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The Effect of Negotiation on Sales Performance in an Organisation

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International Journal of Strategic Research in Education, Technology and Humanities
ISSN Hard Print: 2465-731X, ISSN Online: 2467-818X Vol. 2, No.1 September, 2015

The Effect of Negotiation on Sales Performance in an Organisation

1 2
Dr. Kabuoh, Margret N, Dr. Egwuonwu, Thomas K &
3
Dr. Ajike, Emmanuel O
Department of Business Administration and Marketing
Babcock University, Ilishan, Ogun State Nigeria

Abstract
Effective communication in business transaction is one of the tools that promote
marketing activities. Communication comprises of various tools, one of which is
negotiation meanwhile, people most often disregard the importance of negotiation
due to its silence nature. This study evaluated the effect of negotiation on sales
performance. Secondary data was employed as a source of data elicitation. Text
books and journals were basically the instruments from where the information
relating to the study variables were reviewed from. Results indicated that there
exists a relationship between the independent variable (negotiation) and dependent
variable (sales management). Recommendations were; that negotiation should be
taken as a guide in the preparation of sales task. The employers should always train
their staff on how to imbibe the negotiation guidelines and processes. There is need
to motivate staff for sales performance achievements.

Keywords: Effect, Negotiation, Sales performance, Sales Force,

Communication.

Background to the Study

Most organizations are interested in the maximization of shareholders fund hence
the need for effective and efcient communication strategy. Marketing and
marketing communication mix are changing, new tools, new opportunities and
new challenges are emerging as the 21st century progresses (Smith & Taylor, 2010).
Effective communication is displayed by accurate sales man's negotiation born out
of efcient Sales management leading to organization's performance.

http://internationalpolicybrief.org/journals/international-scientic-research-consortium-journals/intl-jrnl-of-strategic-research-in-edu-tech-humanities-vol2-no1-Sept-2015

Journal of Education, Technology and Humanities Page 120

Leigh and Khakhar (2015) opined that international business negotiation is often a
key element in marketing success. Negotiators frequently interact with potential
business partners from markedly different cultural or social backgrounds. To be
successful, they have to acquire a complex skill set that has to be acquired 'on the job'
– a skill set that is useful in preventing undesired perceptions, ltering out
communication 'noise' and that promotes successful negotiation outcomes. To
quote Shi and Wright (2001:186); “In a global business environment, the business
executive's work has an increasingly international orientation and international
business negotiation becomes an important competency”. The growth of new
emerging markets and of the global economy have seen increasing demand for
negotiation training for marketing executives. Training consultants generally teach
negotiation skills by drawing on communication theory and socio- psychological
perspectives. The success of negotiations in international settings relies on the
ability of managers to effectively communicate their message in different cultural
settings (Schoop, Kohne, & Ostertag, 2010). Managers must be aware of the
contextual factors inuencing the negotiation process, and should have the ability
to alter their style and strategies to suit their needs (Saee, 2008).

In some selling situations, the salesperson or sales team have a degree of discretion
with regards to the terms of the sale. Negotiation may therefore enter into the sales
process. Sellers may negotiate price, credit terms, delivery times, trade- in values
and other aspect of the commercial transactions all focused towards effective and
efcient sales management which enhances increased sales and organizational
performance.

Despite the benets of effective negotiation, some organizations engage

salespeople without recourse to their professional capabilities leaving customers
with after purchase dissonance. Such companies complain of cost of training sales
persons being high, others complain of time consuming, while others say that they
are graduates who have no need for further career development having no regard
for the long term effect of training these sales forces. Hence, the need for this study.

Objectives of the Study

The general objective of this study was to evaluate the effect of negotiation on sales
performance.

This paper specically;

1. Reviewed the function and meaning of negotiation as it affects sales
performance.
2. Examined some guidelines and qualities required to be a good negotiator
and sales person.

