Are You Caught in a Negotiating Trap?
Here’s a common scenario: You’ve just presented your truly tailored, well researched, totally relevant proposal. The customer, who had been nodding in agreement all along, now has a strange look on her face. The change happened the minute you mentioned price.
She says your price is too high.
It’s your move. What do you do? If you start negotiating on price, trying to find a figure that she’ll accept without hurting your business, you’ve just landed in a negotiation trap.
The trap is in starting to negotiate too early, before justifying your value. This is how a lot of money is lost, either by discounting too early or by leaving money on the table.
Getting pushback on price is a common occurrence for sales professionals. That’s why it’s important to recognize the negotiation trap and learn how to avoid it.
First, don’t start off trying to resolve any immediate price objections; focus instead on justifying the value of your proposal.
Consider the objection as an opportunity to learn more about the customer’s situation. Where does the objection come from? Is the customer at the end of a budget cycle? Would splitting payment over two cycles be workable? Or, would changing delivery options add value?
The point is, you need to understand what the customer is trying to accomplish so that you can determine which terms are most important. This can be more than what customers ask for at first blush, so make sure to take the time to question further. If you immediately head into a price negotiation, you’ve limited your options to price reductions.
Once you’ve justified your value and have a better understanding of the customer’s concerns, you can begin to trade terms. Just be sure that before you do, you’ve prioritized your trading points and know their value — to you and to the customer.
The best kind of trade in a negotiation is to give up something that doesn’t cost much to you but is incredibly valuable to the customer. It could be something as simple as a shorter turnaround time that you have the resources to accommodate. But, if you don’t have the resources to deliver on a shorter timeline, your trade could become an expensive accommodation.
I often tell a personal story from when I was in the paper business. One of my sales professionals negotiated a price increase with a major customer. He was quite pleased with himself, as higher pricing is hard to achieve in a commodity business. When I asked how he did it, he said he only had to agree to deliver the paper on half-pallets instead of full pallets. What he didn’t know was his deal meant only half of the paper could be delivered on a truck at a time, which meant twice as many delivery trips. His great pricing deal actually ended up costing the paper company money.
Too many people are enamored with the concept of negotiations but very few actually are engaged in them. Instead, what most end up doing is trying to resolve price objections and, in the end, trading away value instead of justifying it.
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