Category Archives: Sales Management

BATNA – The Tool to Improve Your Negotiating Leverage

“Rajeev, we have been given a mandate by our management. Due to the Covid-19 crisis leading to a steep fall in customer demand, you are expected to reduce the price of your cutting tools by 50%,” said Mr. Padmanabhan, (the purchase manager of Shockproof, a shock absorber manufacturing company from Delhi) adding a veiled threat, “else we have no choice but to switch over to the competition.” Rajeev is a technocrat running ‘Techno Enterprises,’ a MSME manufacturing cutting tools enterprise with a turnover of around Rs. 10 crores. When asked about the customer details, he shared that ‘Shockproof’ is a major supplier of shock absorbers with a turnover of ₹ 1000 crores catering mainly for the two wheeler industry.

One of the questions often asked in our training and consulting assignments is ‘how does one deal with such arm-twisting tactics, especially when the customer is too big compared to the supplier?’

One important concept in Negotiation theory is BATNA, which stands for the Best Alternative To a Negotiated Agreement, a term coined by Roger Fisher and William Ury of the Harvard Program on Negotiation. BATNA is an important tool while preparing for negotiation. Both parties have their BATNA independent of each other. The party having a stronger BATNA has a stronger negotiating leverage. In case the parties are not able to conclude the negotiation, the best option each one has can be called as their BATNA. In the above example, if the negotiations fail, the BATNA for the customer and vendor can be improved as follows:

Customer: Look for other vendors who can give a similar product at the desired price.

Vendor: Develop alternate customers who can provide the requisite amount of volumes at the desired price.

It is not as simple as it looks above. Does the customer have a vendor who can provide deliveries just in time to meet his production targets? Alternatively, does the vendor have alternate customers where his current inventory can be offloaded? Now you will appreciate that BATNA is not only decided by the number of options but also the feasibility and attractiveness of those options.

Whose BATNA is stronger? The conventional answer favours that of the buyer who is much bigger in size. Some points to ponder:

  1. Identify your BATNA: The tool required for cutting/drilling is made with precision which requires tungsten carbide or diamond as the raw material. It also requires a great deal of R&D to develop a tool for a specific application. The vendor has been supplying the tools for the last 15 years. With considerable technical expertise, the production department found the tool useful. The rejection rate was less than 1% and the cost-per-component was low.
  2. Identify the weakness in the other party’s BATNA: The seller knows that the buyer has the option of other vendor but also has the critical information that the rejection rate of the competition’s tool is close to 50%. Also, the shop floor people do not appreciate the tools supplied by the competition.
  3. Spot the customer’s bluff: Even though the Indian two-wheeler volumes fell by 15% in FY 20, the impact on Shockproof was much lesser at around 8.4%. The customer was able to absorb the shock (pun not intended) as it focussed more on improving the content per vehicle. As per a newspaper report, Shockproof had notched up a top-line of ₹ 5000 crores and its EBIDTA rose by 4% to Rs. 800 crores. (Remember the excuse of the Covid -19 crisis the purchase manager articulated earlier?)
  4. Do Proper Homework: Rajeev shared that the customer’s turnover was ₹ 1000 crores, whereas in reality it was 5 times. This can be perceived two ways: conventionally it may produce a feeling of helplessness. Alternatively the helplessness could be transformed into strength as in the end result of a David vs. Goliath fight. The vendor could feel that a supply of ₹ 1 Crore of material is insignificant from the customer’s perspective and there need not be any need for the customer to be so aggressive in reducing the price. Can David stand his ground?
  5. Improve your BATNA: Let us take a different example where both the customer and the vendor are equally strong. For its Power PC, Apple had developed its microprocessor in collaboration with Motorola and IBM. In 2005, Steve Jobs took a call to switch over to Intel, which apart from being a market leader in microprocessors was offering a cutting edge technology in computing. Developing microprocessors needs a huge investment and also technical expertise. Intel had both and was the only vendor for such a high-technology product. With a single vendor, the vulnerability was high for Apple.

