This isn’t a post to suggest you should never discount or give your client some concession when you negotiate. To do so would be to commit a form of sales malpractice. It would be to offer advice that says there are times when it makes sense to negotiate, especially when you have an opportunity to create greater value for your client and your company, something that is possible when both sides are willing to collaborate with that goal in mind.
While it can sometimes be necessary to negotiate, beginning that negotiation requires you to defend the investment you ask your client to make.
The Value of Your Solution
You might exhibit several behaviors during the sales conversation that might lead your client to believe that you believe your solution is worth less than you are asking. You might immediately respond to a question about your price by suggesting that you can lower the price, indicating that the investment isn’t really necessary to produce the better results they need. You might also reply to a lower price request by telling your client that you are going to talk to your manager and see what you can do, essentially promising them a lower price and agreeing that they should pay less than your quote.
There are other more subtle ways you can convey the idea that you don’t believe your price is equal to the value of your solution. You can start by doing everything you can to worm your way out of talking about what your solution is going to cost your client. When they ask you what your solution costs and you tell them you have to go through the entire discovery process before you can disclose the price, you look like you believe the price is out of line with the results you are promising to deliver. You can also withhold your pricing until the end of the sales conversation, providing it after your presentation, hoping that your client believes it is appropriate (a mistake that is easy to make, especially when you are certain to have a higher price than your competition).
If you don’t demonstrate your conviction that your client is still getting the better end of the deal, how are they supposed to believe that? This brings us to the truth about your price: your client has to believe that the outcomes you are going to help them generate are worth more than the money they are trading. If the results aren’t worth more than the money, your client shouldn’t pay for them; there is no reason to be even on a deal.
Defending the Investment
Your unwillingness to defend the investment you ask your client to make all but ensures that they will believe you can—and no doubt, will—provide your solution at a lower price. I have seen salespeople push a pricing proposal across the client’s desk and say, “How does this pricing look to you?” only to have the contact say, “It’s higher than I thought it would be. What can you do for me?” I have had the personal experience of working with a salesperson that executed an excellent, modern sales approach to win my business, only to end the conversation by saying, “We’d really like to get this done before the end of the week.” When I told him I would need him to do better, he revised the pricing.
There are only two ways to begin a negotiation. You can start by responding “No” when asked to lower your price, something that doesn’t mean you aren’t going to negotiate, but a response that allows you to defend the value of the solution to your client—something critical to effective negotiation.
You can also start a conversation by agreeing to some pricing concession and asking for something worth more than the concession you provide. The lower price means they are paying less for the solution, and your request for something more valuable to you is how you reacquire the value you gave up–meaning your client is still paying the full value of the solution.
Without being able to justify the delta between your price, your competitor’s price, and any alternatives, you make it more difficult to justify the difference, a key to defending your pricing proposal. An inability to explain the concessions your client makes—knowingly or unknowingly—and how those concessions increase their costs (something different than price), means you are less likely to put up a strong defense, and one your contacts can defend when asked why they paid more for what to them might look like something too similar to command a higher price.
How You Harm Your Client
Of all the things you might do to harm your results, agreeing that your solution isn’t worth the price you ask your client to pay can be incredibly harmful. For want of a deal, not defending the investment can allow your client to underinvest in the results they need and cause your company to be unable to provide the resources necessary to produce those results, a mistake that, made often enough, can harm your company’s overall strategy by eroding the margin necessary to improving your client’s results.
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Filed under: Sales