Chapter Seven Negotiating Sales Resistance and Objections for

Chapter Seven Negotiating Sales Resistance and Objections for “Win-Win” Agreements Power. Point presentation prepared by Dr. Rajiv Mehta

Chapter Outline • What are buyer objections and resistance? • Planning for objections • Different forms of objections • Identifying and dealing with the prospect’s key objection • Negotiating with prospects and customers • Specific techniques for negotiating buyer objections • A major nemesis: price resistance Copyright © Houghton Mifflin Company. All rights reserved. 2

Learning Objectives After reading this chapter, you should understand: • Why objections and sales resistance are important to personal selling. • How to plan for objections. • The various forms of buyer resistance and objections. • How to deal with prospect resistance. • The importance of win-win negotiation outcomes. • How to overcome objections to price. • Techniques for negotiating resistance and objections. Royalty-Free, Digital Vision/Getty Images Copyright © Houghton Mifflin Company. All rights reserved. 3

Figure 7. 1: The Personal Selling Process (PSP) The fifth step of the professional

What Are Buyer Objections and Resistance? (cont. ) • Objections are statements, questions, or actions by the prospect that indicate resistance or an unwillingness to buy. . . at least not yet Royalty-Free, Digital Vision/Getty Images • Without sales resistance, there wouldn't be any need for salespeople • The first person who reached the prospect would make the sale • Serious negotiations seldom begin until the prospect's objections surface Copyright © Houghton Mifflin Company. All rights reserved. Chapter Review Question: What do we mean by “buyer objections and resistance”? 5

What Are Buyer Objections and Resistance? (cont. ) Reasons for Objections • Prospects and customers raise objections for myriad reasons: • People will almost always raise objections, even if they are totally sold on the product • The prospect may seek reassurance that the product will perform as promised Royalty-Free, Digital Vision/Getty Images • The prospect may have been trained to raise objections as a matter of buying technique or negotiation strategy • The prospect may lack the authority to buy but covers up this fact by raising several smokescreen objections Copyright © Houghton Mifflin Company. All rights reserved. 6

What Are Buyer Objections and Resistance? (cont. ) Reasons for Objections • A few prospects will raise objections merely to be an irritant to salespeople or have fun seeing them work for the order • An objection may actually be an appeal by the prospect for assistance in justifying a decision to buy • Some prospects raise objections so that they can bargain for a better deal. Irrespective of how low your price might be compared to competition, some prospects are obsessed about getting an even lower price so that they can feel “victorious” • Prospects may raise an objection because they have a bias against the salesperson’s company or product type or, in rare cases, simply dislike the salesperson Copyright © Houghton Mifflin Company. All rights reserved. 7

What Are Buyer Objections and Resistance? (cont. ) Signs of Interest • Objections are often indirect ways for prospects to say that they want to know more. One study found that salespeople had a 10 percent higher success rate when buyers raised objections than when they seemed to have none. Nonverbal Resistance • When salespeople spot passive resistance such as frowning, glancing at one’s watch, or playing with a desk accessory, they must find some way to perk up the presentation and get the prospect involved. Copyright © Houghton Mifflin Company. All rights reserved. 8

Planning for Objections • One of the best ways to minimize objections is to learn what the prospect’s objections are before you begin the sales presentation • In planning for buyer resistance or objections, you should keep a running file of the most typical objections: • Develop a master list of prospect objections and classify them according to type, such as product, price, delivery, installation, service, and company. • Include successful and unsuccessful ways of dealing with each objection. • Tap sales colleagues’ knowledge about various types of prospect resistance and successful methods for dealing with each. Chapter Review Question: What steps are involved in planning for prospect objections? © Royalty-Free/CORBIS Copyright © Houghton Mifflin Company. All rights reserved. 9

Different Forms of Objections (cont. ) • Sales resistance can be categorized into either valid or invalid objections. Valid Objections: • Valid objections are sincere concerns that the prospect needs answered before he or she is willing to make the commitment to buy. Invalid Objections: • • • Invalid objections are merely defense mechanisms used by prospects to stall, slow down, or prevent the sales process from proceeding. Invalid objections are typically irrelevant, untruthful, delaying, or latent reasons for the prospect’s unwillingness to negotiate. They are difficult to identify and overcome because the prospect does not deal with the salesperson in a straightforward, honest manner. Chapter Review Question: How can a salesperson distinguish between valid and invalid objections? Copyright © Houghton Mifflin Company. All rights reserved. 10

