Steve Thompson is managing partner at Value Lifecycle, which helps companies position, negotiate, and close critical business deals. In the past 20-plus years, he’s worked on more than $17 billion dollars in business-to-business deals in dozens of industries. In his new book, The Painless Negotiation, Steve teaches how to leverage the principles of the compelling proposal to turn negotiations into straightforward business discussions on how to best maximize the value in a deal for both parties.
This is the Author Hour Podcast, I’m your host Benji Block, and today I am thrilled to be joined by Steve Thompson. He’s just authored a brand new book titled, The Painless Negotiation. Steve, we’re so glad to have you joining us here today.
Steve Thompson: Benji, it’s a delight to be on your program. I’ve looked forward to this.
Benji Block: Steve, for listeners who could be new to your work— we probably have listeners that are also familiar because of books that have come out previously— but talk a little bit about your background and this series of books that you’re in the process of releasing?
Steve Thompson: Sure! The series of books, I titled the Must-Win Deal series, and it’s targeted pretty much at about half my client base, which is B2B salespeople that are selling in the large enterprise space. Also, by the way, half of my business is on the buying side. I work with some of the biggest companies in the world, helping them position and negotiate deals with key suppliers and particular ones that they want a long-term relationship with.
I’m somewhat of an odd duck, Benji, in that I work on both sides. Not at the same time, mind you, but both sides of the fence. And what I began to see was an emerging trend; there was frustration on both party’s sides. I would characterize it as two ships passing in the night, or somebody lands from another planet and they’re speaking a different language. The buyers were looking for one thing and the sellers were talking about something else.
As a result, this was leading to really long sales cycles. In many cases, lost deals and if a negotiation happened, it would be a very contentious and price-focused negotiation. About the time that I started developing this kind of middle model of what was going on in the back and forth of B2B buying and selling, two top executives with a couple of my buying clients approached me and said, “Steve, we’re really good at negotiating when we buy commodities—whether it’s office supplies, things of that nature— but we’ve got business-critical suppliers that we need a long-term relationship with. We need a different framework when we work with those into these.”
In working with those two clients, what evolved is what I called the Value Lifecycle, and that’s the name of my business. The focus there is if you’re going to sell effectively, you need to understand what value means to the customer and you’ve got to manage that value from the first interaction to well after you win the deal.
In fact, from the buyer’s standpoint, everything that happens up until the point where the deal is closed, they consider “sausage-making”. For the salesperson, it’s the center of their universe. But that’s one of the big disconnects. The salespeople tend to sell to a closed deal. Buyers, the closed deal is just the milestone. What they’re after is, deliver on that value that you promised me, okay?
Benji Block: Yup.
Steve Thompson: Because sellers confuse what buyers pay for which is their products and services with what they’re actually buying. Customers are buying different and better outcomes.
That was the genesis of this model. Basically, I focused on what I consider to be four critical touchpoints of the relationship and I started off with the first book of the series called, Must-Win Deals: How To Win Them and Why We Lose Them. What I did in that book, Benji, was lay out for everyone basically the four things that we don’t do well as sellers that make it really hard for customers to award us the business.
If we just get better at these four things, we’re going to win a lot more deals; they’re going to be higher quality deals, we’re going to keep customers longer and they’re going to be interested in buying more. That was the first book in the series and then that led to the first critical issue that sellers present the buyers. That is, they don’t give them a value proposition that the customer really understands and that they can get excited about.
When you talk to your typical salesperson and say, “Okay, tell me what it is you sell?” and they’ll give you the names of the products and services, say, “Okay, can you help me understand what’s your value proposition to customers?” Invariably, they’ll go into features, functions, and God knows if it’s in the technology space. They’ll go ad nauseam, you know? Features and functions and I’m like, “That’s not value.”
That’s what the first book dealt with; how do you create an irresistible value proposition for the customer that they clearly understand, they can socialize it internally, and it gets them excited about doing business with you?
Then that led to the next book, the third book in the series, which was The Compelling Proposal. What I found is, in the B2B space— and by the way, I have buying clients who have paid me quite well over the years to help them review supplier proposals, and I have to be honest with you, I hate that job.
The reason I hate it is, I can already tell them what every proposal is going to say. I don’t know how the math works out but every supplier does have a good marketing department. For some reason they’re all number one, you know? World-leading, innovative, and in the technology space they can be garnering up, upper right quadrant, the whole bit.
