One of my favorite quotes of all time is, “You don’t get what you deserve, you get what you negotiate,” by Dr. Karrass. But here’s what I find interesting…most IT sales people and MSP business owners don’t consider the process of selling managed services a negotiation, even though the definition of a negotiation is, “A discussion intended to produce a managed IT services agreement.”
For example, when a prospective client looks at your managed services proposal and asks you if you can “do a little better on the price?” what do you do? Crumble and give in, or stand firm and risk losing the sale?
How about cherry pickers: A client looks at your IT services proposal and says they want to move forward, BUT they want to change the terms of the managed IT services agreement, extra services thrown in, different payment plans, a discount, etc. Do you change your managed services proposal to win the sale? Or does that set a precedence that you’ll fold like a lawn chair the minute they make any demand?
Or how about this scenario…
You have a good first meeting with a prospect and go back to your office to draft up a managed services proposal. When you call back to schedule the second meeting, the decision maker says he wants you to e-mail it to him prior to scheduling a second appointment because he’s really busy. Now what? Do you do what he asks or do you refuse and risk losing the sale?
To me, these are all NEGOTIATION situations. I know that most IT sales people simply give in because of fear, desperation and (more to the point) they don’t know HOW to overcome these in a way that is non-confrontational.
In my view, an excellent negotiator gets what they want AND makes the other person feel good about it. A poor negotiator reacts with emotion and either ends up killing the deal OR making so many concessions that THEY get the short end of the stick.
So, I have a question for you (actually two):
1. How important do you think negotiation skills are to selling managed services?
2. What are some specific sales scenarios where better negotiation skills would be helpful when selling IT services?
Post your comments below and you WILL be rewarded 
Here’s why…
Later this month I plan on holding a LIVE teleseminar with best-selling author and top negotiations coach, Jim Camp. Jim wrote the book, “Start With No” and is called on by multi-billion dollar CEOs, the FBI and heads of government to assist in major negotiations. Plus, he’s just an all-around sweetheart to work with.
I had Jim speak at the Boot Camp this year and his session was a BIG hit with the attendees. I also had him assist me in working through a sticky negotiation that could have resulted in a very expensive, very draining lawsuit which was COMPLETELY avoided thanks to his coaching – so yes, I’m a HUGE fan.
Because he’s helped me so much, I want to introduce him to all my subscribers. This session will be free of charge, BUT I do need some input into what topics you would like Jim to cover during this call. Could you help me by posting your comments below?
*Important:
Negotiations are normal and SMB buyers expect to get something. In fact, many of these buyers don’t see themselves as a successful business person unless they’ve negotiated something extra in a deal. We also build in some givebacks for this reason.
What “givebacks?” I’m curious to know more!
Answer 1: Negotiation is critical because part of negotiation offers the opportunity to further elaborate on the services offered and their value. It is an opportunity of education and educated people make better informed decisions and your negotiation / education tactics place you into an expert witness position. This reduces challenges to your proposal over all, I believe.
Answer 2: In the government or health sectors where there are wide open ranges of obscurity of requirements and responsibilities of many things including technology. One of my verticals for instance, healthcare and HIIPA, providers are losing money for not using EMR software, the government will actually provide funding for the software (certified platforms) but along with that comes a slew of security requirements. Dr.s dont understand all of them and they are feeling the pressure for trusted advisers but do not want to pay the fees (managed services) so you have to show them the value of a Trusted Adviser / Technology partner vs fines penalties and fees for violations. You have to pose it in the form of an insurance policy and they will understand that, I didnt say they would like it.
I agree with Glenn. Many business owners feel like if they can’t get something better than what was offered to begin with, they’re not going for it. So we go in with “givebacks” to use Glenn’s term. I would define givebacks as the act of including something you were willing to anyways but reserved it for when you were asked or as a bonus when getting the managed service agreement signed. An example of a giveback could be including remote support or antivirus monitoring or … you get the picture.
I came across Jim Camp in 2002, and have bought all his books and audios. I think he’s the best negotiation expert in the land. His approach beats the pants off of all the others negotiation gurus’s techniques that I’d studied before.
