One of the things I hear from sales leaders most often is that their sales force cannot negotiate. It turns out that this is not often true. What is true is that the sales force does not negotiate with their clients. They often do, however, negotiate very effectively with their sales manager.
There is a difference between negotiating and offering a price concession. If you are negotiating, you try to expand the deal and create greater value for both parties. You also trade things that you want for things that your prospective clients want, like extending the life of the contract by years in exchange for a price concession, or building in a price increase later for a concession now. You might also trade for things like aggressive payment terms.
A price concession is something you give for which you get nothing back other than a signed contract. I am not pretending that is not sometimes necessary, nor am I suggesting that it isn’t possible to make a business case for a price concession. That said, there is a negotiation around the concession, and that negotiation takes place between the salesperson and the sales manager.
The client says they want to buy from your company, and they say the only necessary thing is for you to sharpen your pencil. The salesperson runs to the sales manager, excited that they have a deal, and they are prepared to describe in great detail all the reasons that the price concession should be freely granted.
Look, it’s a big logo, and it’s going to look impressive to other prospective clients. This company spends a ton of money in your category, and this will open up future spending. You’ve pursued this client for years, and this is your big chance. Someone else will easily agree to the price they need. It’s getting close to the end of a quarter. This client ensures that the salesperson makes their number, and it helps you, their sales manager, make your number. This is list will grow longer the more you need the deal, and all of these things are likely true.
A salesperson will use all of their sales skills to sell you, their sales manager, and they will explain the value of the deal to you. Some of them, if allowed, will not turn those same skills around and make the case that the client is going to get even greater value. This makes the salesperson a shrewd negotiator, choosing to negotiate with the weaker party, making it more likely that a deal is done.
Your prospective client is obligated to ask, and they are responsible to get the best deal they can for their business. You are responsible for winning profitable business and ensuring that you reach the targets that allow you to execute for your clients. There is no reason to offer a price concession without first negotiating.
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Filed under: Sales