Three years later, Apple bought over a 150-employee start-up in chip design called PA semi. Most of the team members had worked earlier at Intel, including Johny Srouji who now reports directly to Apple CEO Tim Cook. In 2020 Apple announced that it will use its in-house microprocessors for the new range of Macs.*

  1. Risk Mitigation: Apple was giving a business worth $3.4 Billion of microprocessors for Macs to Intel every year according to C.J. Muse an Evercore analyst. For Intel it was like losing a major account which was powering around 20 million Macs shipped by Apple annually. The impact of such a Key Account leaving Intel can be minimized when the figure is perceived not in absolute numbers but by the percentile share. Apple was contributing to 5% of Intel’s annual business and the total no of PCs sold annually are 260 million.

While understanding one’s BATNA, apart from the actual value an account produces, the share of the total business also needs to be considered. It is better not to keep too many eggs in too few baskets. An important tool in risk mitigation is the sales funnel which can help in improving your BATNA.

  1. Guard against Pitfalls while analyzing one’s BATNA: There are two mistakes people make while going in for negotiations. Either they are too optimistic or too pessimistic.

Being too Optimistic: There is a tendency to aggregate all the options and assume it to be The BATNA. Consider for example, Rajesh, an unemployed engineer in Bangalore who has applied for a job in IT and feels that he deserves a salary of Rs. 10 lakhs as he has the following options:

  1. Has applied for similar jobs in Mumbai and Delhi.
  2. Has plans of a start-up in 3-D printing.
  3. Is exploring further studies in the US by answering GRE and TOEFL.
  4. Is pursuing MBA by giving CAT.
  5. Joining the family’s 2-decade old fabrication business which is running well.

It is risky to assume the sum total of all these options as the best alternative because at any moment Rajesh can select only the best one. Contrast this with Gautam who already has a job with a ₹8 lakhs CTC. You will appreciate that Gautam has a better BATNA than Rajesh as a bird in hand is worth two in the bush!

Being excessively Pessimistic: The other mistake in negotiation is being too pessimistic when one is too committed to reaching an agreement without any preparation. There is an assumption that agreeing to all of the customers’ demands will make him happy, giving rise to a long-term business and relationship.

In the cutting tool example, the vendor though small in size vis-à-vis the customer, had a better product quality, a low rejection rate, a lower component cost and a shorter delivery period vis-à-vis the competition, which meant him having a better BATNA than the customer. Does it mean that he should rest on his laurels? Competition will be always trying to catch up with him, which necessitates him having to improve his BATNA all the time so as to keep the competition at bay.

Thus, negotiating strength, rather than being decided by the absolute size of a party or the size of the deal (as in Apple vs. Intel) or the number of back-up options, is decided by your BATNA.

Whether you are a buyer or a seller, starting a new venture or looking out for a new job opportunity, please spend time in identifying and developing your BATNA.

Remember, in life, you do not get what you deserve, but what you negotiate and that is decided by your BATNA, the Best Alternative to a Negotiated Agreement!

(* International Herald Tribune, Don Clark and Jack Nicas – After 15 years Apple prepares to break up with Intel DH – June 23, 2020)

Webinar on How To Acquire New Customers,Tuesday 14th July,

Acquiring New Customers through Contextual Selling

Thursday, 25th June 2020 at 11 AM (IST)

Perspective: The success rate in conventional cold calls is less than 5%. Thanks to internet and with easy availability of information coupled with Covid-19 crisis, your potential customers are wary of meeting unknown salespeople; whether on-line or in person.

When the competition is a mouse click away, retaining old customers becomes a challenge. However it is only through new customers that organizations and salespeople can hope to achieve growth. The practical webinar will show you not only the roadblocks but also powerful techniques to reach out to new customers!!

