My husband loves to negotiate. So much so that whenever I need to
buy new running shoes, he always buys a pair, too, with the hopes
that he can swing a "deal" with the store by buying two
pairs at once. Of course, he never gets a discount, but what I find
fascinating is the number of times he asks for a discount, doesn’t
get it, and still buys the item at full price anyway.
I started thinking about this from the seller’s perspective, by analyzing
my own negotiation techniques, and those of my clients. The questions
I wanted to answer were: Exactly what makes a successful negotiator?
And what do they do differently from the rest of us to get the price
they want, while still leaving their customers feeling that they’re
getting a good deal?
The following simple five-step process can help maximize your results
each time you negotiate. Even better, I find it works wonders at every
stage of the sales process, from negotiating price to discussing delivery,
added product features or any other terms your prospect is looking
for a break on.
Step 1: Get into the right frame of mind
The first thing you have to do when negotiating is make sure you’re
in the right frame of mind. Do you really believe that your products
or services are worth the price you’re charging? If the answer is
no, then you won’t be able to negotiate successfully. Period.
If you implement the next four steps of this plan, I can guarantee
that those readers who truly believe that their products are worth
the price they charge will walk away with more deals at full price.
Those of you who think your products are too expensive, on the other
hand, will continue to sell at a discount.
These steps aren’t necessarily easy, and in fact may take some discipline
to implement. But for those of you who are willing to put in the effort,
I promise that they will help make negotiation easier, and more natural.
Step 2: Hold firm
Sales experts suggest that sales people in the top 20% of their fields
never cave in on the first round. So don’t give in to what your prospect
is asking for right away. Remember, to those who love it, negotiation
is a game. It’s the "art of the deal." And to make those
people happy, you must be willing to play.
Nothing frustrates negotiators more than a sales person who caves
in and drops their price on the first round. If a client asks for
a 20% discount and you immediately say yes, they walk away feeling
two things:
- The price must have been inflated to start with; and
- I should have asked for bigger discount. Next time, I will!
Neither of these outcomes is good for you. So the next time your
prospect asks for a reduction in price, instead of just giving in,
try responding with one of the following instead:
- I can appreciate you’re looking for the best deal, but I can
tell you that we’ve already given you our best price. - You’re smart to be looking for the best deal, but our pricing
is always competitive, and I just can’t go any lower. - A discount? (in a surprised tone)
This is the stage of negotiation during which your belief system
is challenged. In order to be successful, you really need to believe
that you are already giving your prospect a great price. When I was
selling for London Life years ago, I was once approached by client
who wanted a 10% discount on his group health benefit plan. I was
so shocked by his request – nobody had ever asked for a discount before,
and I knew that we had the least expensive plan he was looking at
– that all I could say was, "huh?" Not very professional,
I admit. But he responded with "well, I just had to ask anyway…"
and then paid full price for the plan.
Typically, 40% of all customers will respond the same way, with either
"I had to ask" or "I just thought I’d try." Unfortunately,
over 50% of sales people cave in on the first try, and give the client
the discount they’re asking for. This is lose-lose for everyone. Your
company reduces its profit. You reduce your commission. And your customer
walks away dissatisfied because you refused to play the game.
Learn how to hold firm, and practice your responses in advance.
Step 3: Repeat
Some clients will press ahead with their request for a discount even
after you’ve given them one of the responses outlined above. The vast
majority of them, however, are just looking for assurance that you
really are giving them the best possible price, and there is no room
to move. In other words, they want to make it a little uncomfortable
for you, making sure that you sweat just a bit.
My advice in these cases is again: hold firm. Work to reassure your
customer that they’re getting the best price, and remind them of all
the hard work you’ve both put into the deal. Try something like:
- We’ve been 6 months putting this project together, I would hate
to see it not go ahead because we can’t settle on price;
or - knew you’d be tough, so we provided aggressive pricing up front.
I would hate to see this not go ahead because we haven’t been able
to meet your budget.
We find that an additional 20% of all business is closed at this
stage – that’s 60% of all business closed without ever having to reduce
your price. Unfortunately, by this point, 80% of all sales people
have also already caved. You do the math.
Step 4: Take their mind off the bottom line
If after all this your prospect is still pushing for a discount (and
40% of them will be), then find something else to give them that doesn’t
reduce your price.
Free shipping. Extra manuals or training. A client profile on your
Web site. What you choose will be specific to your business, your
markets and your client base. The key is to have the list of things
you’re willing to offer prepared in advance, so you can draw on it
during the negotiation.
It’s hard to think creatively in the heat of a negotiation, so planning
ahead could give you a ready-made solution that leaves both you and
the client feeling satisfied with the transaction. For a copy of the
worksheet we developed to help you plan your "no money"
concessions, just contact us.
Step 5: The last line of defense
Finally, if your client is still asking for a discount, you may have
to give it to them in order to close the sale. But before you do,
always ask them one of the two following questions:
- "What is important to you about an x% discount?" or
- "Why is an x% discount important to you?"
These questions will flush out any last details that could help you
find a different way to structure the terms and pricing, which will
allow you to keep your price while letting the customer walk away
with their needs met as well. If, however, you ultimately do have
to reduce your price, make sure to follow these two rules:
- Never reduce your price without getting something in return.
Getting something in exchange for a pricing concession is key to
managing customer expectations that future discounts will not be
easily dished out. As with the "no money" concessions
above, what you get in return for a price reduction will be unique
to your business and markets, but could include references or case
studies, a bigger order, introductions to senior level executives
or cash up front. Again, whatever you ask for, prepare the list
in advance so you can respond quickly and smoothly. - Get a firm verbal agreement from the customer that this discount
is all they will need to get the deal done. Try asking them something
like "I’m not sure if I can get you this price, but if I
can, is it fair to say that we can go ahead?" OR "I’m
not sure I can get this discount for you. If I can, though, are
you willing to sign the agreement this week?"
Nothing is worse than coming to an agreement on price (especially
a reduced price!) only to find out that your prospect is still looking
for other concessions. By asking them this last question, you can
ensure you get all the issues on the table first, giving you the chance
to deal with them fairly once and for all.