In the early stages of the pipeline, we spend an enormous amount of energy working with our clients. At this time in history there is a huge demand for customer attention. To attain those first precious impressions and to build relationships, we are fighting to get in front of those buyers and replace their incumbent vendors.
In short, there is a lot of time spent in the communication and prospecting space.
Engaging in serious focus right in those early buyer process stages helps tremendously when it comes time for those all-important closes. Better prospects lead to better margins.
But given all that, what happens when you reach the end of that process and your prospect wants to negotiate?
Right off the top of my head, four negotiation examples that my clients and colleagues have faced just within the last month come to mind:
- To meet competitor’s terms, a recruiting firm asked to lower their percentage fee and provide a guarantee.
- A packaging manufacturer requested that shipping fees be waived, and to be provided full skid pricing but only purchasing individual cases.
- To meet client’s cash flow, a corporate trainer was asked to extend upfront payment terms well into the delivery schedule.
- A Marketing Agency was asked to lower rates to work with a non-profit organization.
It too many instances I’ve witnessed salespeople fold up like a house of cards and cut loose of margin or leverage – simply because they hadn’t adequately prepared for this possibility. Or, conversely, I’ve witnessed hundreds of sales reps whose whole sales process revolved around price and terms negotiation like the Earth circles the Sun.
Neither wins. Of course there are times you’re going to have to negotiate–but how can you set yourself up to close deals that are more “win-win” and less “win-lose-or-draw” propositions?
Six Ways to Less Painful and More Profitable Negotiating
Prequalify. This number is not arrived at scientifically, but I’d hazard a guess that 75 percent of the reason you become entrapped in negotiation with a buyer is because they don’t fit your model of an ideal customer, or your solution is not the perfect one for them. If the fit were exact, they would be more concerned about onboarding, getting started or transitions than obtaining the “best deal.”
Look back at your best clients, your most profitable sales and your most successful outcomes and ensure you’ve got a clear understanding on prequalifying prospects for more successful outcomes. (Read more here – “More Prequalifying, Less Guessing”)
Better due diligence. Another “swing and miss” that makes itself evident in end-of-sales-process negotiation is the failure to ask enough questions and obtain enough of the right information. I’ve been guilty of this many times: Jumping to create a proposal because the buyer asked me to and realizing that I didn’t have all the key facts. Whether the prospect wanted to negotiate price, terms, turnaround times, or delivery fees, I got to the end of my sales process without knowing exactly what was most important in their sales process.
Doing a better job of knowing who is involved in making a decision, why they want a solution, and what success means on their terms is being more thorough at the due diligence to create the ideal solution and optimal agreement. (Read more here – “Ask Better Questions”)
Transparency. This goes hand in hand with prequalifying. If you do a better job of understanding the attributes of your key customer base, you should be able to define exactly which customers would invest in your solution. It’s always been tricky to bring up “budget” in conversations with your customers and there has always been a lot of “Cat and Mouse” play here where buyers either withhold this information or lowball the budget to try to force a better deal.
I’ve found that if you are transparent and introduce price earlier in the conversation, you can save yourself a ton of headaches, time, and retain more margin. When you give a small range or can be specific about how scope or features impact pricing on the front end, your buyer doesn’t feel like they’re going to be gouged or gamed at the end. Be upfront and be confident about your pricing.
Understand why they’re asking. Here’s where preparation can save your deal and save your margin. Offering pushback when customers ask for a discount is not something they are usually prepared for. In twenty years of sales, the reaction of buyers when I ask, “Can you tell me why you’re asking for a discount?” has most often produced the response, “Well, I just want to make sure we’re getting the best deal.” And then 9 out of 10 times, they feel they’ve done their duty as buyers and move on to sign off on the deal. They feel obligated to ask because so often sellers either have inflated the price in anticipation of negotiation or sellers panic and give discounts to save the deal.
If your buyer asks for a discount, push back, tactfully, and probe to see what they hope to accomplish with their ask.
Never negotiate price. I can tell you with every discount or price drop I gave to a customer I lost something way more precious than margin. I lost credibility. By presenting one price and agreeing to a lower one, I told my customer that I was not coming to the table with the best value I could offer. They expected to negotiate at every turn and they were nearly never loyal customers – ready to jump ship as soon as another vendor showed up willing to do business while accepting lower margins. It’s a shame that we’ve conditioned buyers to expect that we’re going to try to build a deal or solution in our own best self-interest so that they must negotiate in their own favor.
In a perfect world, I say never negotiate price. However, that’s not always reasonable. To maintain your credibility and profitability, if you must negotiate, work through negotiating the scope of your project – remove or add to make the value work for the price. Or, I have worked to make negotiation to benefit both me and my customer by leveraging individual item pricing with a guarantee for more share of wallet with other products.
Transparency and prequalifying help here as well. Discuss price earlier along with your dedication and confidence in the value you deliver.
And while you’re at it, understand and be able to articulate how discounting undermines the quality of investment for your customers. Do they really want discounted pricing if it means discounted effort, attention, or results? Because that’s what they’ll be ultimately trading if they arm wrestle you into giving them lower prices or terms.
Be able to walk away. Be willing and able to walk away by having a healthy pipeline. Working a healthy pipeline of qualified opportunities saves you from stinking of neediness and fear. Customers can smell desperation and what does desperation smell like? Discounts!
When you need to close a sale to hit your quota or to fill your pockets, your buyers know that they have the leverage to squeeze you into meeting their terms or price.
You have something they want. They have something you want. If you’re not able to walk away, you end up on uneven footing and like above, lose credibility with your customers.
Many times in my own sales career, I’ve walked away from a customer where we couldn’t reach consensus on price or scope and they went with a competitor’s offer. I stayed in touch with my buyers because I had created a relationship with them and dozens of times, they have circled back to me because they found they didn’t have the exact right solution when they sought what they thought was the best “deal.”
Patience trumps discounts. You can afford to have more patience for one buyer when you are building relationships with dozens of more qualified opportunities.
Don’t put yourself in the position to be desperate enough for discounts.
On the front end, preparing to eliminate the need for negotiation is ideal. Being prepared for when a customer wants to negotiate in the back end will save you money and credibility. Create a section in your playbook to push back and handle negotiation before your customer handles you!
Until next time, stop hoping and start SELLING!
What kind of success have you found in negotiating? Leave a comment and let us know.
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