Are you suffering from premature negotiation?
So the phone rings and on the other end is a potential new customer. What’s more they seem very interested and excited about your product- so much so that they want to get right down to talking about price. Who knows what this business could be worth? It’s been a slow week and you are now as excited as they seem to be. They hint that they could become a regular purchaser and want to know what the best price you can offer them is .
a) give them a run down on all the different price options but refuse to give them any sort of discount?
b) give them a rundown of all the prices and let them know what discounts and free stuff you can give them if they buy?
c) Take a deep breath and…..
If you have answered a or b, you have handed over way too much control to the customer. Here’s why;
5 reasons why premature negotiation doesn’t work.
1) Value is subjective
Price is largely an arbitrary figure; you have decided the offer price for your product based upon some calculations that include (amongst many factors) cost of sale, perceptions of value and competitor activity.The price that a customer is willing to pay for a product is largely down to how much value they place on it.
When a customer calls you and asks you;
a) absolutely love the product and need to buy licenses for 50 of their colleagues right away.
b) liked it but found parts of the UI a bit annoying
c) liked the bits of the functionality that they bothered to check out but haven’t yet considered the many ways in which the product may benefit them.
d) downloaded your trial because they are looking at a range of competitor products and are playing each of you off against another
If you start to talk price too early in the call, you are trying to justify a pricepoint without any reference to what the customer really values.
2) It’s a negotiating gambit, A TRICK!
Some buyers, particularly those who have been trained to to buy, understand point 1 and push for an early commitment to a price before you have had an opportunity to sell the product fully. They believe ( because experience has taught them) that if they go straight to a conversation about the money, that you will fold quickly. Over the years I have heard and observed countless examples of salespeople throwing in discounts and free stuff before the conversation has even got warmed up. It is a trick, it is trained as a legitimate technique on buyer,s courses and it works particularly well on inexperienced sales people.
3) The bigger opportunity is probably elsewhere
A quick sale may be one step away from a HUGE sale. The guy who is looking for a discount on one small deal may well work for a company that needs lots of your product or a whole suite of your products.
4) Relationships Matter
A conversation about price i.e. what the customer is going to buy, is entirely transactional, a conversation about a business need is much more personal and therefore memorable. You will have a far greater impact on the customer if you avoid a premature negotiation.
5) When price dominates a conversation then the authority to buy is often elsewhere.
People who refuse to discuss anything but price are often negotiating on behalf of other more senior colleagues. Years ago when I sold advertising, it was always the junior buyers who were the real hard asses. They would never engage in a discussion about the marketing need because they didn’t know anything about the marketing need. They had been told to get the best price they could and that was all that they were interested in. You need to ask yourself the question whether you should be negotiating with these people at all.
So how do I avoid getting sucked into an early negotiation?
Here are some tricks that work for me.
1) Politely ignore the price request
Client : ” I wanted to get your best price for three licenses”
You: “certainly, may I take a few details first”
“May I ask what kind of project you are hoping to use the software for”
2) Trade off
Client: ” I am interested in buying 5 licenses but I want to know what your best price is”
You: “That’s great, I am always happy to consider a deal based on volume bookings, but in order for me to do so I need to understand more about who will be using the software and what for”
3) Separate price from the quote
Client: “How much is this going to cost me?”
You: “I will email you the prices right now but in order to prepare a tailored quote for you I need to know a little bit more about…..”
Client: “I just need your best price, I don’t want to discuss things further”
You: “Certainly our best price is – quote directly from your published price list-”
If you talk price before you have made a case for your product, done the demo or answered the customer,s concerns you are actively reducing the value of your product in the customer’s mind.
Stand firm – Keep questioning – Build value.