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Design a Digital Negotiation System in 5 Steps

Darius Fekete< Darius Fekete November 4, 2020

While traditional face-to-face meetings might return to normal at some point, virtual and online sales is the new standard today. But despite rapid digital transformation, B2B e-commerce often fails to deliver a better customer experience than traditional channels. Insufficient product descriptions, lack of transparency into product availability, and slow response times are among the most cited reasons for reluctance for a buyer to purchase online.

Additionally, most e-commerce sites do not allow for the same quality of engagement as a phone call to a sales rep. Buyers cannot cite a competing offer or try to negotiate commercial terms to achieve a better deal. E-commerce sites often act as an order entry system, rather than solutions that aim to make the buyer’s job easier. The good news is the current shift to virtual sales creates a massive opportunity to delight B2B buyers and generate higher engagement.

Negotiating: The Last Mile

Negotiations represent the last mile of pricing and sales activities. It’s a dialogue where parties align their interests. The interaction with the customer provides sales with a chance to collect more business context, explore deal urgency, offer alternatives, gather competitor information and deliver trade-offs for better pricing. For the buyer, negotiation creates a sense of balance of power during the customer journey.

Reimagining negotiations for digital must go beyond simply modernising the digital selling technology. Self-service solutions should enable customers to control their journeys and allow sellers to capture more data points. A recent McKinsey study cites a potential gain of 1-5% market share for B2B companies when digitising customer journeys and creating new ways to engage.

The challenge for B2B e-commerce platforms and marketplaces is to improve the customer experience without adding complexity to the purchasing process. Modern solutions need to deliver relevant product information, as well as contextual and personalised pricing to the customer. Additionally, incorporating the last price paid into the offer is a standard expectation from B2B buyers in most industries.

Imagine the following situation: A B2B buyer logs in to a dedicated e-commerce website. They immediately have access to an up-to-date product catalogue with prices that reflect who they are as a customer (based upon your segmentation). Having identified the items they need; they want to see a better price offered on an article where they have a competitive offer: “instead of $120 per piece, they want to pay a $110 unit price.”

The platform allows the customer to enter their price request. As a response, the system suggests an increase in the number of items the customer is required to purchase to get their target price: “buying 2000 units more will support the price that is requested.” The buyer decides to allocate more volume and automatically receives improved pricing. If the proposal is not accepted, the system escalates the deal to a sales rep.

Digital negotiation capabilities start with a self-service customer portal. Designing the process can be done in 5 steps.

5 Steps of a Digital Negotiation

1. Preparation

Identifying the scope of business that is fit for automation will require analysis of sales and customer behaviour. Customer profitability and growth potential are usually key qualifying factors for allowing any concessions. A purchasing behaviour-based segmentation (e.g. volume buyers vs deal optimisers) will drive the opportunity to pursue different objectives across the customer base such as revenue growth vs margin optimisation. Typically, smaller sized transactions are good candidates for digitally enabled negotiation.

2. Initiation

Consider who should make the first suggestion for a counterproposal. The customer could suggest a preferred price level first; alternatively, the system could proactively provide information about the price at the next volume threshold. Since customers often use previously negotiated prices as an anchor, it is vital to present the negotiation as a trade-off: the seller supports a lower price if a higher volume is purchased. Clearly communicated conditions will prevent margin erosion when quoting different quantities.

3. Bargaining

Offering customers the chance to negotiate allows for differentiated bargaining strategies. It is often possible to systemise a portion of the commercial negotiation, while some discussions will still require sales rep involvement. Those enabled by an e-commerce platform can be as simple as a price-quantity trade-off based on volume thresholds or balancing break-even on discounted items.

Next to trade-offs, businesses looking to encode predefined policies should consider guided self-service options which help the buyers to reduce their overall costs. A virtual assistant can guide the buyer towards a better deal by proposing product alternatives, different freight options or alternative payment terms.

4. Closing

Proposals and counters that require manual approval take longer to close. Identifying thresholds for automated approvals or providing self-service guidance options reduce the number of deals that require human attention. A predefined decision-routing mechanism will help to determine which transactions are good candidates for decision automation. Outliers, especially from high-value customers, will always need the human touch. Facilitating manual approvals through a workflow triggered by the e-commerce system will help to capture decision rationale and avoid conflict with the sales team.

5. Tracking

Measuring the results of the negotiation – and customer behaviour throughout the process – becomes critical for continual improvement. Early identification of positive results helps to amplify those and weed out assumptions with lower returns. Benefit tracking will help to build sales rep confidence in the system and share success stories across the organisation.

Realising the transformational aspect of digital negotiations becomes key to delivering better customer experience. Overall, digital negotiations drive the organisation to become more customer-centric, create higher engagement and listen to buyer feedback. They will also uncover new areas of growth potential.

For more on negotiating within e-commerce, download our whitepaper B2B Digital Negotiations, Driving Higher Customer Engagement in E-Commerce Channels.