Major Themes:

  • Shift in  Customer Loyalty due to multiple vendors
  • Imperative for Continuous acquisition of new Customers
  • Business Etiquette while selling ON-LINE and in person
  • Why are new prospects wary of talking to unknown salespeople?
  • Stereotypes associated with Salespeople  
  • Breaking the stereotypes through Trust & Rapport Building
  • Intent, Competence and Commonality: Toolkit to enhance Sales call success
  • Role of reference and recommendations in acquiring new customers

Resource Person: Rajan Parulekar, B.E. (Electrical), MBA

  • Author of Contextual Selling®: A New Sales Paradigm for the 21st century
  • Completed Enhancing Sales Force Performance program at IIM-A in February 2013
  • Trained around 15,000 managers and sales executives from 1000+ companies since 1995.
  • Conducted programs for culturally diverse groups in India, Malaysia, Singapore Sri Lanka, Qatar, Muscat, Bangla Desh etc.
  • Best Sales Performance in Asia award while working for Wiltron USA in 1990
  • Winner of International Taped Speech Contest by Toastmasters Int’l  USA in 1997
  • Worked with Larsen & Toubro, Wiltron and Toshniwal in Sales and Marketing
  • Advanced Toastmaster (ATM) certified by TMI USA.

For Whom: The program is recommended for sales executives selling high-value products, services and solutions from Automobiles, Engineering Products, Chemicals, capital Equipments, Electronics, Telecom, IT ( Software and hardware) sector. The program may not be suitable for OTC/FMCG sales.

Investment: Rs.1950/-, US$ 40 per person.

Payment Mode: NEFT/Credit card/Google Pay: +91 98802 36793/PayTM: +91 98450 14098

For details : contact : rajan@paradigm-info.com, madhura@paradigm-info.com

WhatsApp: +91 98802 36793/98450 14098

Paradigm Trainers Private Limited| https:// http://www.paradigm-info.com

Behavioral Dynamics of Personal Selling

To understand the salespeople’s attitudes and beliefs towards salesmanship; a questionnaire used to be administered during the Sales Training program commencement. One of the questions said, ‘In a sales call who should talk more? Customer or the Salesperson?’ Majority of them voted for the latter. In a sample size of 285 participants, around 78% participants responded that they feel that they speak for 80% or more during a sales call.

The interesting part was the above statement was perceived by the group as a positive correlation to sales success.  When probed deeper about the reasons for dominating the conversations the answers given by the group were:

  1. To Engage with the customer
  2. To educate the customer.
  3. As I know more about my products, I have to talk more.
  4. To beat the competition.
  5. To close the order fast.
  6. As the time given by customer is very short, I have to speak as much as possible.

After taking the groups through a psychological process called Cognitive Dissonance, which is a gap between the beliefs and the reality,  the participants were shown that the above are apparent reasons and the real reasons why salespeople tend to dominate conversation is out of fear ( of rejection ) and the desperation to sell!

Let us try to understand the above language from a Neuro-Linguistic Programming (NLP) perspective. The language verbalized by the salespeople is not the reality but is the map of an  individual. The map is not the territory. The map is arrived at by three universal modelling processes which are Generalization, Deletion and Distortion. If there is a close approximation between the map and the territory then the salesperson is able to perform successfully in his given role.However with a great divergence, the perceptions will be flawed and he may not be able to achieve his quotas.

The above modelling processes have their validity and relevance in day -today life. However they may also create the problems depending on the context.

  1. Generalization: Generalization is the process by which elements or pieces of person’s model of the world become detached from their original experience and come to represent the entire category of which the experience is an example.* ( Leslie Cameron, Bandler 1985, p224) When a person has learnt a process, say of driving a car, he moves from unconscious incompetence to conscious competence. While coming out of the garage, he knows to put the reverse gear, turn the car, change the gear and put on the accelerator without looking down. In a way he need not have to learn the activities every time he drives the car. In a similar manner from a sales perspective, when an executive goes for a sales call, majority of the activities are common like introduction of the self and the company, ice breaking, understanding the client needs etc.

