Your prospective clients are always going to ask you if you can provide them with a lower price. Their obligation to their company is to select the right partner while also controlling their costs, not paying more than is necessary. The powers that be inside your company are doing the same thing when your sisters and brothers sell them the things they buy. A good deal for your client must also be a good deal for your company, the definition of a win-win deal.
Here is a framework for executing a win-win negotiation in B2B sales.
Disclose the Investment Early
Some antiquated sales approaches would have you postpone a conversation about the price of your solution until you have had a chance to convince the prospect of its value. While there are no right or wrong answers to the right strategy of positioning your solution, context is critical. That said, you are often better off disclosing the investment early, especially if you are sure to have a higher price.
By disclosing the investment early, you give yourself the rest of the sales conversation to demonstrate the higher value your solution creates, while providing your prospective client with the experience of working with you. An agreement that the investment is in line with the outcomes your client is pursuing early in the sales process provides you with the ability to refer back to the early conversations where you agreed to the investments and outcomes.
Understand the Value to the Client
The ability to negotiate effectively begins with understanding the value of your solution to the client. The term “value” is somewhat indistinct, meaning different things to different people under varying circumstances. For our purposes here, the idea of levels of value creation in Eat Their Lunch: Winning Customers Away from Your Competition is instructional.
If you frame the value of your solution as the product itself, Level 1, the positioning makes it easy to perceive what you sell as a commodity, a sales approach that is not often the best choice. By positioning your solution and the outcomes it provides as strategic (Level 4), you increase the likelihood your contacts perceive you as a more valuable, and therefore, worth paying more to obtain.
Harvard professor Theodore Levitt once stated the idea here as “people don’t buy drills; they buy holes.” The critical factor here in negotiating is knowing the “holes” you enable, not your “drills.”
Justify the Investment and the Delta
As a professional, B2B salesperson engaged in complex sales, part of an insight selling approach requires you to justify the investment you are asking your client to make.
In a competitive situation, your solution and your competitor’s solution are going to be nestled together on a spreadsheet in some purchasing person’s office. The work you have done through the sales conversation needs to position your to tie the necessary investment to the desired outcomes.
One useful way to think about justifying the investment and the delta between your price and competitive offerings is to understand the concessions your client will make by choosing a different or lower-priced solution.
Lower price is not evidence of a lower cost, and is more often an indication of a higher total cost). Being able to discuss the concessions the client will be forced to accept along with the lower prices, as well as the investments you make that prevent higher costs, better positions you for success in a negotiation.
Retain the Ability to Walk Away
The concept of “win-win” means a deal is right for your company, as well as your client. Your responsibility as a professional, consultative salesperson requires you to ensure your client benefits from buying what you sell. It also means ensuring your company is profitable and captures enough value from the opportunity to be able to execute for the client effectively. These two outcomes form a knot that cannot be untangled without damaging one or both of the parties.
When what your client wants in the way of a pricing concession is bad for your company, you must walk away. If the investment your prospective client is willing to make is less than is necessary to deliver the results, you must walk away. This is true no matter how large the deal or how badly you want it.
Your power in a negotiation begins and ends with your ability to walk away from the deal. If you must win a deal, you are the weaker party in a parley. A full pipeline of opportunities strengthens your position, just like having a considerable number of options of suppliers provides your client with a position of strength.
You increase your position by focusing on the strategic nature of the outcomes, how you are a better partner and the risks of underinvesting.
Prepare for Purchasing
If it is customary for you to end up in purchasing, prepare for that conversation. One way to prepare is to ask the business owner contacts whether or not they are going to be able to get the support they need to make the necessary investment. You might also prepare by discussing with them the approach you are going to take together when purchasing begins the process of removing the investment from what will be their solution.
By doing the work in the paragraphs above, you have prepared for a conversation where you ask your contacts to defend the investment internally by explaining to them why the investment is necessary and justifying any perceived delta.
You might also ask them to intervene, should you end up in a situation where purchasing’s demands put their outcomes at risk. One of those risks is choosing a partner who doesn’t understand the results they need or who gives them pause when it comes to imagining your competitor as their partner.
Preparing your strategy before purchasing will find you in a much better place when you do have to negotiate with a professional buyer. Being able to leverage the cost of a change to the solution the business owners need protects them from a wrong decision—and improves your ability to work a deal.
Ensure You Are Chosen
There is never a reason to negotiate before your prospective client chooses you and before you have agreed on the solution. Professional purchasing agents know how to maneuver you into a position where they can play you against your competition or drag you through multiple negotiations. In some cases, your first negotiation with your contact is followed by a talk with a purchasing agent. The CFO intervenes, refusing to sign the contract without additional price reductions.
There is never a reason to negotiate against yourself. Doing so makes it much less likely you end up with anything resembling a win-win deal. Instead, the business isn’t profitable, while the demands are still enormous, you having already agreed on strategic outcomes that are now difficult to execute, ending up with you and your company resenting the client.
The rule here is to negotiate once and only after your client selected you.
Be Prepared with Trade-offs
One of the ways salespeople weaken their position in a negotiation is uttering the words, “Let me talk to my manager, and I’ll see what we can do.” With those thirteen words, you confirm that you have no power—and that you are going to come back with a concession.
A better approach is the ability to agree to any concessions and asking for what you need to be able to provide it. Maybe you need a five-year deal instead of a three-year contract. Perhaps you need better payment terms, a larger deposit, or some demand that the client makes a particular investment you might have had to make for them.
Your ability to agree to whatever concessions you can make while asking for what you need in return strengthens your ability to negotiate a win-win deal. Giving your client a win while gaining something that makes it a success for your company is a win-win deal.
If you want you and your dream client to both be happy and successful in consultative sales, you’ll prepare to create a deal that serves your client and ensures you can deliver.
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Filed under: Sales