Win Price Negotiations on Value
Thursday, May 10th, 2012
How often do you experience a situation similar to the one below?
You have been working a prime sales prospect for the past six months. Your product is the ideal solution, you have done a great job of selling the value and you have carefully calculated a value-based price point for this prospect. But, despite your very best efforts at winning the deal, the buyer is asking for a lower price.
What do you do next?
Let’s step back for a moment and look at the physics of selling and buying. Think of the economic relationship between seller and buyer as a balance between benefits and price. On one side are the benefits delivered by your solution. On the other side is the price the customer must pay to realize these benefits.
The goal of any win-win sales situation is to maintain a fair and even balance between price and benefits. If benefits are increased, they will outweigh the price and disrupt the balance. Likewise, an increase in price will outweigh the benefits and disrupt the balance.
When a buyer asks for a lower price, he or she is effectively disrupting the balance in value. A lower price essentially tilts the value in favor of the buyer.
In order to maintain balance in the value equation, when the buyer asks for a lower price, we can respond with a resounding “Yes!” …with a caveat. We must remove something from the benefit side of the equation to maintain the balance in value. Essentially, we are reducing the benefits of the product for the lower price.
Look for product features, services, delivery schedules, warranties, payment terms or lower-priced product alternatives as sources for reducing value. Remove or reduce these value features to decrease the delivered benefits. From a negotiation standpoint, the trade for value does not necessarily need to be completely equitable. You just need to communicate to the buyer that there is a “price” to be paid for a lower price. Lower prices are not free.
Buyers often expect lowered prices from suppliers because the seller has historically trained the buyer to agree to lower prices without concessions. Your job is to train the buyer to expect a trade in the benefits delivered in return for a lower price.
Smart salespeople will be prepared for this type of value-trading discussion. Identify items in your proposal that you can remove if the buyer pushes back on price. Be prepared to tell the buyer what items can be removed from the proposal at the moment the buyer asks for a discounted price.
We find, in many cases, that the buyer is not willing to sacrifice any component of the proposal and agrees to the full price.
Empowering your sales team with this negotiation strategy helps you strengthen the perceived value of your brand as you ensure healthier margins. Once buyer and seller agree to place value over price, you will discover how easy it is to hold the line on price and build more meaningful business relationships.