Journal of Education, Technology and Humanities Page 121

3. Made some recommendations based on the ndings from the study.

Literature Review
Concept of Negotiation
Negotiation is to confer with a view to arriving at mutually acceptable terms for a
contract or agreement (Oxford, (2009). The favored technique for resolving conict
is negotiation. Thus, negotiation can be examined as a management mechanism
that can allow both parties to benet from the experience and move toward a
stronger relationship (Atkin and Rinehart 2006). Research that explores the impact
of negotiator characteristics on negotiations will, we believe, facilitate the creation
of these strong relations through the pragmatic understanding of the impact of these
individual level characteristics.

Wall (1985) cited in Jack & Samuel, (2003, p. 299) denes negotiation as “the process
through which two or more parties seek an acceptable rate of exchange for items
they own or control”. Negotiation in another vain, is dened as a eld of knowledge
and endeavor that focuses on gaining the favor of people from whom we want
things” (Cohen, 1980, cited in Jack & Samuel 2003, p.298).

Out of all the communication skills, negotiation skill is employed mostly by sales
managers but the one that is the least discussed. Negotiation skill seems to be the
most important skill needed by sales force as the tool to convince a prospective
buyer to buy in the idea, product or service. In sales management, negotiation can be
used to resolve conict that might arise as a result of things not made clear to any
transaction stakeholder or by the sales person himself. Negotiation is important
because, proper and accurate negotiation takes one protably through the
transaction process, otherwise it may negatively impact on the business deal.

In some selling situations, the sales person or sales team have a degree of discretion
with regard to the terms of the sale. Negotiation may therefore enter into the sales
process. Sellers may negotiate price, credit terms, delivery times, trade-in values
and other aspects of the commercial transaction. It is important that negotiation is
preceded with preparations such as:
1. Having adequate product knowledge and benets
2. Having adequate knowledge of competitors' products and their benets
3. Sales presentation planning
4. Setting sales objectives
5. Sales cycle
6. Understanding buyer behavior
7. Assessment of the balance of power; the number of options available to each
party, the quantity and quality of information held by each party, need

Journal of Education, Technology and Humanities Page 122

 recognition and satisfaction and the pressures on the parties.

The sales person having been done with the preparations (Jobber & Lancaster, 2009)
should then be guided on the selling process as follows;

Start high but be Realistic

It is important to start up sales canvassing with high morale. Firstly, the buyer might
agree to it and secondly, it provides room for negotiation. A buyer may come to
expect concessions from a seller in return for purchasing. This situation is prevalent
in the car market. It is unusual for a car salesperson not to reduce the advertised
price of a car for a cash purchase. When considering how high to go, the limiting
factor must be to keep within the buyers' realistic expectations; otherwise they may
not be willing to talk to the seller in the rst place.

Attempted to Trade Concession for Concession

It may be necessary sometimes to give a concession simply to secure the sale. A
buyer might say that they are willing to buy or he is willing to buy if the seller drops
the price by N100. The seller may create room for negotiation which may be
accepted by the buyer. When the seller has a degree of power through meeting
buyer requirements better than competitor, the seller may be able to trade
concessions from the buyer. This is made possible with the 'if…. Then' technique.
1. If the goods are to be collected by your own arrangement, then we shall be
willing to make a 10% knock off from the purchase price.
2. If you are ready to make payment on or before 10 days, I am willing to offer 3%
discount.

This term is ('if….Then' technique) a valuable tool at the disposal of the negotiator
since it promotes movement towards agreement while ensuring that proposals to
give the buyer something are matched by proposals for a concession in return.
Possible concessions are evaluated at the preparation stage in the light of costs and
values not only to the seller but to the buyer also. The cost of delivery to the seller in
the case above might be much higher than the cost of collection by the buyer. Net
effect of this proposal is that the sales person is offering a benet to the buyer at very
little cost to the seller.

Implement Behavioral Skills

Ask lots of questions: questions seek information (knowledge is power) and
identify the buyer's feelings. Control is enhanced as the questions are directed to
the topic.

Journal of Education, Technology and Humanities Page 123

Use Labeling Behavior: Example, “can I ask you a question?” “I should like to make
two further points”, and “may I summarize?”

Do not Label Disagreement: such statements as 'I totally disagree with that point
or 'I cannot accept what you have just said.

Maintain Clarity by Testing Understanding and Summarizing: seeking if

previous contribution has been understood and let me see if I have got this right.
You are saying that if we could deliver next week, match the competition on price
and provide a day's worth of free training, you would place an order with us.