However the dysfunctional aspects of generalization happen when he goes through some setbacks when the self -talk revolves around the following statements: Today, you can sell only on price. Clients don’t respect my time. They buy only from competition.

  1. Deletion: Deletion is the process by which people selectively pay attention to certain aspects of their experience and exclude others. This allows them to focus the awareness and attend to one portion of their experience over others. This process makes coping possible and protects them from being overwhelmed by external stimuli *( Leslie Cameron – Richard Bandler 1985, p225)

Some of the examples of deletion are the ability to focus on a book in the drawing room when TV is blaring and children playing. Another example is when you are in a party with a group of people and you are talking to an important client over phone. The negative examples of deletion is self-talk by a Salesperson: John does not respect quality products.

  1. Distortion: Distortion is the process which allows people to make shifts in how they experience sensory data. Without this process, they could not plan for the future or dream into reality.

Positive Examples: fantasy allows a salesperson winning the Best Sales Performance Award which motivates him to push harder; abstract and surrealist paintings by Picassos and Dalis are other examples of distortion. The dysfunctional examples of distortion are:  A successful salesman in the past who is reprimanded for his abysmal performance in the last three quarters says, “I am perfect.”When he has lost order due to poor follow-up he says , “ that’s because the design department didn’t give me the specifications in time.”

From the above it can be observed that modelling processes discussed above are not good or bad per se. Generalization helps us from reinventing the wheel on a day-today basis, deletion helps to focus on important issues and distortion helps us to be creative.

Let us look at the number of categories where the salespeople can get into a self-defeating mode and the ways the seniors, mentors can help them come out of it.

Sr. No. Deviation Example (as verbalized by a Salesperson) Challenge (as perceived by the Sales Manager)
1. Simple Deletion I am tense About whom. what?
2. Comparative Deletion Competition offers better product and at a lesser price.  Better in what way? Price how much lesser?
3 Lack of referential index Their salesmen are trained. Who are they?
4 Cause and Effect I have lost orders because Dinesh from Pre-sales did not give the support. Have all the orders been lost because of Dinesh?

What about those orders which you have won?

Any body apart from Dinesh you can contact?

5 Presupposition I talk more because I know my products are better than my competitor. Does the customer buy because of your product or has he a problem to solve?
6 Mind Reading My manager does not like me.

Customer is biased towards competition

How do you know that?
7 Nominalization (Event to be converted into a process for more possibilities) I am a poor negotiator. Is it possible to improve your ability to negotiate?
8 Modal Operator of Necessity I have to achieve my quota this quarter. Can you choose to achieve your quota? (Less anxiety)
9 Modal Operator of Possibility I can’t share the LOST ORDER statement with my manager. What happens if you share? (worst-case scenario)

Instead of can’t what happens if you won’t?

10 Complex Equivalent Customer hates me… he yells at me. Are you sure his yelling means he is hating you?

It may be noted this is an indicative list to identify the mental roadblocks faced by the young salespeople. The sales manager or the HR manager is advised not to use the challenges in an indiscriminate manner; lest the damage may be caused to the young executive. An adequate amount of credibility and trust which needs to be created by the manager which will enable the executive to make the necessary behavioural changes in reaching the designated goals.

Rajan Parulekar , Paradigm Trainers Private Limited,  rajan@paradigm-info.com , 98450 14098

Difference between Convincing & Con-Vincing

Soumyajeet Mohanty ran Edu Solutions,  an educational consultancy service in Bhubaneswar Odisha. Initially he started Sunrise Coaching Solutions providing tuition to engineering students. As the venture did not yield much returns, he ‘moved up the value chain’ by providing  ( fake) admissions to students wishing to get into medical colleges. Continue reading

Do Sales Incentives necessarily Improve the Margins?

One of our clients in Pune had invited me to diagnose the problem of their poor margins. When I asked the VP-Sales he said,” We are facing this problem for the last three years, so last year we have launched an attractive incentive scheme, but still it is not producing results.”

