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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