Give Feelings: Allow your buyers express their feelings which make them appear
humane, create an atmosphere of trust.

Avoid Counter- Proposing: This is usually an instant turnoff. If the seller is not
ready to give due consideration to the buyer's proposal, why should the buyer listen
to the seller's?

Avoid the use of Irritators: these are behaviors which are likely to annoy the other
party through self praise and or condescension. Example 'Listen, Young man, I
think you are going to nd this a very attractive and generous offer', are likely to be
more irritating than persuasive. The response will be 'I am best placed to judge your
offer, and don't patronize me.

Do not Dilute your Arguments: Make your point and don't add more because the
more you dilute your argument, the more the seller will pick you on the weaker
points.

Avoid Personalizing the Discussion: negotiator should never say'You are being
ridiculous' instead say 'That price is too low'.

Buyers Negotiating Techniques:

Kennedy & Macmillan described a number of techniques designed to weaken the
position of the unsuspecting sales negotiator.

First, shotgun approach involves the buyer saying, 'Unless you agree immediately
to a price reduction of 20%, we'll have to look elsewhere for a supplier.'

Secondly, the ploy buyers use at times is the 'sell cheap, the future looks bright'
technique: we cannot pretend that our offer meets you on price, but the real payoff
for you will come in terms of future sales'. This may be a genuine statement-in fact

Journal of Education, Technology and Humanities Page 124

the seller's own objective may have been to gain a foothold in the buyer's business.
At other times, it's a gambit to extract the maximum price concession from the seller.
If the seller's position is reasonably strong they should ask for specic details and
rm commitments.
The nal technique is the 'Noah's Ark': old technique. The buyer says, tapping a le
with one nger, you'll have to do much better in terms of price. I have quotations
from your competitors that are much lower.' The sales person's response depends
on their level of condence. The salesperson can call the buyer's bluff and ask to see
the quotations; or take the initiative by stating that they assume the buyer is wishing
for them to justify the price; or if ushed with the condence of past success, can say
'Then I advise you to accept one of them.

The Skills and Personal Qualities of a Good Negotiator

Successful negotiators have three key skills-communication, listening, and
judgment. Three personal qualities-honesty, exibility and credibility.

Honesty
Honesty is the single most important personal quality of a successful sales manager.
Almost every other mistake a person makes can be overcome and forgiven but not
dishonesty. Once a person lies, no one fully trusts him again, and his inuence and
effectiveness are ruined. Nevertheless, many professional sales people will risk
damaging their credibility and violate their integrity rather than admit that they
deceived buyers. Hence negotiation entails both parties agreeing to a term. Over
promising and under delivering should be avoided as much as possible so that the
buyer will not be left with after purchase dissonance feelings, rather the buyer is
expected to be lled with after repeat purchase dissonance.

Flexibility
A good negotiator is expected to be exible, there should be considerations for
changes in the economic, political/legal, competition and cost of goods/services.
Flexibility in form of transactional terms such as discount, payment terms,
guarantees and warrantees are all abound.

Credibility
The negotiator is known to be a person of integrity, knowledgeable, capable and
dependable. A
Reputation for credibility is earned; it cannot be established overnight, and it will
not be believed until it is demonstrated. Credibility is something to develop being
patience and persistent.

Journal of Education, Technology and Humanities Page 125

Communication Skills
The negotiator is the spokesperson for his company. He must be eloquent and
uency with good command of the language. Study has conrmed that negotiators
who are procient at communication are more successful.

Listening Skills
Listening works hand in hand with negotiation. Being a good listener is key to being
a good communicator.

Many people seem to dene communication as the art of speaking effectively but
forget that communication requires dialogue. They forget the other half of the
communication equation; listening. As a sales person is negotiating, he must listen
to the prospective buyer's view regarding the transaction.

Good Judgment
Good judgment is based on knowledge of the subject, the ability to project what the
consequences of the judgment will be, the ability for problem solving and
generating alternative solutions, and the capacity for making decisions.

