June 3rd, 2015

Are You Caught in a Negotiating Trap?

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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LEARN MORE!

Click on the following link, or on the image below, to learn more about Richardson’s award winning sales negotiation training

Negotiating-training

About The Author: Kimberly Dean

Kimberly Dean utilizes the insights and strategies she gained from her career in sales and sales management to establish credibility and help sales teams address the relevant business issues their customers are facing. As a Senior Training Consultant with Richardson, Kim integrates her real-life experiences into the facilitation of her interactive workshops to validate the learning and challenge participants to improve their skills so they can strengthen customer relationships and grow revenue.



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Kimberly Dean

4 Responses to “Are You Caught in a Negotiating Trap?”

  1. June 03, 2015 at 12:00 pm, Richard J Orlando said:

    Excellent blog Kimberly. Knowing the customer’s key “value” drivers is an easy to say, hard to do technique ( why reps need your training!) that is so critical in B2B sales processes that often involve lengthy sales cycles engaging with multiple stakeholders. Nice piece.

    [REPLY]

  2. June 04, 2015 at 6:36 pm, Kurt Haug said:

    Great story about the proudly negotiated “price increase.” The rep got HALF the message– “don’t just DROP your prices on demand. But that doesn’t automatically make a price INCREASE the goal in and of itself either. It’s pretty obvious that the customer realized that a slightly higher unit cost was a bargain when considering inventory carrying cost for the product. Which is not a bad thing in and of itself – unless it actually costs US more money in the process!

    When we say negotiations is more than a PRICE discussion, we MEAN it! It’s VALUE… For BOTH parties.

    Thanks for a great real world example.

    [REPLY]

  3. June 04, 2015 at 6:42 pm, Kurt Haug said:

    Great story about the proudly negotiated “price increase.” The rep got HALF the message– “don’t just DROP your prices on demand. But that doesn’t automatically make a price INCREASE the goal in and of itself either. The customer obviously realized that a slightly higher unit cost was a bargain considering inventory carrying cost. Which is not a bad thing in and of itself – unless it actually costs US more money in the process!

    When we say negotiations is more than a PRICE discussion, we MEAN it! It’s VALUE… For BOTH parties.

    Thanks for a great real world example.

    [REPLY]

  4. June 04, 2015 at 6:46 pm, Kurt Haug said:

    Great story about the proudly negotiated “price increase.” The rep got HALF the message– “don’t just DROP your prices on demand.” But that doesn’t automatically make a price INCREASE the goal in and of itself either. The customer obviously realized that a slightly higher unit cost was a bargain considering inventory carrying cost. Which is not a bad thing in and of itself – unless it actually costs US more money in the process!

    VALUE is NOT PRICE!

    Thanks for a great real world example.

    [REPLY]

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