Different Forms of Valid Objections (cont. ) 1. Product Objections • Product objections are usually concern the features, advantages, and benefits associated with a product or service. When prospects use this form of resistance to purchasing, salespeople should provide additional information to reassure them. 2. Price Objections • Price objections are the most frequently raised form of initial resistance. To counter price resistance, salespeople must show that their product or service offers the prospect higher value per dollar spent than competitive offerings. 3. Promotion Objections • Promotion objections are commonly used as a resistance tactic when the seller is known not to promote products aggressively. To overcome this resistance, salespeople may have to offer buyers promotional allowances or cooperative advertising arrangements, special rebates, or purchase incentives. Copyright © Houghton Mifflin Company. All rights reserved. 11

Different Forms of Valid Objections (cont. ) 4. Distribution Objections • Distribution objections typically involve the physical movement of products through the channels of distribution. These forms of buyer resistance include concerns about long delivery time, high delivery costs, and large-quantity stocking requirements. 5. Capital Objections • Capital objections generally revolve around budgetary issues that prospects give as an excuse for not purchasing products now. This resistance tends to increase with the price of the product or service. 6. Source Objections • Source objections may result from negative publicity about unethical, illegal, or inefficient business practices by the seller. Conversely, the seller company may not be well enough known for the prospect to feel comfortable purchasing from it. Source objections also can result from the prospect’s loyalty to a competing firm. Copyright © Houghton Mifflin Company. All rights reserved. 12

Different Forms of Valid Objections (cont. ) 7. Needs Objections • Needs objections are raised by prospects who feel they simply do not currently need or have use for the products or services being offered. Handling “no need” objections requires innovative approaches by salespeople to educate prospects on the potential benefits to be derived from purchasing their products. Copyright © Houghton Mifflin Company. All rights reserved. 13

Different Forms of Invalid Objections (cont. ) 1. Latent Objections • Latent objections are hidden and sometimes too personal or embarrassing for the prospect to reveal, so they remain unspoken. 2. Stalling Objections • Stalling objections are usually delaying tactics articulated by such comments as “Around here, all decisions are shared, so just leave your product literature for us to look over, and we’ll get back to you if we’re interested. ” It is usually a waste of time to attempt to overcome repeated prospect objections that appear invalid. Copyright © Houghton Mifflin Company. All rights reserved. 14

Different Forms of Objections 3. Time Objections • Time objections are delaying tactics that usually surface in prospect statements such as “I’ve got to prepare for a meeting in ten minutes, so I don’t have time to talk now, ” or “I’m just too busy for the next several weeks with a special project to meet with you. ” 4. Unethical Objections • Unethical objections include actions or attitudes that seem unprincipled or immoral. Examples of unethical resistance to buying include excuses about not doing business with a particular ethnic group or religious persuasion, use of sexual overtures, and soliciting bribes or kickbacks. Copyright © Houghton Mifflin Company. All rights reserved. 15

Table 7. 1 Types of Valid and Invalid Objections Copyright © Houghton Mifflin Company.

Table 7. 1 Types of Valid and Invalid Objections (cont. ) Copyright © Houghton

Identifying and Dealing with the Prospect's Key Objection • Identifying and negotiating the prospect's most important or key objection is the first step to negotiating total prospect resistance Royalty-Free, Digital Vision/Getty Images • One subtle way to start is by engaging the prospect in informal conversation before the sales presentation and encouraging him or her to reveal personal concerns and perspectives on problems Copyright © Houghton Mifflin Company. All rights reserved. 19

Figure 7. 2: Keystone in the Arch of Resistance Copyright © Houghton Mifflin Company.

Identifying and Dealing with the Prospect's Key Objection Process for Uncovering and Overcoming Objections 1. Start with the proper attitude 2. Uncover the objection 3. Clarify the objection 4. Acknowledge the objection 5. Handle the objection Copyright © Houghton Mifflin Company. All rights reserved. 21

Table 7. 2 Process for Uncovering and Overcoming Objections Copyright © Houghton Mifflin Company.

