Why do Smart Salespeople Make Such Stupid Mistakes?

Author: 
Chris Merrington

When I think back over my career working in agencies and now advising agencies and salespeople, many of my mistakes led to some of my best lessons in business. (Come to think of it many of my personal mistakes led to some of my best life lessons.) We will look at the typical mistakes people, including smart people, make when selling and negotiating in the service industry – agencies especially. In other chapters of the main book we will consider how best to avoid and learn from these mistakes. It’s not dumb to make mistakes. What’s dumb is to repeat the same mistake. One mistake in particularly is very expensive for agencies.

It’s dumb not to learn from our mistakes. It’s dumb not to observe, reflect, think and change your behaviors when you can see a particular action or strategy isn’t working well. So why do we find it so hard to learn from our negotiation mistakes? Is it habit, pressure or the wrong mindset?

I’ve worked with many really smart people working within agencies and in sales teams of many leading companies. However, I see the same mistakes being made in many of these companies repeatedly. Many of the strategies are common sense, yet they often aren’t common practice.

Mistake 1: Price Crumbling
How well do you hold your price?

Clients and customers will challenge your price. It’s part of their job to challenge your price. However price crumbling too quickly will cost you dearly.

The more you drop your price and the quicker you drop your price the more the client will expect you to drop your price even further.

Clients will see your behavior to drop your price not as generosity but that your original price was over-inflated or had so much fat built in that you could afford to give away so much profit.

Does this mean you should never drop your price? Of course not. However, there are specific strategies to apply if you do choose to drop your price. 

Studies show that for most businesses a 1% drop in price can impact profitability by around 10%.

Imagine you are looking to buy a new house. You go to see one priced at $300,000,  which you like. You decide to put in an aggressive offer of $250,000 expecting it to be refused. Instead the vendor enthusiastically says OK.

Instead of feeling delighted that you can buy the property more cheaply, you are now thinking you should have gone even lower and that maybe something is wrong with the property as the vendor seems so keen to sell. The relationship and trust between buyer and seller is compromised.

Yet how often do we do something similar with our clients? We drop our fee or price as soon as the client challenges us.

During the recent recession several agencies told me their clients had threatened them that they had to reduce their fees between 20  and 50 percent.

If you are over-dependent on that client you are left with little alternative but to comply.

Most people price crumble – often in the belief that they will lose the deal unless they drop their price. The paradox is that the more we drop our price the more the client wants us to drop our price further.

So will we lose a deal if we don’t drop our price – maybe, maybe not? Dropping our price too easily creates mistrust and can seriously damage the relationship. The more we drop our price to secure the deal the more suspicious the client becomes and the less value they attach to the deal. If you don’t believe in the value you provide then why should anyone else?

When we come up against a tough negotiator who uses aggression and even threatening behavior, it’s easy to give-in to their demands and drop our price.

Decide in haste, repent at your leisure.

Mistake 2: Lack of Preparation.
How well do you prepare for negotiations?

It is common to skip preparation before negotiation meetings and phone calls believing you can wing it in the meeting, or worse still, on the phone.

It seems the more senior the person in the agency, or salesperson, the more they think they can wing it. This can be exacerbated when two or more of you go to a negotiation meeting with clients and you haven’t prepared. You are likely to contradict each other.

Time invested in preparation pays off. It will increase your confidence to negotiate, provide goals to aim for and help you anticipate possible actions, questions and challenges by the other party.

There are few areas in life where preparation pays off more than in negotiations.

Chris Merrington is the author of "”Why Do Smart People Make Such Stupid Mistakes?” a practical negotiation guide to more profitable client relationships for marketing and communication agencies, sales teams and professional services people. Chris regularly runs masterclasses and workshops in the areas of negotiation, trusted adviser selling, business prospecting and pitching to win. He can be contacted at chris@spring8020.co.uk.