While most negotiation methods are needs-driven, Jim’s approach is not. Totally amazing material. Look forward to the teleseminar.
One key in negotiating effectively is to KNOW your costs, both fixed and variable! Become skilled in scoping your projects accurately, and most of all… think about the BIGGER picture. Will giving something up today lead to a better relationship? Will a $50/month concession lead to a $15,000/year contract?
I agree negotiating skills are very important. The type of potential client who emphasizes price, or insists on getting a bargain or freebies in my opinion will never stop this behavior if you let them get going. In cases like this, I remain firm on the basics of my proposal, and instead emphasize value. I also contrast my services with the rest of the market, which I stay on-top of, so I always know pretty well what others can offer, and more importantly, deliver. If such a prospect indicates they are really insistent on “getting something”, I will offer something that is clearly a one-time-only type of thing, like a few free hours of work, or comping the labor in a small project, but never giving-in on the fundamental pricing of a managed service agreement or package.
I find bargain-shoppers very often respect you more if you show them that money and value are important to you, too.
Negotiation skills are extremley important, however I am not always sure that it comes down to a case of whoever is the better negotiator is the one who wins. Perhaps he/she whom didn’t educate the customer on the value of the solution needs to fall back on negotation to close the deal. I think it important to educate your customer on the value of the solution or service being offered. This goes back to the rule of not selling your clients a product, rather sell them a solution. If the solution is a polished solution that you truly stand behind then you shouldn’t have a problem presenting the value and need to the client. From my experience in a lot of cases if the client is able to see the real value, they truly have better things to do with their time than to go after extra free stuff.
If you run across those people that always want something for nothing, no worries..offer them things that don’t cut in to your bottom line.
Example of what we try to do if we let the situation get to the point of negotiation: Our client wants us to budge on the monthly price for monitoring their network. We kindly explain to them that in order to provide the monitoring services our company has costs in which we need to cover to be able to provide the level of service our customers have come to expect. Above and beyond the cost we explain to them breifly why our solution is superior and touch on the value that they are receiving. We remind them how our solution is going to help save them money/time/personel/etc. If they still just want something for nothing then we provide them with weekly instead of monthly reporting (doesn’t cost us money to send them extra reports above and beyone what you would have done.) We even tell them that we are going to go above and beyone and customize some of our reports just for their company.
One client we told them we would give them a complimentary network assessment. We signed them up and needed to do an assessment for our own purposes to better familarize ourselves with their environment anyways.
Who are the top three people you mentored or mirrored your negotiation skills from.
What are the top three questions to ask during any negotiation?
What company / industry can I work for as a salesmen that will teach me the best negotiating skills?
One more thing we have toss around the idea of doing is to offer what is called introductory pricing. The introductory price would be a very fair value, but perhaps not as high as what you would have liked to see yourself offer it for. The client feel that they are getting a so called good deal as the introductory price is less. Then down the road the client is some what married to your company as they have adapted to rely on your services and you have a bit of room to renegotiate on price when they have already see the true value.
Negotiation abilities are such a huge factor in the sale. The need that has been highlighted and the value proposition to correct the problem only are meaningful if you can hold value and make the customer happy by doing so.
Does the negotiation begin at hello, and what are daily things that can be done to sharpen the skills? I could read a book, and read constantly about sharpening many other facets of what’s required for success, but I often would like to have a method that can help remind me of high points or a daily ‘workout’ to build negotiation strengths into everyday memory.
Way to go Robin – Great topic and seminar –
It takes guts to say NO and skills to get negotiate to the benefit of the MSP. The key (as mentioned above) is to drive/demonstrate VALUE of the services and to have the confidence and skills (and pipeline) to hold firm. I’ve found that weak pipelines lead to all kinds of desires to cave in for pricing which leads to a weak company foundation overall.
I’m looking forward to the content – Thanks –
Glenn Hafner
Much of the negotiation comes from ambiguity in the way we (in the industry) tend to do things. I’ve found that clear communication and asking questions prior to even drafting a proposal goes a long way toward answering many of the issues up front. I’ve even gone so far the last couple of successful proposals of asking–albeit slightly hesitantly–what they have been paying, what level of service they have been getting, and happy they are with it.