Basically, when you look at this state of B2B proposals, they’re fundamentally a bunch of marketing material that’s all publicly available nowadays, packaged around a short quotation which is usually a list of indecipherable acronyms, skews, volumes, and pricing. That’s supposed to carry the day and it’s definitely a problem in today’s world where so much of the selling is happening virtually. In truth, most of the selling is happening when the salesperson’s not on a zoom call.
It’s happening internally at the customer because in a B2B purchase today, I’ve seen studies that say, on average, there are seven decision-makers involved or influencers, and I’ve seen numbers double that. What your champion needs to sell on your behalf is a document that tells their story, not your story.
It helps them make sense of their situation and helps them make an informed decision. That’s what that book was about. Now it leads to the next book in the series— and by the way, as I introduce the concepts and how to address them, I tried to link all of these books together with what I called a case story. This is an actual story. It has characters on the buying side, and on the selling side, there’s politics and dynamics ongoing which is what the real world’s about.
I use that to bring alive these concepts in the first three books, and I continued in this one, The Painless Negotiation. That’s kind of a common thread. I try to take these concepts, and instead of this being an academic book, if you will, they’ll make it street level. Something that people could understand and act on. That’s where we are with this one and then coming out shortly— the manuscript is done. My editor is doing the final editing and putting the final touches on— is the fifth and the final book in the series, which is called, Can’t Lose the Counts.
It should be outright after the first of the year but this is; after you win the business, how do you ensure you’ll deliver the value, get credit for it, and create a lot of upsell and cross-sell opportunities with that customer?
Internal Negotiations: Knowing What A Good Deal Looks Like
Benji Block: Amazing. When you’re writing these five books, who is the ideal reader? Anyone within the sales team? Is it upper management? Who is your ideal reader?
Steve Thompson: I started off really targeting your B2B salesperson as well as their direct reports, the frontline managers. As I started writing this, it’s really evolved because of the work that I do in my consulting practice, I started bringing in more executives into the conversation because there’s so many executives today, if they don’t have a sales background, they kind of see it as magic or black art.
What I wanted to do was kind of strip away that façade and pull back the curtain, if you will, and show them that no, selling— there’s a phrase out there that’s selling isn’t helping. But helping is selling, and that’s what customers want, is help.
They spend money because they want a new and different result, and they’d like to spend money with businesses that will get in the proverbial boat with them and row to the distant shore of success. That’s who they want to keep doing business with. So I would say, to directly answer your question, it is the front-line salesperson, their management team, up through executive management who wants to understand in this day and age, what are the expectations of customers, how do we build within our organization a machine that’s going to be managing this value for the customer. From the first interaction all the way through after we win them.
Benji Block: That’s great. Let’s jump into some of the content of the book. I’d love to start here. Let’s talk about internal negotiation. You say that you have long contended that you— being you, Steve— have long contended that not enough attention is given to the internal negotiation, the one where you work out with the appropriate stakeholders within your company, the specific deal levers you should bring to the negotiation table, along with the priorities and limits of each of those levers.
The internal lack of communication becomes basically just this massive pothole for the sales cycle. How do you recommend these conversations are facilitated internally before ever going to negotiating externally?
Steve Thompson: Well, a couple of things in your question. For one thing, procurement professionals are counting on the fact that that the salesperson is not prepared to negotiate and that they’re not empowered to negotiate, that they have to call a timeout and, as I say, go running back to the mother ship and basically plead, I got to have… or we’re going to lose.
This is happening in many cases, near the end of a fiscal quarter and it’s happening in a panic. Because it’s astounding to me how many B2B deals if you look over a 90-day quarter, about 90% of the deals close in the last two weeks.
Benji Block: Got to hit those numbers.
Steve Thompson: That’s right, man. It’s a 13-week spread but this thing’s a hockey stick, okay?
It’s that way for two reasons. One is, it works. Customers know if they just sweat you long enough that you’re going to cave and give them whatever they want. Number two, it works because the selling organization isn’t prepared, and what they’re counting on is that we’re going to exhaust a lot of our time, effort, and energy, negotiating with ourselves. And in fact, we’re actually negotiating against ourselves internally.
Whereas if we prepare and determine, “these are all the items that are important to us in a deal”, we prioritize them and then we step back and say, “For each item, here’s what we’re going to ask for but if they really push us, this is what we would accept.” Map that out and empower, and the term I use. We’ve just painted a picture of what I call a great deal. A great deal is one that advances our strategy as a sales organization, whether it’s an individual, an account strategy, or the larger corporate strategy, it ought to be supporting that.
The second attribute is, it meets the needs of the customer and that we’re bringing to the table the right mix of products and services that they need. Then number three, when we finish with this deal, it’s got the right product services, volumes, time tables, all the other elements of a deal in it that will give us the highest probability of delivering that value.
