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Don’t Negotiate Until You Have Been Selected

Have you ever been in a competitive situation where your price is raised before there is a discussion about you having been chosen? Maybe you presented, did well, and then were immediately told you need to sharpen your pencil? The negotiations have begun. Or have they?

This happens all of the time, but it’s a mistake to enter into negotiations before you are chosen.

One Against the Other

Some buyers like to pit sales organizations against one another when it comes to price. They may not exactly share what your competitor’s prices are, but they make very clear you are in a contest over price. There are number of problems here.

First, if you haven’t been chosen, you are being used a leverage against your competitor. You may not be very friendly with your competitor, but you don’t gain any business by helping them find their way to the bottom (and it’s likely they don’t need your help getting there). Or maybe it’s the reverse of this; your competitor’s price is being used to get you to lower yours.

Second, by shifting to a competition on price, you are allowing the contest to shift from value being to price. You don’t want to win on price. You aren’t competing on price. And this puts you smack in the middle of a contest over price, if there is a contest.

You don’t want to participate in a contest on price. There is nothing for you to gain.

First Things First

To protect your pricing, you need a commitment that you have been chosen before you enter into pricing negotiations. You also need this commitment to protect your clients from underinvesting in the results that they really need.

When asked about price, you ask the question: “Have we been chosen?” If the answer is “no,” then you have to say something that sounds like this: “We’re happy to negotiate a final agreement. But until you decide that we are the right choice for you, we believe it’s premature to start negotiating price. We want to make sure you get the outcomes you need, including the right price.”

I’m not from the school that suggests that buyers are trying to hurt you. They negotiate price because they believe it benefits them to get the most for the money. You might have language that is every bit as direct and even less adversarial. But until you are selected, negotiating price can only hurt you.

If you are pressed to negotiate price before being selected, you can always push back and say something like this: “We’d love to begin final negotiations. We know we can reach an agreement. If we can’t, you can always choose someone else. Have we been selected?”

Negotiate once. Only after you have been selected.

Questions

Why do some buyers bring up price before they select a partner?

How do you push that conversation to some point in the future, after you have been selected?

What leverage do you give up by entering into price discussions before you are selected? What do you give up in the way of value creation?


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Comments

comments

  • Ed Healy

    Does this approach not preclude you from most bid-based jobs?

    • http://www.thesalesblog.com S. Anthony Iannarino

      Hey Ed, I don’t spend a lot of time on bid-based jobs, but it might not be the right approach. If you bid a job and aren’t told you are chosen, would you go ahead and negotiate price?

      • Ed Healy

        I don’t do bid-based jobs by choice. The thought did occur to me, though, and I thought it might be something you could not and address at some point (in your book, perhaps).

  • Joe

    Anthony, conceptually, I like this post. I’m assuming you are having some sort of conversation around budget or level of investment prior to “being picked,” right?

    Otherwise, how can a client know they want to work with you?

    • http://www.thesalesblog.com S. Anthony Iannarino

      Hey Joe, I hope the conversation around investment happened early in the process.

      Too your point, a lot of sales organizations get invited to compete for business simply because the buyer is doing their due diligence. The buyer doesn’t know they want to work with them. Backwards? Yes. Reality? Unfortunately, still yes.

  • Stefan

    I think it depends a lot on the type of product/service you are selling. I am fortunate enough to sell premium quality products (of which our company is the only distributor) and am able to highlight the quality rather than the price. However, from a buyers point of view, if I want to buy products that are available from multiple distributors and don’t require ulterior support, such as car parts or various electronics, I guarantee you that there is no single thing that I care about besides where is the lowest price.

  • http://twitter.com/annmariastat annmariastat

    I agree with Stefan( and why does he have the same pictures as Joe?) It depends on the type of product you are selling. We contract for consulting services and customized software design. I give clients a price and if they can find someone cheaper for the same quality, then good luck to all parties. If they just can’t afford us (and we are very reasonable), I have no problem recommending someone with less experience/ track record who will do the work at a lower price. You get what you pay for.



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