be clear on what is going to be written in an agreement

 Take approval from both the parties

 Cross check that any higher authority hasn‟t been missed out for informing about the agreement

 Ensure that the method of implementation and the level of service are clearly stated in the agreement i.e. ETA (Estimated time of arrival), number of employees working on the project, type of resources used, etc.

 Cross check the details in the agreement with all the members before signing the contract

SAQ 2

1) Describe various objectives of the negotiation process.

2) Explain the need of a well documented SLA after the negotiation process

3) Explain the need for understanding the customer group before starting the negotiation process

4) Explain the pattern which is generally followed during the negotiation process