I learned negotiation at Harvard Business School. A lot of the ideas in the class came from Getting to Yes, a book by Roger Fisher, William Ury, and Bruce Patton, which I had read before. After reading assignments and lectures, we spent most of the time negotiating scenarios. One of the popular strategies we learned was BATNA, an acronym for your “best alternative to a negotiated agreement.”
The BATNA was typically a deal that you were confident negotiating that was close to what you wanted most. The steps to identifying your BATNA are as follows:
- List all your alternatives.
- Evaluate the value of each one.
- Choose your best alternative.
- Determine the lowest deal you will accept.
This strategy is very good for certain types of negotiations, but isn't useful for B2B sales, where there is no alternative to a negotiated agreement.
B2B Sales Negotiation Training
Like most negotiation training, BATNA is not designed for B2B sales professionals. When salespeople are trained with methods that are not sales strategies, their sales skills do not improve. It's important for sales management to provide training—including in negotiation—that is specifically designed to improve sales performance.
Most of the time in B2B sales, there is no reason to negotiate. You provide your prospective client with a proposal and pricing, they sign your contract, and you deliver whatever you sell. When there is a negotiation, it's almost certain to be a request for a lower price. Depending on what you sell, you may also have to negotiate indemnification clauses or an SLA (service-level agreement).
These sales scenarios always come with the possibility of negotiations failing. There are some things your company can do and other requests they will not accept. No one wants to take long-term business that isn't profitable or a deal that shifts all the risk to the sales organization. In a B2B sales negotiation, only one party has a BATNA, and it isn't the salesperson.
Negotiation Power
Let's imagine you have been pursuing a large client for a few years. You have finally captured their attention and carefully guided them through their buyer's journey. Everything you have done has positioned you to win your dream client. Your contact says their company has chosen you, and you believe you have reached an agreement.
At the eleventh hour, procurement inserts themselves into your deal, opening a negotiation about your pricing, your SLA, and a give back once they reach certain spending milestones. Should you fail to negotiate an agreement, your prospective client has a BATNA, giving them greater power, as they can call your competitors should they reject your offer.
If you have a best alternative to a negotiated agreement, I am not sure what it might be. Unless you sell something that is in high demand and you have a line of people who want to become your clients, you are the weaker party in a BATNA negotiation.
An Important Idea About Negotiation
One of my negotiation professors at Harvard had been a competitive swimmer. He raced the butterfly stroke and it always made his arms burn. One day, as he turned his head to take a breath, he noticed the competitor in the next lane felt the same burning.
Success in B2B Sales Negotiations
There are several sales techniques you can use to improve your power in a negotiation. You can start by ensuring you have a strong pipeline of opportunities. When you spend time prospecting, you increase your power in a negotiation.
Knowing you have other deals you will win can level the playing field when it comes to negotiating power. The ability to walk away from a bad deal makes your client's arms burn. Because your dream client found you to be the best choice, they are not getting what they wanted.
In addition to prospecting, there are negotiation techniques that can improve your results in B2B sales. The very first thing you must do is to ask your sales leadership team to provide you with a grid of what you can trade in a negotiation. The worst thing you can do during a negotiation is go ask your sales manager about what concessions you are allowed to make. This is a serious sales mistake. Once your contact asks you for a lower price, the negotiation has started. You destroy your power by running back to your manager.
There are only two responses when your prospective client asks you for something: yes or no. There is every reason to say no the first time your client asks. (See Jim Camp's book Start with No.) If you are going to say yes to a price concession, make sure you have your client’s permission to negotiate, say yes, and explain what the client will need to do to obtain that lower price.
If you give a price reduction without capturing something as valuable or more valuable to you, you are not negotiating. To negotiate, you must ask for something in return.
One of my most important principles is: If something happens frequently, you are better off addressing it before it happens. If you know your prospective client is going to have you deal with procurement, use part of your sales call to explain to your contacts that you have narrow limits when it comes to lowering the price or agreeing to unrealistic service-level agreements or rebates.
Explain why you can't make concessions like other companies do by sharing that the higher price is necessary to produce the better results the client needs and how underinvesting will raise their overall costs. Because you don't have a BATNA, you must use sales strategies and techniques that work in B2B negotiations. We teach a framework of 10 strategies that help sales reps level the playing field in negotiation.
B2B sales training and the BATNA negotiation strategy can be ineffective for many businesses, and they can lead to costly mistakes that may be irreversible. It's important for businesses to invest in high-quality training and develop a comprehensive negotiation strategy tailored to their specific customer base to improve sales results.
