1. First, sell your customer on the value of your proposal.
When customers are hard-nosed about getting a lower price, 80% of the time it is because they do not appreciate the value of your product and have not made a commitment to buy. Take a step back and sell benefits and solutions again; Customer; “You’ve got to do better than that on the price”.
Sales Person: “I’m glad you mentioned price, Ms.Customer, let’s take another look at how our product is going to (save you money/make you money/increase productivity).”
Get a clear agreement from your customer that your solution works before getting into price.
Customer; “ OK, let’s talk price.”
Sales Person: “ Sure. Just so that I’m clear before we move on – we are in agreement that our product – with the modifications we discussed - is exactly what you are looking for, right?”
Customer; “Well, I don’t know about that, I’ve still got to run this by my boss…”
2. Calculate the cost-benefit for the customer.
Never take for granted that customers understand how much money your solution saves them, or what return they can expect on their investment.
Customer: “I need at least a 20% discount”.
Sales person: “Why 20%?”
Customer: “There’s no way this is worth the price you are estimating.”
Sales Person: “That depends on what return you expect from the investment. What do usually consider a good return – 3 times, 10 times? …..Earlier we estimated that you could get an additional 10% more business from your customers with our product. I figured that translates into an additional $5 million, and that’s just on your major accounts. Not a bad return on a $100,000 investment don’t you think?”
3. Know your bottom-line Obviously you know the limits of your ability to discount. But do you also know how much room you have to maneuver with delivery schedules, product quantities or quality, and payment terms? If you don’t know the bottom line on all these variables, you might lose the deal, or get the deal but lose the profit margin. Knowing your bottom line also gives you more power, and more confidence in negotiating.
4. Determine what you want from this negotiation.
It is not always the same objective. Sometimes I may want to “buy” my way into the account by delivering at cost, because it is a cornerstone customer. Other times, I might want to demonstrate to the buyer that the days of “off the rate-card pricing” are over. Or because there is a large backlog of orders, I must hold the line on delivery times, but can give a little on payment terms.
5. Calculate the most likely outcome.
Know the answers to these questions. What is my customer’s position (Vs. real need)?
What negotiating tactics might my customer use?
How has my customer negotiated in the past?
6. Identify your “deal sweeteners”.
These are one-time-only incentives. They are not standard discounts, “ rush” services or other negotiables. They are “perks’ or incentives that you use to close the deal NOW. You bring them out at the last minute and only if the deal is at risk. Do not include them as part of a “package”. Do not offer them if the deal is going to close anyway.
Customer; “I appreciate your flexibility on delivery, and the extended warranty, too – I’ll think it over this weekend and let you know Monday.”
Sales Person: “I’d really like to wrap this up before then; I’ll tell you what, you give me the go-ahead now, and I’ll throw in a couple of tickets to the Bills game Sunday for you and your family. How about it?”
Customer; “Can I take a rain check on the Sunday game? Actually, can you guys get your hands on a couple of tickets to the ballet next month?
7. Be fully aware of any resource, time, or money constraints your company may be under.
Maybe production is slow, you have a surplus of product, and deliveries are running behind, cash flow is critical, it’s the end of the month and you need just one more order. This information is critical in putting together an attractive package for the customer, and one that helps solve a problem on your side.
Sample Negotiables
Discounts Payment terms Payment methods Financing Bonuses Cancellation penalties Resources Quality/performance standards Information Warranties Access to experts Additional customer support Seminars/Workshops Presentations Training Delivery timetable Delivery destination Delivery method Packaging Insurance Licenses Customization Private label
The Secret to Negotiating in Sales - To learn more about this author, visit John Brennan's Website.
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John Brennan
(Visit John's Website)
John Brennan Ed.D.
Dr. Brennan is President of Interpersonal
Development, LLC, a training and
development firm. Interpersonal
Development has provided sales training
and coaching to more than 3,000 sales reps
from over 100 companies.
A native of Australia, Dr. Brennan
received his doctorate from the University
of Rochester. His dissertation researched
the effectiveness of Behavioral Modeling
Technology in training people in
interpersonal skills. While he has spent
most of his career designing or delivering
training, he was also a Vice-President of
Sales of a training and development
franchise with operations in 25 markets.
Dr. Brennan has designed and delivered
sales training in North America, Asia,
Europe, Australia and the Middle East. He
has been a guest speaker at numerous
national and regional professional
conferences.
When Microsoft wanted Best Practices
articles on sales for their web site, they
called Dr. Brennan. The results are at office.microsoft.com/e
n-us/FX011387391033.aspx
His firm’s clients have included Volvo,
The Prudential, Merrill Lynch, Eastman
Kodak, Gannett, Equifax Europe, the
Economist Group and countless small
businesses.
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