Sell to Power and negotiate from a position of strength— Know the executive-level value of what you offer
Many salespeople dread contract negotiations. They know that even though it seems like a deal is done, it could fall apart at any minute because of some surprise detail or a fight over cost. When this happens, contract negotiations are about as much fun as going to the dentist because the sales cycle may start all over again. But it doesn’t have to be that way if you sell to Power.
The fundamental flaw of selling to mid-level management
Salespeople can fall into the trap of thinking about their products and services in terms of features and capabilities – very often from a mid-level Operations point of view. The sale then becomes dependent upon middle management’s ability to sponsor the project or sell it themselves at the executive level. This is dangerous.
In this scenario, the entire sale pitch has focused on the needs of the mid-level manager and the executive with budget authority is only brought in at the end of the sales process. Yet, the fate of the sale depends upon the executive, or Power, seeing value in the project and approving the expenditure. Since no-one has taken the time to identify Power’s pain, she has no stake in the project. So her aim will either be to get the deal done as cheaply as possible – or preserve the company’s capital for what she perceives as a worthier expenditure.
This puts the salesperson in a very weak position during negotiations. To obtain a stronger position, salespeople need to target Power from the start and understand the value of what they offer from that person’s perspective.
Power’s concerns are different from Operations’. Operations people are concerned with issues such as simplifying a job function or minimizing labor. Power is concerned with issues such as driving rapid growth, making changes which improve competitive differentiation, or leveraging core assets to increase shareholder value.
When Power is the audience, the sales message needs to focus on the measurable financial value that the solution offers in addition to any of its other benefits. The solution may address operational issues that bear on Power’s concerns, but it must clearly connect the solution to solving Power’s pain. This requires the creation of a business case that facilitates a total cost of ownership discussion.
Talking Power’s language with a business case
To establish value for Power, you will want to engage in a total cost of ownership discussion. This is a discussion that Power will understand. Through this discussion, you will provide Power with an objective and comprehensive assessment of your solution’s value. You will evaluate all costs (including the cost of capital and deployment of resources for adoption). In addition, you will assess the value of the expenditure relative to all other potential capital expenditures. This discussion is a game changer because it tells Power that you understand how she thinks.
In order to have this discussion, a business case must be developed that provides the verifiable data to support your value proposition. For this, look no further than existing customers. For complex and high-dollar projects, most will have used a capital appropriation request, or CAR. The CAR employs numerous financial calculations such as ROI, economic value add, payback period and the like to provide a thorough cost-benefit analysis. Projects that survive the analysis have proven their worth – not just relative to competitive solutions – but to all other potential capital expenditures. By talking with existing customers, you’ll understand the promises that were made to get projects approved and the value that was assigned to the project.
Armed with a credible business case, the total cost of ownership discussion will change the entire sales process and send you to the negotiating table in a very strong position.
The effect of selling to Power at the negotiating table
Backed by verifiable financial data, your sales message will have resonated with Power. Now instead of approaching the negotiating table as adversaries, you should be allied to make the deal work. Power has a vested interest in a positive outcome because she sees how she will benefit from your solution. And because you have shown how adoption of the total solution is critical to the predicted value, there is a disincentive for Power to negotiate out or change elements to bring down the cost.
By the time you reach the contract negotiation stage, you will have:
- presented and verified your solution’s value
- provided financials that show how an investment in your product compares with all other uses of available capital
- explained the key Power pain points your solution addresses
- presented the solution cost including every element needed to make the value possible
Having accomplished all of these steps ahead of time, you are in a powerful position to get the business, hold your price firm, and complete a win-win contract in a timely manner. This is the power of selling to Power!
"This article was originally published in SOLD magazine, a monthly digital sales magazine for sales professionals."