Negotiation Guidelines
Taylor (1998) listed a number of guidelines that could be followed to become a
successful negotiator. These items are important and should be systematically
adopted by the sales force;
Prepare: know everything possible about your product/service. Prole your
prospective partner whom you are to negotiate with.
1) Be Sensitive to Different Perceptions: separate people from the problem.
Understand that each person's view of the transaction matters and may be
different.
2) Use Creativity and Imagination: create options. Be exible.
3) Help Others to Agree with Your Proposal: use appropriate convincing
words. Consider company's goals and objectives.
4) Value any Deadlines You Agree to: Never violate the agreements made
with customers individually or collectively.
5) Take Notes and Follow up with a Record Outlining the Agreements:
outline meeting points before and after the negotiations of what agreements
each party made.
6) Prepare for no Agreement but Leave with an Intact Relationship: be
prepared incase no agreement is possible. Leave every negotiation with the
relationship intact. If no sales today, there may be tomorrow.

Journal of Education, Technology and Humanities Page 126

Methodology
This study adopted the secondary source of data. The data were elicited from text
books, journals and internet. The independent variable (Negotiation) and
dependent variable (Sales performance) were all reviewed via the secondary
sources. Conclusion and recommendations were made based on the ndings.

Conclusion and Recommendations

The concept of negotiation has been dened in various ways in the study but most
notable are the ones given as; Wall (1985) cited in Jack & Samuel, (2003, p. 299)
denes negotiation as “the process through which two or more parties seek an
acceptable rate of exchange for items they own or control”. Negotiation in another
vain is dened as a eld of knowledge and endeavor that focuses on gaining the
favor of people from whom we want things” (Cohen, 1980, cited in Jack & Samuel
2003, p.298).

In sales management, negotiation can be used to resolve conict that might arise as
a result of things not made clear to any transaction stakeholder or by the sales
person himself. The selling process of Jobber and Lancaster (2009) are necessary
tools to guide sales persons in preparations to win the market. We concluded also
that there exist a signicant relationship between negotiation and sales
performance.

Negotiation by the sales force should be upheld guarded so as to enhance sales

performance. There is need for both the seller and the buyer to come together in
agreement to achieve any business transaction in a manner that benets each party.
Organisations are encouraged to train their personnel with negotiation guidelines
and processes so as to prepare them with the task ahead with clients. Staff
motivation in form of performance achievement reward is recommended to
encourage others to work hard.

Journal of Education, Technology and Humanities Page 127

 References
Atkin, T. S. & L. M. Rinehart. (2006), “The Effect of Negotiation Practices on the
Relationship between Suppliers and Customers”. Negotiation Journal (1):
47-65.

Jack, R.M., & Samuel, J. M. (2003), “The Nature of Negotiation.” Project

Management: A Managerial Approach, 5th Ed. New Delhi: John Wiley and
Sons Inc. 110002.

Jobber, D., & Lancaster, G. (2009), “Negotiations Guidelines to Aid Salespeople.”

Selling and Sales Management, 8th Ed. Gosport: Asford Colour Press
Ltd.

Leigh I.E. & Khakhar, P. (2015), “The Effect of Negotiator Characteristics on the
Success of International B2B Negotiations”. Proceedings International
Marketing Trends Conference

Oxford, (2009), “Dictionary of Business and Management”. 5th Ed.

Saee, J. (2008), “Best Practice in Global Negotiation Strategies for Leaders and
Managers in the 21s Century.” Journal of Business Economics and
Management, 9, 309–318.

Schoop, M., Kohne, F., & Ostertag, K. (2010), “Communication Quality in Business
Negotiations.” Group Decision and Negotiation, 19, 193–209.

Shi, X. & P. Wright. (2001), “Developing and Validating an International Business

Negotiators Prole.” Journal of Managerial Psychology 16 (5) 2-15.

Smith, P.R. & Taylor, J. (2010), “The Changing Nature of Marketing.” Marketing
Communications: An Integrated Approach, 4th Ed. Replika Press PVT Ltd.

Taylor, J. (1998), “Guidelines for Successful Negotiations.” A Survival Guide for

Project Managers.” N.Y: AMACOM.

Journal of Education, Technology and Humanities Page 128

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