Those three questions tend to uncover where the pain-point is for them, and that is where to focus the proposal.
In the delivery phase of security projects with health boards . I find that the project has been scoped and priced at fixed cost. The customer then lumps this into a larger program of work, which then blows out the project by creating numerous dependencies within the larger program of work . Beware of this one in the up front negotiations with customers. It must be clear that any delays due to dependencies are at the sole risk of the customer not you the solution provider. Longer engagement costs must be covered by them as they will still expect you on the project advising etc but not delivering.
this post is very usefull thx!
Interesting how some say to negotiate and others to hold firm.
I’m a fan of Alan Weiss and value based fees but if you are comfortable with the profitability of a client how can I argue with that?
1. Negotiation skills are key in any sales situation. The key for me has been learning when to negotiate. It’s often tempting to start giving pricing concessions before you’re even sure the client definitely wants to go with your service. Which brings me to my second point, price usually typically isn’t the only negotiation point. I like to keep a few “freebies” in my pocket that don’t cost much (if anything) for us to deliver, but can be very valuable to the prospect and his/her productivity.
Yes, “Salesmanship begins, when the customer says ‘No’”.
I hate sales.
But since no one dumps truckloads of money on my driveway, I have to do it.
And yes, there is a ‘cat and mouse’ game with about half our customers.
These include ‘Introductory pricing’, but also ‘padding/givebacks’.
Sadly, some customers (especially in this economy) only know “Whatever you’re offering, I want 10% cheaper”.
So we have to swallow our ‘work ethic’ in a way, and make a ‘big deal’ out of what we do (which is probably true in a way, we just don’t boast – maybe we should!), and ‘negotiate down’ to what we want in the first place.
So I guess my summary response is “You have to go into this, expecting to ‘give’ something (even if only to make the customer feel good), so pad a little up front, don’t walk in with your best price”
Oh, and don’t elaborate too much on your proposal, lest they ‘pick your brain for free’, and then comparison shop you – you having done all their homework/research for them!
Good site!
Excellent comments.
Yes, I agree that Negotiating skills and knowing your costs are important. Knowing where your prospect is coming from and listening skills are equally important in this sales dance.
No-one has mentioned trust. To be heard in the first place you need to build trust, to be seen as an authority in the industry. As the relationship grows it becomes easier to sell the value. It takes time to negotiate.
I think negotiation skills are extremely helpful/valuable but listening is as important. It is far easier to sell managed services when you have a relationship and they “trust” you. If it is a prospect listening and learning their pain points should make the negotiations easier. A difficult scenario is when they have had minimal IT service events (looking at just outsourced dollars and not internal time) in the prior year and the perception is a managed service plan would be “spending more”.
Excellent post, and good tips. I also agree that listening is extremely important as a negotiation tool and taking detailed notes on what the prospect is saying (as well as asking all of the appropriate “probing” questions), goes along way in overcoming objections when it’s time to close the deal.
There is no doubt that negotiation skills are paramount to a successful endeavor in any business. I personally have much trouble determining where the balance is between a reasonable compromise and capitulation.
Please help.
I would say that you shouldn’t go into any sales situation with the expectation to compromise or that’s what you’ll end up doing. Plus, there is no such thing as a “reasonable” compromise – a compromise is just a compromise and there is no black and white line of what is “fair” and what isn’t. It’s a matter of opinion so it’s up to you to determine what you need and how you can best help the client. Further, I think many IT firms “compromise” thinking they are doing the client a favor when in fact they aren’t. If you fully understand what the client needs and wants, know what the best solution to their problem is, then why on earth would you compromise anything? It’s your job to help them understand that. I recommend reading Jim Camp’s book, “Start With No” to help you overcome this challenge.
I NEED all the help I can get for contract negotiation. I am tired of losing out to the competition! Specifically, I would some in depth material on controlling the sales/proposal meeting while still maintaining desire in the client.
Hey Jodie – help is on the way! I believe you are a Managed Services Blueprint client…the next couple of sessions coming up are going to be focused on mapping out the sales process to overcome objections in advance, build value (desire) and dramatically improve your closing ratio.