Most of the sales managers intuitively feel that incentives lead to higher margins.  However the research carried out by Edward Deci and Richard Ryan at the University of Rochester and Adam Grant at Wharton say that the effectiveness of motivation varies with the task.  There are two types of tasks:  Algorithmic and Heuristic tasks. Continue reading

Importance of Weak Ties in Strengthening your Social Network

In your social network you have two types of ties:

  1. Strong Ties: These include your close friends whom you know well and with whom you interact frequently.
  2. Weak Ties: These are the acquaintances who know you superficially and your interactions with them are rare.

Between the two of them who should support you more in propagating your service? The intuitive answer is obviously the former,  that is the strong ties.  Let us look at a hypothetical scenario.  You (A) have strong ties with B & C with whom your total strength of the network is 28 connections whereas with X & Y you have weak ties and the total network among you is 25 connections. Which one should give you more mileage? (refer figure below)

strongweak-tie

Let us look at it mathematically.

You will observe that in strong ties there are lot of common connections which lead to a great deal of overlap. Whereas in case of weak ties, the overlap is less and the distributed network is high.

strongweak-tie_graph

You will observe that your message will spread to 7 new connections with strong ties whereas with 18 connections with weak ties.

Let us look with two examples:

  1. My book, Contextual Selling was published a few years back. I had conducted a few sales training programs for Rittal India, a leading manufacturer of IT enclosures. When Jacob Chandy, the Vice president Sales and Marketing went through the book, he immediately ordered for 80 copies. In the last 5 years I might have met him hardly 3-4 times.

I was delivering a Keynote address for Metrology Division of Carl Zeiss in 2014. After seeing the book, Mr. Wolfgang Schwarz, VP Sales based in Germany ordered for 30 copies. Our interactions over mail and linkedin are hardly 3-4 in the last two years.

I suggested Sunil my good old friend (strong tie) who was in sales about the book. He said, “I need a complimentary copy.”

  1. Last week I was conducting a program for Bruker Analytics in Mumbai. I had interacted with Dr. Shreeram Oak CEO, only once in 2012. After that meeting the second time I met him was while conducting the program.

In Mumbai I have two close friends, Amar and Ramesh (names changed) who are CEOs of companies in similar field and competing with Bruker. Both of them know me for the last 25 years. (We were working in the same company earlier ) Whenever we meet,  they regularly  complain about the poor quality of their salespeople and the need for a training program But training program to Rajan , no way!

Strong Ties:

  1. They know you too well. ( familiarity breeds contempt?)
  2. They move in almost similar circles
  3. There is a considerable overlap in their networks.

Weak Ties:

  1. They know you enough about your professional competence.
  2. More novel information about you can move into this network.
  3. There is a less overlap

The concept paper on Weak ties was developed by Mark Granovetter a Harvard Theoretician in 1972 as a part of his Ph. D. thesis. The Strength of Weak Ties is considered as a most influential sociological paper.

Quite often life is illogical and counterintuitive, do not ignore the weak ties,make the best use of them to improve the strength of your social network. Wish You a Very Happy and Prosperous New Year!

Rajan Parulekar|Paradigm Trainers Private Limited| #7, 7th Main, Binny Layout, Vijaynagar, Bangalore 560 040| T: 080 23207930, M: 98450 14098| rajan@paradigm-info.com

How NOT to recruit a candidate

Natasha,  a sales manager from a renowned  hotel in Goa interviewed a candidate called Moin,  a B.Com graduate for the post of a trainee sales executive. Moin was a tall, fair and handsome guy who  spoke fluently during the interview. Natasha felt he was an ideal candidate for sales. When asked about his strength, Moin  replied his strength was manipulation. Save for this ‘minor’ aberration he looked OK on other fronts.

He was shortlisted  for the next interview, where he repeated the same answer when asked by the GM. The considerate GM said, “young man, please go home and refer the dictionary and check the meaning of the word manipulation. You should not give such answers. Elsewhere you would have been rejected straight away.”

