Eliminate the Gamble from Your Negotiating
Do you ever feel that you are more gambling when you try to negotiate the matter of price with your clients? How often do you encounter customers trying to fish some kind of discount out of you? Do you know how to win without giving in? Your prospective buyer will often be out hunting for a deal, particularly if their budgets are tight. And since many buyers will want to negotiate price, even when they see the value, be prepared to use a few of these five proven negotiating gambits.
Gambit #1: Always pad the margin.
By padding the margin, you’re giving yourself some flexibility later in the game—just in case your buyer comes back to you and says, “Your price is too high.” When you’re selling on value and have established a strong trust-bond, you should ask for more than your competitors do.
Gambit #2: Add more value.
If a buyer tells you that your price is too high, don’t offer a concession (discount). Offer the buyer more for the same or a higher price. Yes, keep the higher price!
- For example, let’s say that your price is $10,000 for a new telecommunications system and your buyer comes to you and says, “Your competition is offering their system for $8,000.” You can do one of two things. You can talk to your sales manager and see if you can match the price. Or, you can approach the buyer and tell them you’re going to add another service or feature that adds to and equals out the value. This will let you remain firm on your higher price of $10,000.
Adding soft dollar items such as time or expertise works particularly well in the service industry where these kinds of resources are more readily available for your arsenal.
Gambit #3: Make time your ally.
When a buyer asks for a better price, the natural tendency is to immediately react and lower your price, but the trick here is to actually avoid answering right away. Answering too quickly shows you’re eager, willing, and able to offer discounts. This is certainly going to send the wrong message. By slowing your response, you’re communicating your uncertainty about whether or not you can fulfill his request. This immediately puts you in the driver’s seat. Here are two approaches you can use to slow things down:
- Higher authority. Let the buyer know that you need time to ask your management team for approval. Using the word “team” gives the buyer the impression you have several hoops to jump through. If you are in a position to make price concessions without approval, avoid letting your buyer know this.
- The good-guy/bad-guy approach. This will keep you on the buyer’s side as his advocate and partner. Let him know you’re going to bat for him, but that you have a very margin-sensitive controller or CFO who doesn’t yield to discount requests often or easily.
Gambit #4: Never offer to split the difference.
Splitting the difference is exactly what your buyer is hoping you’ll do when she low-balls you. Offer more services or products to add value instead of making cuts to your price.
- For example, suppose your price is at $120,000 and your buyer’s price request is $110,000. Instead of offering to split the difference at $115,000, add more value and use a higher authority. Say to her, “I need to speak with my management team. Can I get back with you tomorrow?” When you return to the buyer, say to her, “Our controller, Bob, would like to offer six months of unlimited, online technical support and one year of free upgrades for $120,000. These two components represent a value of over $30,000. Therefore, you’re receiving a $150,000 solution for $120,000. This offer expires March 1, 2011.”
Gambit #5: Use a trade-off.
If you have to discount to secure the business, always ask for something in return. This will improve the value of the deal. Most buyers view the “give something/get something” principle as reasonable and fair. In essence, you’re saying, “I can give you that discount, but you’ve got to give up something in return.”
- In example, you might say, “Ms. Buyer, I’d like to know if the back-up system is a ‘must have’ or a ‘nice to have.’ If we can eliminate the back-up system, we should be able to meet your price of $1,200—subject to my management team’s approval, of course. Does that sound reasonable?”
Take the Next Step to Winning with Impact
You’ll find that it will go both ways; sometimes for the sake of profitability, you’re going to have to walk away from low-margin business. Alternatively, sometimes you’re going to have to accept low-margin business in order to secure more profitable business down the road. It’s a balance that you’re going to have to weigh out carefully over time.
It will also take confidence to pull these tactics off and one way to build that confidence for you or your team is professional sales training. Encore Consulting Group offers comprehensive training workshops that tailor specifically to your needs and that of your sales team.
Trushar Mody is BUSINESS STRATEGIST, SOFT SKILLS TRAINER, OUTSIDE-THE-BOX THINKER AND THOUGHT PROVOKER. He is a Warehouse of knowledge and wants to share it. His passion lies in teaching Wholestic Learning and Emotional Intelligence.
Trushar Mody is a role model who has extended himself to help others along their own journeys. He works from his passion of helping people live their lives with purpose and without fear. He is a managing partner and senior trainer at Encore Consulting Group.