Table 7. 2 Process for Uncovering and Overcoming Objections (cont. ) Copyright © Houghton

Identifying and Dealing with the Prospect's Key Objection (cont. ) Sell the Prospects on the Benefits • Prospects may use many sales resistance tactics, but by emphasizing the bundle of benefits that the prospect will derive from the product, salespersons can resolve many objections or push them into the background. • Salespeople must remember to cover intangible benefits as well as tangible ones. Stressing the product’s bundle of specific benefits can usually overcome most objections. Royalty-Free, Digital Vision/Getty Images Copyright © Houghton Mifflin Company. All rights reserved. 24

Identifying and Dealing with the Prospect's Key Objection (cont. ) • Some general rules for helping salespeople successfully negotiate prospect and customer objections are as follows: 1. Don’t be defensive about objections. 2. Make sure you understand the objection. 3. Don’t disparage the prospect’s objection. © Royalty-Free/CORBIS 4. Never argue with a prospect. You don’t win sales by winning arguments. 5. Try to lead the prospect to answer his or her own objection. Copyright © Houghton Mifflin Company. All rights reserved. 25

Identifying and Dealing with the Prospect's Key Objection (cont. ) 6. Don’t over answer or belabor the point because you risk insulting the prospect’s intelligence. 7. Don’t be drawn into pointless squabbles. 8. Don’t try to fake an answer. Admit you don’t know but promise that you’ll get back promptly with the answer. 9. Confirm your answers but don’t question them by asking whether you’ve fully answered the prospect’s question. Royalty-Free, Digital Vision/Getty Images Copyright © Houghton Mifflin Company. All rights reserved. 26

Figure 7. 3: Flow-Chart Approach for Handling Objections Copyright © Houghton Mifflin Company. All

Negotiation Royalty-Free, Digital Vision/Getty Images • Negotiation refers to the “Mutual discussion and arrangement of the terms of a transaction or agreement" Copyright © Houghton Mifflin Company. All rights reserved. 28

Negotiation Strategies • The best way to negotiate with prospects is to try to draw them into creative, problem-solving partnerships by: • Focusing on issues where you and the prospect have the most agreement. • Taking a relatively firm negotiating position initially so that when you compromise, the prospect will feel that he or she negotiated a bargain. • Trying to avoid making the first concession except on a minor point. • Keeping track of the issues resolved during the discussion; use frequent recaps to confirm the progress being made. Royalty-Free, Digital Vision/Getty Images Copyright © Houghton Mifflin Company. All rights reserved. 29

Negotiation Strategies (cont. ) Royalty-Free, Digital Vision/Getty Images • Concentrating on problem-solving approaches that satisfy the needs of both the buyer and the seller • Agreeing to a solution only after it is certain to work for both parties • Beginning negotiations with your highest expectations in price and terms • Not allowing yourself to be emotionally blackmailed into concessions Chapter Review Question: Outline some basic negotiating strategies. Copyright © Houghton Mifflin Company. All rights reserved. 30

Negotiation Outcomes • Every sales negotiation has four possible outcomes: 1. Seller Win - Buyer Win 2. Seller Win - Buyer Lose 3. Seller Lose - Buyer Win 4. Seller Lose - Buyer Lose • Only one of these, the "win-win” agreement, will further the business relationship and set the stage for future sales agreements Copyright © Houghton Mifflin Company. All rights reserved. 31

Negotiation Outcomes (cont. ) 1. Seller Win - Buyer Win Agreements • This is the only outcome that leads to long-run success for salespeople and the only outcome that professional salespeople seek 2. Seller Win - Buyer Lose Agreements • When the buyer is dissatisfied, the business relationship is in serious trouble • If a buyer feels manipulated or taken advantage of, he or she may refuse to have anything more to do with the salesperson or the company and sometimes may even seek to harm the salesperson's relationships with other prospects and customers Copyright © Houghton Mifflin Company. All rights reserved. 32

Negotiation Outcomes (cont. ) 3. Seller Lose - Buyer Win Agreements • Salespeople will feel short-changed and may try to cut corners on the service contract or get even in future negotiations – this relationship is in trouble 4. Seller Lose - Buyer Lose Agreements • Both parties are dissatisfied so the bond of trust is probably severed – future negotiations are unlikely Chapter Review Question: Describe the four possible outcomes in any business negotiation. Copyright © Houghton Mifflin Company. All rights reserved. 33

Figure 7. 4: Sales Negotiation Outcomes Copyright © Houghton Mifflin Company. All rights reserved.

