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Negotiating or Defending Your Price?

There is a difference between negotiating and defending your price. What they have in common is that there is a potential obstacle that needs to be dealt with. Negotiating is one way to think about that obstacle. But it shouldn’t be the first choice. The first choice should be to defend your price. There are number of reasons why.

If you believe that you have to negotiate your price then you will begin with the idea that the only way to win the business is by making price concessions. But a price concession may not even be necessary. What may really be necessary is a justification as to why you cost more than your competitor. Your prospective client may also need the ability to justify your pricing internally.

And it’s important to remember that every responsible person in any company, whether purchasing or not, is going to ask you to discount your price. They are being responsible to their company by asking. But you have to be responsible to your company by justifying the price.

Another way that a price negotiation differs from simply defending your price is that in more complex negotiations you have the ability to increase the size of the pie. You have the ability to explore opportunities to increase the size and scope of the project you’re working on with your potential client, creating more value for both of you. This is sometimes possible in sales negotiations. But oftentimes there isn’t a way to expand the pie. They need what they need, and you need what you need. So it’s difficult to log roll and trade this for that.

A lot of the rules that apply to negotiations assume that parties have different levels of power. Some of the tactics that are recommended assume that the sales organization has as much power as their prospective client. But in crowded markets your prospective clients may have many choices available to them. This means that they likely have more power. This often means that the sales organization can’t offer ultimatums. By offering an ultimatum, a take it or leave it offer, they often find the client leaves it. Sometimes it’s necessary to walk away; but sometimes the negotiation is really gaining agreement to prove the value you really create.

You may end up negotiating your price. You may even end up discounting (although I hope you don’t) to win the business. Even if you have to negotiate, your best first bet is to defend your price. That’s often enough to allow you to win the business without negotiating.


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Comments

comments

  • SmallTimeMarketer

    Pricing can be a challenge, very good take on pricing. Listen for the leverage, then price with it in mind.

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

      Thanks!

  • http://simplifilm.com/ Chris Johnson

    So, this sounds petulant, but it’s true: when someone asks for a price discount at Simplifilm – for no reason – I end the call and stop the pitching. I’m firm about it – “you’re welcome to reengage, but if you try and whittle our price down again, that will terminate our business relationship.”

    I don’t know if I’m right or wrong – but we are booked solid for months and working with some of the top brands and people I want to work with.

    So I’d say that “every responsible person” may do this, but we’re firm and we make no exceptions, ever for anyone, not even “big names” that can give us referrals and exposure. In fact -that’s one way I present our price ($15k for a 1 minute video). “Well, this price presumes that you are well connected and will be eager to give us referrals on a successful engagement, and that we’ll be able to use the work in our reel. If that’s not the case, I can share standard pricing with you.”

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

      Chris: If you have pricing power, you use it. It means you are creating more value and capturing more for doing so. There is nothing wrong with that. It sounds like you are also using price to disqualify, and there is nothing wrong with that either. It’s a valid position to stake out. I have some other thoughts, but they’re not for sharing here!

      Anthony

  • http://raulcolon.net/ Raul Colon

    I have a big problem trying to understand how to negotiate especially when the other party just want to discount my rates.

    A week ago I moved away from an opportunity because the main subject of the proposal was price. They forgot about all the other factors they just did not want to pay the price but where not straightforward with it.

    I stand on price but I would like to see a few more posts regarding how to defend by demonstrating how valuable you are… This post really got me thinking!

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

      Thinking is the right place to start, Raul. I think oftentimes prospects reject the price because we haven’t done enough to help them perceive the value in what we sell AND we haven’t helped them make it defensible by giving them the proof and the language they need. They are obligated to ask about price. It makes them responsible. The newsletter I send to subscribers today may help.

      A

    • http://simplifilm.com/ Chris Johnson

      Generate more leads, my friend. When you generate business beyond your capacity to serve it, you needn’t tolerate idiots.

  • Harvey Gardner

    Good advice. Never be ashamed of your price if you have the superior product and the best service.

  • Dan Wyse

    Ours is price driven industry, hardly advertisers ready to hear value or benefits, all they want is discounts upon discounts and this has been our major challenge this year.



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