What I focus on is, you’ve got to aim for a great deal. It doesn’t mean you’re going to hit it every time, but I’ll give you the other side of the coin. If you aren’t aiming high, where are you going to hit?
It’s usually low. Therefore— and look, here’s my experience in 20-plus years of doing this. About 75% of the time, selling organizations go into a sale and a subsequent negotiation and they don’t know what a great deal looks like.
Benji Block: Yeah, they have no picture painted.
Steve Thompson: No. So fundamentally, they’re prepared to accept about anything— and by the way, you get to the last few days of the quarter, that bar starts dropping pretty dramatically. You got to remember, negotiations [are] between two parties. My experience on the buying side— this is something that sellers don’t think about— sellers sell for a living, customers don’t buy for a living. They’re in the business of their business.
And my work on the buying side tells me that about 90% of the time, the buying organization hadn’t thought through and really don’t understand what a great deal looks like to them, based on the outcomes they’re trying to achieve. I mean, we don’t have to do the math here on the program but as you can imagine, this is basically the blind leading the blind, right? What are the odds a good deal comes out of this?
Are You Having The Right Negotiation?
Benji Block: Yeah, not very high, and actually, I’d love to give a question that you post in the book right on this topic. I thought there was a fantastic clarifying question that you provided and here’s the question, you say, “how much value could you bring your customers if you took the time early in the sales cycle to educate them on the key elements of a great deal based on their desired outcomes?”
Even from the baseline, we’re talking then, how that bar drops at the end of a quarter. I mean, this is raising the bar to a completely different level where you’re saying, we need to put ourselves in a place where we’re letting them think of their desired outcomes. That’s a whole different level of thinking.
Steve Thompson: It is, but that’s what leads to a painless negotiation because the negotiation needs to be about the outcomes they’re trying to achieve.
But rather, we let it devolve into individual deal elements. And of course, one of the big ones is price. Well, explain to me, if we put together an offer that has all the right mix of products and services, and it’s got a demanding delivery schedule, and there may be penalties or warranties involved, and there’s very strict service level agreements or SLAs we got to meet— if we agreed to all that, how can you negotiate price in a vacuum? They’re all related, okay?
Look, on the buying side, they’re struggling. They want someone to paint them a picture and connect the dots. Because you see, in this day and age, they can Google tremendous amounts of information about the selling organization’s business, their products, their services, reviews by customers. And they typically do this before they even engage with a salesperson. But here is the most important question to any buying organization and I submit they can’t Google the answer to it and that is, who understands me and what I’m trying to achieve?
Benji Block: That personal level.
Steve Thompson: That’s why salespeople exist. But unfortunately, many of them are being taught to continue to be a two-legged brochure and it doesn’t work. Customers have already got all that information.
What they want to know is, “Do you understand me, and can you connect the dots on how your products and services can help me get to where I want to go better, faster, easier, cheaper, and lower risk, whatever it may be than whatever my alternative is?” if I am the buyer. Just give it to them and it makes it easy for them to make a decision and choose you.
Benji Block: One of the ways that I hear you saying that you are going to end up with a more painless negotiation, is to essentially stop thinking that the negotiation is just something that happens at the end, right?
Steve Thompson: Correct.
Benji Block: There’s this process— when would you say that the negotiation process begins? What you discuss in the book, but I think that’s a common misconception, that this negotiation is just something that happens at the end and in some closed room, this discrete thing.
Steve Thompson: Benji, I have been battling that perception most of my career because people do view it as that formal event. But the truth is, like so many things you’ve either won or lost that formal event well before it. And the way I packaged that up and presented it in the book is the following: You’ve got to ensure you’re having the right negotiation. Because I don’t care how good a negotiator you are, if you are having the wrong negotiation, you’re not going to get the outcomes you want.
That’s what I see time and time again, is that they’re having the wrong negotiation. The answer to your question; when are we negotiating? We’re negotiating from the very beginning but not in the way that most people view it because, again, they view it as this give-and-take across the table, pounding-on-the-table theatrics, you know, all that kind of stuff.
Benji Block: It’s a power struggle.
Steve Thompson: Exactly. That’s not it at all. You’re negotiating by, right at the very beginning, framing the conversation about the customer and their outcomes. And this is probably the most important concept that I introduce in this book, which is the concept of anchors.
Benji Block: Yep, right where I wanted to take this. Let’s break down what anchors are a bit.
