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Negotiation tactics for customer success managers
Negotiation: a word that can strike fear into the hearts of CSMs. For me, the term brings to mind car dealerships, aggressive salespeople, and shouting. It can feel like a situation where nobody really gets what they want.
As a CSM, the stakes can feel high. What if the customer decides not to renew? What if they downgrade? Will this make you look incompetent to your customer or your boss? Will it put your job at risk?
Creativity and confidence can help you become a better negotiator. Luckily, you can develop both strengths through preparation and practice.
When do CSMs need to negotiate?
The obvious answer is when a customer wants changes to their contract or pricing. Yes, many CSM teams handle those types of negotiations. However, you might also need to negotiate items that are not related to contracts.
For instance, how often have you needed to:
- Ask for an extension on a project timeline;
- Redefine the scope of services you’re delivering to a customer; or
- Get a customer to adopt a workaround they don’t want to use?
These are also negotiations.
When you consider all the things you negotiate daily with customers, you start to realize that you probably already have some negotiation and persuasion skills. That can make the prospect of negotiating things like contracts a lot less intimidating.
Additionally, remember that as the incumbent vendor, you are in a position of power. It is expensive and painful to replace technology, especially in the first few years of working with a vendor. Your customer would lose most of the time, effort, and money that they have invested in your solution. Unless you severely messed something up, your customer doesn’t want to change vendors.
How to prepare for a customer negotiation
Solid preparation for a negotiation boosts confidence and makes the conversation run more smoothly. Here are three of the most effective ways to prepare for a negotiation.
1. Understand your interests and consider what your customer’s might be.
Interest is the reason behind the position you take as a negotiator. For example, your position might be that your company is raising prices across the board. Your company’s interest in this position is that the cost of development has increased. To keep the new releases flowing, they need to cover the new costs. Your customer’s position might be that they don’t have additional budget for your solution in the coming year. Their interest in that position is that they have a new CFO who is trying to make a good impression on their board members by keeping costs flat. Knowing the reasons behind the positions you and the other person are taking helps you to creatively solve for the motives, rather than dig in on your positions.
2. Ask questions to better understand your customer’s interests.
Until you have a conversation with the other person, you can only guess at their interests. It might be an educated guess that is based on prior discussions, but it is still worth the time to clarify what is going on behind the scenes.
Think of questions you can ask to understand the other person’s interests.
- Is your budget freeze happening across the board or just in your department?
- What impact is this having on other solutions you’re using today?
- Does this mean that you’re going to end up with gaps in your technology ecosystem? How will that impact your team? What are your plans to bridge those gaps?
Use the answers to these questions to fill in the missing pieces and help the customer understand their own situation better so that they are in a problem-solving mindset.
3. Bring 2-3 possible solutions to the table.
There is a common parenting strategy that absolutely applies here. If you want your kid to eat healthy, you give them a choice between peas and carrots, not peas and candy. Making it easy for a customer to say “yes” to a choice that you’ve offered them is sometimes the simplest approach to negotiation. This means that you need to bring some options to the table—and they need to be solutions that work for you.
Using my example above, you might want to offer a reduction in the renewal rate in exchange for a customer story. This gives you a smaller increase in your renewal rate but it also gives your sales reps a tool they can use to drive more new business.
An alternative might be to offer a longer agreement at a lower rate increase. This provides more certainty for your business, while still providing a small increase in the rate. As I’m sure you can see, this is where creativity comes in.
Three tactics to become a better negotiator
Sometimes in a more difficult negotiation, you’ll need to find ways to reduce the tension in the conversation and make it more productive. Here are three negotiation tactics that I find both easy and effective.
Anchoring is basically expectation-setting. If you know you’re heading into a tough conversation you can lead with a statement like, “So, I’m sure you’re looking forward to this conversation about our price increase just as much as I am!” or “I know that conversations about price increases are always tough.”
By setting the bar for the conversation low, you are anchoring the customer’s expectations in the idea that the price increase is going to be high. Once they hear the real numbers, they will be more likely to have a positive reaction because it isn’t as bad as they expected.
Mirroring is copying the pace, tone, and mood of the other person during your conversation. Mirroring your customer shows that you are listening and want to work with them to find a solution.
Mirroring is something that humans often do subconsciously. If you have a customer who is upset, you can slow down and calm your tone. Often the other person will subconsciously follow your lead, which will de-escalate the conversation.
Labeling is naming the things that are getting in the way of having a productive conversation. If your customer is angry or blocking the conversation, it can be useful to call out the dynamic at play.
For example, you might say something like, “It seems like you’re upset about this change,” or “It looks like you’re frustrated with what’s going on.” If they acknowledge how they are feeling, you can follow your comment up with, “Can you tell me more about what is going on?” All you need to do is listen and learn more about what is happening, which takes you back to understanding their interests.
Seal the deal with confidence and empathy
Negotiating is really about two people working together to solve a problem. As a CSM, the task boils down to understanding what each person wants, thinking of inventive solutions, and always remembering that you’re dealing with an individual, not just a business.
If you find these strategies useful, consider exploring CSM Certification courses offered by The Success League. You’ll learn how to navigate the trickier aspects of being a CSM such as how to have better goal-setting conversations, negotiate like a pro, handle difficult discussions, and sell with confidence.