Negotiation is a Process of Creating Value, Not Cutting Cost
Negotiation is not simply a matter of agreeing to the lowest price. True negotiation is about reaching a balanced resolution that delivers value to both sides.
When you work in sales and you go into a negotiation cycle, you need to have a set of rules of engagement. Negotiation, as I mentioned in a previous blog, is about a lot more than just getting the sale at any cost. It’s a process of understanding, trading ideas and meeting the customer’s needs, and then refining your offer until both you and your client feel you’ve achieved a worthwhile outcome.
To do that, you need to have a series of fixed points for your position. Never mistake having a clear and fixed position as you enter the negotiation as being inflexible or restricting your ability to compromise. What you need is an understanding of where you stand, what you can offer, and, something that is vital if you don’t want overconfidence and over-competitiveness to ruin things, a big spoonful of self-awareness.
Value isn’t the same as price
When you think of negotiation, particularly early in your sales career or when dealing with aggressive buyers, it’s easy to see it as a discussion focused entirely on cost.
It is very, very, rarely is, and value is certainly not just defined by price. Reducing your selling price should never be the first response. Yes, of course, it may be a negotiation point somewhere (it would be naïve not to accept that it is important), but it is just one factor.
There is also this misconception in some industries that price is everything. Is it though? Would that client you want come to you for just a penny less, then? I doubt it. In most cases, there is much more at play than just a number.
Even when a client comes to you with the seemingly insurmountable statement of, ‘I need X price because that’s what I want to pay and Fred down the road will do it for me’, that isn’t really about just price. It is an opportunity to discuss the deal. To show how good you are and to negotiate a different sales narrative.
Cutting your price may appear to create value in the short term, but it can erode trust and weaken your position. Instead, define and communicate the true value of what you offer to customers and focus on the factors that make your solution the best fit for their needs, not just the cheapest.
Key Point: Value is a mix of factors, and price is only the end cost. Focus on solving your client’s problems, not just cutting the final bill. Value may come from reliability, delivery speed, service quality, ongoing support, or a sense of partnership, for example. A good client will recognise what you offer and will be willing to pay for value.
The power of the trade variable
When I am training teams in sales negotiation, we usually spend time on identifying the trade variables. These are the significant additional benefits or adjustments you can offer that may cost you very little, certainly less than a price cut, but will mean a lot to your customer.
When you come up against a client who is resistant to a price, don’t cut immediately. Think beyond the number first. What else can you put on the table? How about options like:
- Additional training or onboarding support
- Quicker delivery schedules
- Extended warranties or service packages
- Priority access to support
- Where practical, better payment terms or split delivery schedules that equate to a supply on demand scenario
By introducing trade variables, you create perceived value that strengthens the deal for both sides.
Key Point: When price becomes the sticking point, use trade variables to add value and always exhaust these safer options before even considering cutting price or surrendering profit.
Prepare well and remember it’s not usually a one-shot process
Negotiation is rarely a single conversation. It’s a process and an exploration of customer needs. That means it is about discovery and adjustment. Knowing that means you can be ready for it and prepare. In any situation where you can control the outcome, preparation gives you confidence. It ensures you stay in control. This is particularly true when the discussion becomes complex or tense.
Preparation also means anticipating objections and knowing your facts. It means you will be familiar with pricing structures, know the important variables such as your delivery timelines, and understand the key client priorities.
That said, realistically speaking, there will be times when, no matter how much you prepare, things don’t go to plan. When that happens, you need to recognise that you are no longer in control.
You must know when to pause by pushing your internal “big red button”. This is the pause button that gives you a little thinking space.
If the discussion becomes heated, confusing, or you feel pressured, take a step back. Say something like, “Let me review this and get back to you.” This pause helps you think clearly and prevents rash decisions.
Key Point: Negotiation is a process, not an event. Prepare thoroughly and use your “pause button” to maintain control.
Know your lines in the sand and when to walk away
Before any negotiation, establish your individual non-negotiables. These are a list of points at which a deal stops being viable. Again, these are not always solely about price. They might include, but are not limited to, the following, all of which I have seen cause major issues:
- A minimum ‘safe’ profit margin
- Delivery demands that would result in a catastrophic disruption to operations
- Excessive customer management challenges!
- Payment terms and customer reliability that expose you to financial risk
Walking away can be difficult, especially if you’ve invested time in the opportunity, and it can also feel like losing.
It isn’t.
Losing is when you take a deal that results in little or no profit and has no value to the business. Always remember that a big sales number that doesn’t make any actual profit is just a big vanity number that means nothing.
Consider the Pareto Principle, also known as the 80/20 rule. It suggests that 80% of your issues will come from 20% of your clients. If a customer is going to create a disproportionate level of effort or stress compared to their value, you need to question whether they’re worth pursuing. Is that negotiation really going anywhere useful at that stage?
Key Point: Define your walk-away line in the sand early. Not every deal is worth winning, and certainly not if it requires too much compromise or if the client is going to cost too much to maintain.
Keep Emotions Out of the Room
Negotiation is a skill rooted in calmness, structured logic and reasoning. Emotional reactions, such as frustration, panic or excitement, can cloud your judgment and lead to poor decisions.
Maintain a professional tone, listen actively, and never allow yourself to be rushed. If you feel pressured, use your internal red button to pause things. You’ll appear measured and in control, and that confidence often earns respect from the client.
As a side note on this one, be a little cautious not to come over as completely unemotional, though. Emotional connection, shared experience, and similar basic emotional connections can be a powerful tool, but that is a subject for another blog!
Key Point: Stay calm, stay rational, and never let emotion dictate your decisions.
Establish Your Rules of Engagement
Before entering any negotiation, write down your rules of engagement. These are the guiding principles that keep you focused regardless of how the discussion unfolds.
Your rules might include things like:
“Never agree to terms on the spot.”
“Trade value, not price.”
“Have a series of trade variables to hand”
“Walk away if the margin drops below X% and there is no leverage left”
“Always confirm the decisions clearly and concisely on the spot and confirm ASAP”
“If uncertain, press the red button and pause, review, and return.”
When you have your own rules fixed in your mind, you enter the negotiation with structure and confidence. They act as your internal compass, helping you balance flexibility with discipline. They are also the alarm bell that warns you that things are not going your way.
Key Point: Writing down your rules of engagement will provide you with a personalised guide to clarity and consistency. They will help you recognise if you are making impulsive, regrettable decisions, as well as being your anchor throughout the negotiation.
The real skill of negotiation is in preparation, balance, and respect. It’s about ‘crafting a deal’, not forcing a decision. It should be something that delivers value to both sides without compromising your boundaries or profitability. When you understand your value, use trade variables strategically, and stay emotionally grounded, you turn negotiation into collaboration... and that means repeat sales to satisfied customers.
For support in developing stronger, more confident negotiation skills, contact me and let's talk.