Table 7. 3 General Rules for Negotiating Objections Copyright © Houghton Mifflin Company. All

Specific Techniques for Negotiating Buyer Objections (cont. ) Various methods have been developed and tested to handle prospect objections, which are classified under five categories: 1. Put-off 2. Switch focus 3. Offset 4. Denial, and 5. Provide proof Copyright © Houghton Mifflin Company. All rights reserved. 36

1. Put-Off Strategies (cont. ) 1. I’m coming to that: put off things like price until the end so you don’t turn off the prospect early 2. Pass-off: keep a pleasant expression but say nothing Copyright © Houghton Mifflin Company. All rights reserved. 37

2. Switch Focus Strategies (cont. ) 1. Alternative product: switch focus to another model 2. Feel, felt, found: trace own experience with product 3. Comparison or contrast: compare product with another 4. Answer with a question: what do you think? 5. Humor: use lighthearted humor to ease tension and redirect the focus 6. Agree and neutralize: give some level of agreement, then explain benefit Copyright © Houghton Mifflin Company. All rights reserved. 38

3. Offset Strategies (cont. ) 1. Compensation or counterbalance: counter an objection that cannot be denied by citing an even more important buying benefit 2. Boomerang: turn the objection into a reason for buying © Royalty-Free/CORBIS Copyright © Houghton Mifflin Company. All rights reserved. 39

4. Denial Strategies (cont. ) 1. Indirect denial: agree with prospect’s objection but follow with a disclaimer 2. Direct denial: tackle the false rumor head-on Royalty-Free, Digital Vision/Getty Images Copyright © Houghton Mifflin Company. All rights reserved. 40

5. Provide Proof Strategies (cont. ) 1. Case history: tell experience of a satisfied customer. 2. Demonstration: dramatize major advantages and benefits. 3. Propose trial use: offer free trial use. Royalty-Free, Digital Vision/Getty Images Chapter Review Question: Give some basic techniques for handling objections in each of the five categories discussed in the chapter. Copyright © Houghton Mifflin Company. All rights reserved. 41

Table 7. 4 Specific Techniques for Negotiating Buyer Objections Copyright © Houghton Mifflin Company.

A Major Nemesis: Price Resistance • Most buyers are more concerned about relative value for their money than absolute price • Usually, a price objection means that the salesperson has not convinced the buyer of the value of the product in terms of its price Perceived Valued = Perceived Benefits Perceived Price Chapter Review Question: What do we mean by perceived value? How do prospects determine perceived value? Copyright © Houghton Mifflin Company. All rights reserved. 43

Value Analysis and Industrial Buyers • A value analysis shows how the salesperson's product is the best value for the buyer or organization's money • There are 3 approaches to conduct a value analysis: 1. Unit Cost • 2. Product Cost Versus Value • 3. Illustrate the product’s higher value (benefits) versus its cost over time Return on Investment • Royalty-Free, Photodisc/Getty Images Breaking the overall cost of the product down into smaller units ROI refers to the amount of money expected from an investment over and above the original investment Chapter Review Question: What are three basic approaches to preparing and presenting a value analysis, and how does each approach work? Copyright © Houghton Mifflin Company. All rights reserved. 44

Price Resistance and “Reality” • Professional salespeople recognize that prospects and customers often raise price objections merely to try for a better deal or to slow down the selling process. • Prospects’ price resistance may well be a ploy to conceal their real reason for not buying. • By unveiling the prospect’s sales resistance, it is possible to discern how critical price is to the buyer and which selling strategy to employ to deal with that resistance successfully. Copyright © Houghton Mifflin Company. All rights reserved. 45

Key Terms • Objection • Anything that the prospect or customer says or does that impedes the sales negotiations. • Valid Objections • Sincere concerns that the prospect needs addressed before he or she will be willing to buy. • Invalid Objections • Irrelevant, untruthful, or delaying actions or hidden reasons for not buying. • Keystone Objection • The customer's most important objection. • Win-Win Negotiations • Negotiations in which both parties feel satisfied with the outcome; the only kind of negotiations that professional salespeople seek! Copyright © Houghton Mifflin Company. All rights reserved. 46

