If you need to negotiate on price, practice these tips before stepping onto the mat.
Recently, we covered different ways to minimize the chances of getting caught in a sticky price negotiation. Nobody wants to waste time, energy and effort, only to reach a standoff on price at the end. So by setting expectations early on, before the proposal, you eliminate price from being an obstacle that will halt a sale.
This is accomplished by asking your client about their budget up front and setting expectations about the price range they are looking at. By doing so, you are showing clients that:
- You are not shying away from the price discussion because you believe in the value of your product.
- Counter offers outside of the discussed range are unreasonable.
While this pre-work works in your favor, what if despite all your efforts, you still find yourself in a price negotiation? Obviously you need to follow your company’s rules and guidelines, but how do you approach the situation?
Here’s some points I keep in mind that have worked well for me over the years:
Remember, They Need to Negotiate; don’t take it personally if a client tries to negotiate anyway; it is oftentimes just part of their job. Most companies require that buyers have the conversation about a lower price, even if they’re not going to force the issue. Imagine their boss saying to them “did you ask for a lower price?” They have goals to meet too.
High Price = High Value; rarely is price the determining issue, and if it is, you’ve got trouble! On the other hand, a product having a higher price is often a sign that it is worth more. Use that to your advantage.
The Power of Silence; when you know what you want, and you have shown the client, don’t push it. Silence can be used as a strategy where you let the deal come to you. This of course has to be used at the right time, and when it is, a customer will often feel the need to fill that silence, giving you the upper hand.
If You Give, You Need to Get Back; if you do give a price concession, you must get something back. This may be an introduction to another prospect, a testimonial, a LinkedIn recommendation, etc. Don’t be surprised if your prospect says it’s conditional on the product being as good as you said it is. Fair enough!
Make Sure it’s the Last Negotiation you Do; I would never negotiate on price until the customer says that’s the only issue separating you from doing a deal. Otherwise you’re wasting your time… and setting yourself up for further price negotiation down the road!
Discounting Hurts You! It might be obvious, but any discounting you do basically comes right out of your company’s profit. The average company in the S&P 500 is making $0.15 on the dollar of sales. Think about that when your prospect asks for a 10% discount! These additional profits are most likely going to be reinvested in making your company stronger, which enables you have more support selling and thus make more money. Hold your ground!
Saying ‘No’; you need to be prepared to walk. And by prepared, I mean mentally. Otherwise you’ll never have the balls to hold your ground. Before you enter the negotiation, you need to know what you are willing to do and where you draw the line. Many times, this will bring the client to your side when they see you are serious about your position.
With these tips in mind, you can become a more effective negotiator. A huge aspect of negotiations and the outcome of them depends on the mindset you have when entering in. By first taking steps to prevent negotiations in the first place, and being prepared with these guiding tips when they do happen, you can steer more deals in your favor.
