When I ask sales managers the most common mistake their people make when negotiating with customers the answer is always the same regardless of the industry: salespeople give ground too quickly and get little to nothing in return. While I understand the challenges of closing a deal, some salespeople want to “sweeten the deal” by providing a little extra incentive for the customer to buy. Many times it isn’t necessary and can cost companies much needed profit margin.
Here are some very easy tips for holding your ground against customer requests for a lower price.
Start with the right price – I’ve never received a satisfactory answer to this question from any negotiating guru. Mostly their answers go something like this, “Steve, it’s not really about price, you have to get the customer to focus on the bigger picture” or “focus on interests, not positions.” I’m sorry, but it is about price and customers focus on price because they can. Frustrated with their answers I came up with my own. Simply put, the price you put on the table is the price you can defend. The two questions every salesperson needs to be able to answer once his or her number is on the table are, “How did you arrive at that price?” and “Why should I pay more for your product or service than your competitor’s?” If you cannot answer these questions you begin the negotiation in a defensive position.
Defend your price – The most common response I hear when customers ask salespeople for a better price is, “that’s the best price I’m allowed to offer” or “I will check with my manager and get back to you.” While I understand this dilemma can be uncomfortable for salespeople, both of these responses weaken your negotiation position and communicate that you are not the ultimate decision maker. For any salesperson, in any industry, in any negotiation situation, the best response to the customer’s request for a lower price is, “our price is fair and reasonable and let me tell you why…” Having a solid value proposition that ties into the customer’s needs is the first step in defending your price.
Nothing is ever free! Too often I hear salespeople tell customers that after-sales service or training or some other value-added program is offered “for free” or “no charge" to the customer. Bad negotiating language. If you are going to provide a service with “no charge” to the customer the way to position it is to tell them that your company absorbs the costs of these services or programs. This might seem a small point but at the close of a sale when the customer asks for an additional price reduction your response can then be, “remember, we are already absorbing the cost of the XYZ service program so I don’t think we can meet that price too.”
Why BATNA doesn’t apply to salespeople – The term BATNA is an acronym for Best Alternative To A Negotiated Agreement created by William Ury and Roger Fisher in their book, “Getting To Yes.” It is simply another term for walk-away option. And although it is important to understand both sides’ walk-away options, no self-respecting salesperson I’ve ever worked with willingly walks away from a potential deal. For many the term Best Alternative is a misnomer. Their Best Alternative may in fact be terrible; losing a sale can sometimes mean losing a job. Most salespeople would rather lose a deal to a competitor than withdraw from the running. As a salesperson, I never walked away from a deal, although I’ve lost many to lower priced options by my competitors. That’s what makes us salespeople successful: our unreasonable optimism in the face of certain defeat.
Using these techniques takes some practice but try them out and get used to applying them in negotiation situations. These techniques will make you a better salesperson by making you a better negotiator.
Steve Reilly is a principal of SPJ Consulting and author of “You’re Killing Me Here: When Win Win Negotiation Doesn’t Work.” He works globally in the areas of sales, negotiation and leadership.