Steve Thompson: Okay, it is sometimes a difficult concept to explain to people. It gets a little bit academic but I think I can give a couple of examples that will make it come alive. Imagine that you’re a seller, you’ve been going through a long sales cycle and it is getting near the end. You can see the end of the tunnel when the deal is going to be signed, and you are in front of procurement. By the way, your management is calling you, saying, “When is this thing going to close?”
I mean, you’re getting pestered constantly, and procurement looks you in the eye and says, “Our people really like your products and services but I got to tell you, we’ve also been talking to your competitors and I think they’re pretty much equal with you, all with one exception. Their price is 20% cheaper.”
Benji Block: Always someone cheaper.
Steve Thompson: Yeah and if you don’t match it, you won’t get the business. Now, what happens in your mind at that critical point as a salesperson? You forget everything else. You are now focused on one issue and one issue only, and that’s price. And you’re thinking to yourself, “My God, I wonder how much under 20% more off I can get him to agree to?” What just happened here is you’ve been anchored.
The buyers already won. He or she doesn’t have to do anything because you’re going to do all the work for them. You’re going to go running back to the mother ship, “Man, I got to have them or we’re going to lose”, type thing. And the truth of the matter is they were probably looking for 10% more off but you’re playing their game. That’s an example of an anchor.
Here’s another one; you’re working on a sales campaign. You are working with the customer and you’re scoping out exactly what it’s going to take to deliver the results that they want. You give them a preliminary budget or budgetary estimate if you will, and they start ranting and raving, saying, “Well, my budget is only 500k.” You’re scoping this thing out as close to a million. Well, what happens as soon as you hear that number? Again, you forget everything else.
You are panicking and you’re wondering, “How can I cram a million-dollar solution into a 500k budget?” They’ve already won, they don’t have to do any more work. You’re going to do it all for them. That’s how anchors work when customers are trying to anchor you.
I’ll give you one more example of how sellers anchor themselves in its previous deals, okay? I’m sure most sales reps have had the experience of taking over an account from a previous sales rep, where that rep did some unnatural lax at the end of a quarter or of a fiscal year.
In other words, they basically gave the farm away to get the deal closed and this rep is now in there trying to sell more, upsell, cross-sell additional volume. Well, guess what? You know, on that first deal, if we gave the customer a huge discount and they happen to get value out of whatever product and service we sold them and now they want to buy a bunch more, guess what they’re expecting?
Benji Block: Yeah, that same.
Steve Thompson: Oh no, no they want more. They want a bigger pound of flesh, right? Because they are spending a lot more and you just set yourself up for failure. You’ve been anchored by that previous deal.
So, anchoring will determine— we’re working hard as sellers to create this potential for value for the customer. Whoever anchors effectively is going to be the side that’s going to capture the majority of that value.
That’s why as sellers, we have to understand when we’re being anchored and what anchors are. As I explained in the book in detail this is how you manage them. I specifically use the word manage because you don’t control the behavior of the other side, you only control your behavior, but this is how you manage anchors being used by the customer. But then, see anchors are a two-edged sword. They also work extremely well for you when you anchor effectively.
Benji Block: Can you walk through an example of maybe anchoring effectively and how that can be positive?
Steve Thompson: Sure, and this goes back actually to your question a moment ago about when are you negotiating. You see, when you start the selling motion off, focused only on their outcomes and what they’re trying to achieve, you’re anchoring. You’re framing the conversation and that is going to impact the remainder of the sale and it is ultimately going to impact the negotiation. Then the next step— as we discussed a moment ago but I really go into detail in the irresistible value proposition book— you’ve now got to take the outcomes they’re trying to buy and you’ve got to translate that into, what bundle of products and services are you going to provide to deliver on those outcomes? See, I’m anchoring again. I am framing the conversation.
The biggest anchor is the proposal that you submit. If it is structured the right way, and as I showed in the previous book The Compelling Proposal, you can do it with just five slides, that’s it, okay? Every one of those slides is an anchor but it is about the customer. It’s telling their story and the journey they want to go on and the happy ending when we reached this distant shore of success.
And of course, the centerpiece of the proposal is options. We give the customer options and we invite them in to help construct the best deal for them. See, we’re anchoring. We’re framing this not in a malicious way, but we’re controlling and guiding the conversation. And when the customer is presented with options and they get to discuss and debate the merits of one versus another, nine times out of ten the deal that’s done is not one of those options, it is some combination.
