It is by far the number one complaint I hear as I meet with sales managers across the country: “During sales negotiations, my sales reps cave in too easily when a customer says he has to have a lower price.” In a competitive market, customers have grown accustomed to demanding – and receiving – discounts. However, with margins being what they are for most companies, you can discount your way right into bankruptcy these days. There has to be a better way to handle these objections during the negotiation process.
Of course, price objections are by far the most typical objection you hear from customers. After all, who wouldn’t want to buy at a lower price if they could? Wouldn’t you do the same thing? However, just because a customer asks for a lower price doesn’t mean you have to give it to him. At the very least, you should never give a discount without getting something back. This is the cardinal rule of negotiation strategy: never – and I mean NEVER – give a concession without getting one in return. If the scales don’t balance at the end of the negotiation, you can’t come home a true winner, even if you come home with a sale.
Here are a couple of ways to respond during a negotiation if the other side asks for a discount on price.
First of all, if a customer indicates that the price is a problem, try sidestepping the issue of price altogether and focus on something else. A good way to do this is to ask him if price is the only problem. Sometimes a customer may be seeing other problems with the proposal, but he would be willing to tolerate those defects if he could squeeze 10% out of you. So politely but persistently work this angle first. You may have to ask several times, but very often you will eventually get him to admit that, as a matter of fact, he is also uncomfortable with something else. It may have to do with delivery or shipping arrangements, contract terms, access to support, the strength of the warranty, etc. Whatever it is, once you have coaxed this out of him, your next negotiation step is to fix THAT problem. For example:
“Okay, Bob, thanks for sharing that with me. What if I could guarantee delivery in ten days, and extend the warranty by a year? Would that make the deal look better to you?”
This approach is very effective in neutralizing price objections, and the best part is, you never actually responded to his request for a discount. By finding a creative way to meet another need, you found a way to give him something of value while protecting the most important thing to you – the price. This maneuver is a great example of a powerful corollary to the concession principle I mentioned above: when granting a concession, try to give away something that has high value to the other side but is of comparatively low cost to you.
Sidestepping the question of price works often, but not always. Occasionally, the customer really digs in on the price issue. Does that mean you have to discount to get the deal? Not at all; at least not yet, anyway. There are a couple of ways to approach this. You might call them the collaborative approach and the restrictive approach.
In the collaborative approach, you might agree to a discount (something that is important to the client), but in exchange, you need to ask for the customer to give you something back that increases the value of the transaction for you, too.” For instance:
“I’ll tell you what, Michelle, I might be willing to lower the price by 10%, IF you would be willing to increase the length of the contract from one year to two years.”
Nothing takes the sting out of giving a discount like doubling the amount of business you earn! This collaborative approach gives you and the customer the opportunity to work to create value that you can both appreciate.
The restrictive approach has a slightly harder edge to it, but it has the advantage of doing a slightly better job of protecting your price. Under this approach, you would agree to the discount, but only in exchange for removing a benefit to the customer that had been previously agreed upon. Here is what that looks like:
“Carl, if it is really important to you, I guess I could lower my price by 10%, but in that case we would have to go back to 30 days net instead of the 90 days we had agreed upon earlier. Also, I would have to change the warranty from next day, on-site service, to a mail-in program where you pay for the shipping.”
How important is that 10% to Carl now? If he is just squeezing you to see what he can get, now he knows, and he may suddenly be quite satisfied with your price.
In any negotiation, sales or otherwise, recognizing the power of giving and receiving concessions will go a long way to protecting the things that are most important to you. Just remember, never – and I mean NEVER – give a concession without getting something of equal value in return. When you learn to do this, you will always be able to protect your profit margin, even if you can’t always protect your price.
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October Negotiation Quick Tip of the Month – Take It From The Top
How many times has this happened to you? After spending an hour or an afternoon, or maybe a week, carefully negotiating all the intricate details of an important deal, the person across the table suddenly says, “Well, this looks pretty good to me. All I have to do now is run this by our CFO. If it is okay with her, then it looks like we have a deal.” That sinking feeling you suddenly experience is caused by several important parts of your beautiful deal that are now circling the drain. Bringing in a new person at the end of the game means you are potentially starting all over again. Here is how to avoid this annoying and expensive delay: Make it a point – very early in the negotiation – to ask something like this: “Do you have the authority to give final approval to the deal we negotiate here, or do we need to include someone else in these discussions?” If the person you are talking to can’t really approve the deal, you need to be talking to someone else. Ask if this other person can participate in the negotiation, or at least be consulted regularly during the process, to prevent a wasteful and expensive surprise.