After joining, Moin started throwing tantrums . When asked to usher a guest in the restaurant, he said, “I am graduate, I do not do such things.”  Natasha once asked him to follow up for payment from one of the regular guests of the hotel.  Moin fired the guest saying that if the latter does not pay immediately, he may have to face dire consequences. Luckily Natasha, the manager overheard the telephonic talk, seized the receiver and apologized to the guest. Within two months, Moin resigned without giving any reasons.

The manager had spent her precious time of hers as well as of others including the GM. It is very rare for someone to contribute significantly during the first six months. Precious time and money of the organization were wasted.  Some of the mistakes managers  make while recruiting are:

  1. Selection Bias for common traits: The candidate revealed his interest in being a DJ which was a common interest for the manager too.
  2. Emphasis on external appearance: Selection of candidates is based on appearance, personality as well the hearing the expected responses. For example when asked why would you like to join our company, the typical response from candidates is: “I would like to take challenges and grow with a growing organization.”
  3. Ignoring the Obvious: Listen to what the candidate says and also what he does not want to tell. Here Moin went on harping his manipulation skills which was ignored.
  4. Mistaken Competencies of a Job Role: Most of us feel that a good talker is a good salesman. It may be true for low-value sales. However for high-value product or service like premium hospitality,  the converse is true. It is not the glib talker but the effective listener who fits the bill for a good salesperson.

For more details please refer the chapter,  Why do Salesmen Love to Talk in my book Contextual Selling (for more details http://www.paradigm-info.com)

Cognitive Biases that affect Decision Making

“I tried to get an appointment with my client for six months, I could not succeed”, said Shashi, my friend in an Omani Company. “However the moment my Scottish counterpart sitting in the next cabin called him, he got an appointment the next day”.

Two Caucasian ladies, one French and the other a Polish, sang an average composition on peace & harmony in Bangalore for 2-3 minutes. After their recital, there were hordes of people from the audience who wanted to get photographs along with them. The singers were neither celebrities nor accomplished singers, but the colour of their skin made all the difference! Let us look at the different types of perceptual biases most of us have.

  1. Blind-Spot bias-: Your own cognitive bias is a bias in itself. People notice cognitive and motivational biases much more in others than in themselves. We have a positive bias towards the Caucasians but may discount brown or dark-coloured skin executives.
  1. Anchoring bias: People are over-reliant on the first piece of information they hear. In a salary negotiation, whoever makes the first offer establishes a range of reasonable possibilities in each person’s mind
  1. Availability heuristic: People overestimate the importance of available information. A person might argue that smoking is now unhealthy because they know someone who chain smoked and still lived upto 100. Quite often the information is taken out of context or only a sample is selected by ignoring the other data.
  1. Bandwagon effect: The probability of one person adopting a belief increases based on the number of people who hold that belief. This is a powerful form of group-think and is reason why meetings are often unproductive.
  1. Choice-supportive bias: When you choose something, you tend to feel positive about it, even if that choice has flaws. Like how you think your dog is awesome – even if it bites people every once in a while.
  1. Clustering illusion: This is the tendency to see patterns in random events. It is key to various gambling fallacies. Like the idea that red is more or less likely to turn up of a roulette table after a string of reds.
  1. Confirmation bias: We tend to listen only to information that confirms our preconceptions – one of the many reasons it’s so hard to have an intelligent conversation about climate change.
  1. Conservation bias: Where people favour prior evidence over new evidence or information that has emerged. People were slow to accept that the earth was round because they maintained their earlier understanding that the planet was flat
  1. Information bias: The tendency to seek information when it does not affect action. More information is not always better. With less information, people can often make more accurate predictions.
  1. Ostrich effect: The decision to ignore dangerous or negative information by “burying” one’s head in the sand, like an ostrich. Research suggests that investors check the value of their holdings significantly less often during bad markets

It is not possible to eliminate all the biases, but the least we can do is to be aware of them and in mindfulness the chances of our decisions going wrong can be minimized.