But here is the critical thing— it’s no longer our deal as the sellers, it becomes the customer’s deal because they helped craft it. We have totally anchored this thing because once it’s their deal, these things happen fast. All of those issues they told you that were going to have to be addressed and all of the internal hurdles that had to be overcome, that’s done now. These deals get done quickly. So, that’s an example of anchoring. That’s what it means to be negotiating from the very beginning. You’re framing and setting up the right “formal negotiation.”
Benji Block: When you talk about anchoring and then you talk about their story, their options inviting them in, I mean ultimately that would change anyone who reads this book. It is just going to change their perspective and put you in the right place as someone who is doing sales, right? You’re able to put yourself in their shoes. I think that is a really key takeaway from chatting with you today, is making sure you are putting yourself in their shoes to make sure that for both sides then it’s a win-win, right?
Steve Thompson: Yeah and look, it’s got to be, okay? Because it’s too damn hard and expensive to keep finding new customers, and it’s incredibly expensive to lose customers especially if your business is, what I’ll call, something as a service [or] a subscription business. Well, the biggest thing that kills those businesses is churn and the biggest thing investors want to see is net dollar retention or net revenue retention. They’re both interchangeable terms.
They want to make sure you’re not just winning customers, you’re keeping them and growing them and the companies that do that well are the ones that are being valued to the stratosphere. The only way you can do that is, absolutely focus on value from day one, but particularly after you win the business, ensure you’re delivering the value, get credit for it and then you’ve got to manage.
I go into great detail on this in the next book, I Can’t Lose Accounts. You see, the day you win a deal, things are going to start changing on the customer side and nobody can predict what they are but it is absolutely predictable that things are going to change within their company, within their industry. It’s change that could put your current engagement at risk and you’ve got to manage that, but change is the catalyst for new opportunities.
You see, if you have a customer and there’s zero change in their business, well, guess how many opportunities you have to sell to them now, in round numbers?
Benji Block: Right, none.
Steve Thompson: Zero, okay? If nothing is changing, they ain’t buying anything. That is a part of what I see so often in many practices, is that companies don’t gear themselves up to manage this change. But if they did, man, they would unearth a tremendous amount of, not just opportunities, I am talking highly qualified opportunities.
Because look, the easiest sale in the world is to an existing happy customer. Those deals happen quickly, they’re typically not price-sensitive, and it is good for everybody. That’s ultimately the relationship that we’re aiming for.
Benji Block: Yeah, you solved my problem once, now I have a new problem and I know you guys can help me solve this again, right?
Steve Thompson: Yeah, or you know what? At least I am going to approach you first if I have a new problem because you’ve demonstrated that you all would get into the proverbial boat with me and row to that distant shore, and I am going to give you the first shot at it. I mean, what more could you ask for as a business?
Benji Block: Yeah, always looking for ways to be in their corner.
Steve Thompson: That’s as good as it gets. Exactly but what it all boils down to at the end of the day is this, B2B selling is hard and it is getting harder. I will freely admit that but the reason it’s getting harder is that it’s just too damn hard to buy as a customer.
Here is a statistic that your listeners may or may not know. This came out pre-COVID and I’ve seen some numbers post-COVID. Roughly between 43 and 48% of true official buying initiatives end up with no decision and no reward. Almost half. Now, why is that?
Somebody approved this as an initiative, a budget was set aside, they put resources to it and put people on it. Why did it end up in no reward or no award? Because it was too hard. It was too hard for the customer to feel like they were making an informed decision. It just got too risky, and successful salespeople today are the ones who strip away that risk.
There is risk in any deal because when a customer is buying, they are planning on changing something. We’ve got to show them we’re the right people. We understand the risks, we know how to manage minimize and mitigate that risk.
Customers don’t trust you because of what you know about your company and your products and services. Those are just table stakes to be in sales. Customers trust you because of what you know about them, and how you can help paint the picture of how you can get them to that future state of success.
Benji Block: Amazing. Well, Steve, it has been such an honor to have you here on Author Hour today. This series of books is so helpful, it’s practical, it’s needed especially in this time when it is complicated and there are a lot of components that are out of whack. This is such a practical tool for sales teams. For those that are looking to connect with you further, where can people find you may be online and reach out?
Steve Thompson: Sure, they can find me on LinkedIn and my website is valuelifecycle.com, they could reach out to me there. It’s got all my contact information and I’d be more than happy to get on the phone and chat about what their challenges may be, or some opportunities they’re trying to capitalize on.
Benji Block: Amazing. Well, The Painless Negotiation is available now, go pick it up. Steve, this is going to be a great resource for so many. Thanks for being on the show.
Steve Thompson: Benji, it’s been my pleasure.
Benji Block: Awesome, thanks.