Key Terms (cont. ) • Put-Off Strategies • A set of strategies for handling a prospect’s objections that require the salesperson to delay dealing with the objection initially. • Offset Strategies • A set of strategies for dealing with objections that uses the technique of offsetting the objection with a benefit. • Perceived Value • A product’s value from the prospect’s perspective. • Value Analysis • A financial analysis, usually written, that shows how a product is the best value for the money. Copyright © Houghton Mifflin Company. All rights reserved. 47

Topics for Thought and Discussion 1. Why are objections sometimes called the salesperson’s best friends? Wouldn’t it be better for salespeople if prospects had no objections to buying their products? 2. Explain the concept of the buyer’s “arch of resistance” and the “keystone” objection. 3. Why is the term negotiation appropriate for describing how the salesperson should handle prospect resistance and objections? 4. Describe some ways in which a salesperson could change the prospect’s perceived value for a product. Copyright © Houghton Mifflin Company. All rights reserved. 48

Internet Exercises 1. Use an Internet search engine to find three firms that specialize in negotiation training. Peruse their websites to see if you can find some negotiation strategies, in addition to those discussed in this chapter, that could be used in personal selling. 2. Use Google or any other search engine to locate two examples of negotiation strategies being demonstrated using Flash or streaming video. 3. Use the Internet to find articles on negotiating sales resistance. Identify and describe some guidelines for handling objections besides those outlined in Table 7. 2. Copyright © Houghton Mifflin Company. All rights reserved. 49

Projects for Personal Growth 1. Go to the Business Periodicals Index online or at your school library or do a computer search to find five articles on business negotiation. Read at least three of them, and then prepare a list of guidelines that a salesperson might use. In class, compare the list you developed with those developed by classmates also given the same assignment. 2. Ask four professional salespeople about their philosophies and strategies in negotiating prospect objections and resistance. Decide, on the basis of these discussions, whether they believe in win-win or win-lose outcomes in negotiating with prospects. Explain your reasons for making this judgment about each salesperson. Copyright © Houghton Mifflin Company. All rights reserved. 50

Projects for Personal Growth (cont. ) 3. Ask three professional salespeople who each sell to different customer categories what their favorite techniques are for handling buyer resistance and objections. Do the negotiating techniques differ with the customer type? Why or why not? Copyright © Houghton Mifflin Company. All rights reserved. 51

Case 7. 1: Learning to Handle Prospect Objections 1. Look at the two situations one at a time. In your opinion, which of the three sales trainees seems to be on the best track toward handling the objection in each situation? How do you think the prospect will respond to the other two sales reps’ approaches in each case? 2. Which one of these sales reps would you prefer to be assigned to a territory where you were the sales manager? Why? Copyright © Houghton Mifflin Company. All rights reserved. 52

Case 7. 1: Learning to Handle Prospect Objections (cont. ) 3. What overall advice would you give the sales reps to help them in negotiating prospect objections or resistance 4. What do you think of the process of setting up a situation via videotape, stopping the tape to let sales trainees explain how they would deal with the situation, and then showing how the sales rep actually dealt with the situation? Copyright © Houghton Mifflin Company. All rights reserved. 53

Case 7. 2: Negotiating Price with a Taskmaster 1. Should Mc. Granahan’s lower the price to Bargain City by another five cents? Should Johnson agree to take an even lower commission to win the order? 2. How successful do you think Johnson, Barnhart, and Harris were in negotiating price resistance during the sales call? What types of techniques did Johnson, Barnhart, and Harris use to negotiate resistance? Do you think more persistence could have won the three-member sales team the Bargain City order? Case 7. 2 is found online at http: //college. hmco. com/pic/andersonps 2 e. Copyright © Houghton Mifflin Company. All rights reserved. 54

Case 7. 2: Negotiating Price with a Taskmaster (cont. ) 3. Do you think it was a good idea to bring Ron Harris, the district manager of Dura. Flor, along to help make the sales presentation to Bargain City? Why or why not? 4. How well overall did the sales team (Johnson, Barnhart, and Harris) do in negotiating concessions? What, if anything, should they have done differently? 5. What would you advise Chuck Johnson and Tom Barnhart to say in responding to Mr. Schramm’s request for another nickel cut in price to win the Bargain City business? Copyright © Houghton Mifflin Company. All rights reserved. 55