How can I negotiate more effectively?
This is one of the aspects of selling I get asked about on a regular basis. “What do I need to do to make sure I get my price?” (or as close as possible) “Given that the people I’m negotiating against have often been trained in negotiating techniques what chance do I have of closing a profitable deal?” These, and other questions, are posed to me on an almost daily basis so I’m going to give you my very best advice regarding negotiating. Ready?
Well, that was simple, wasn’t it? That’s right. My very best advice regarding negotiating is, “Don’t do it.” Don’t negotiate. Ahhhhh, I can hear you right now saying, “But Jeff, I live in the real world and in this world you have to negotiate.” Well, ducky, I live in the real world too and I don’t negotiate. For sure I don’t negotiate my price. Let me explain why.
I offer a service. Training, seminars, keynote speeches, consulting. My time is valuable, just as yours is. My services are valuable too. Just as your products or services are. I gave a lot of thought when I decided how to price my services. What is the value of my time and teachings? What is the “going” rate for similar services. How much money do I need to earn to be profitable? After careful consideration I came up with what I felt was the “right” price. It’s a price that’s fair and reasonable. It’s a price that when clients pay it to me I feel I’ve been fairly compensated for what I’ve delivered. It’s a price that when my clients pay it to me THEY feel like they been treated fairly and received outstanding value. So, if all those things are true, why would I ever negotiate?
One of the things you need to understand is that it’s human nature to want to receive a fair deal. It’s also human nature to want to receive the “best” deal you possibly can. But you also have to understand that a question regarding price (which usually sounds like this – “Can you do any better on the price?”) is often just a question. It doesn’t necessarily mean that if you don’t do better on price that the prospect won’t buy from you. Unfortunately, most salespeople don’t think that way and as soon as they hear a price question they automatically drop their price. Dropping your price isn’t negotiating, it’s discounting. If you want to consider dropping price as negotiating then understand it’s the weakest form of negotiation and it’s what the weak salesperson does first.
Why do people try to negotiate with you but not when they buy tickets at the movies? Why do prospects expect a better price from you but not at the grocery store? We could go on with examples all day long but the reason is simple: At the movie theater the price is the price. Same thing at the grocery store. In the movie “Borat” the star goes into a hotel to book a room. When the front desk clerk gives him the nightly rate Borat makes a counteroffer. The clerk explains that the rate is the rate. Why should your rate be subject to negotiating? We train our customers how to buy from us. If we let them know that we’ll discount once, they’ll expect a price reduction every time they buy. Better to train them to buy on value so that price isn’t a concern.
What you want to get really good at is defending your price. You must be able to explain to your prospect, in a way they’ll relate to and understand, why your price is fair and reasonable. You must get very good at showing the value of what you’re selling. People buy value and relationship, not price. What is the value of owning your product or service? What benefits will your prospects receive when they become your customer? How will it improve their life, business, profitability, etc? When you’ve done a good job of selling you’ve carefully pointed out the value and if you’ve done that the price question (“can you do any better?”) is usually simply that. A question.
Now, since I do live in the real world I understand that you might not be in a position where you won’t discount so here are some tips for better negotiating if you must.
1) Never give anything up in a negotiation without getting something back. If you give up something without getting anything in return you’re discounting, not negotiating.
2) Know your walk-away point. Before negotiating effectively you must know the point where if it’s one penny less you’ll walk away from the deal.
3) Be willing to walk away. If you’re not willing to walk away from the deal you can’t negotiate effectively. This means you must have a full pipeline of prospects you’re working with so that no one deal is too important. By having many opportunities to work on at any given time no one deal will run your life.
4) Know what you can add-in that will cost little or no money. For example, when I train salespeople I often include a follow-up session over the phone. While my time is valuable and worth money it doesn’t cost me very much to do a follow-up session but my client receives great value from it. Before I’d ever drop price I’d offer to include an extra follow-up session or two. My client wins and so do I. That should be the goal of all negotiations, the client and you must both win.
5) Give the client a good reason to pay you your price. A while back I had a conversation with a prospect regarding training his team. It was a fairly good sized deal and I wanted to close it. When I gave the client my pricing he asked if I could do better. I explained why I was charging what I was charging. He asked again if I could do better. I explained, “Yes, I could chop $4000.00 off the price but let me ask you this: When I’m standing in front of your team and training them, would you like every thought in my head to be focussed on delivering the material in a way that they’ll understand it and be able to implement it immediately or do you want the little voice in the back of my head to be whispering to me, “They chewed you down $4000 on price?” The client said that the initial price I gave him would be fine and the deal closed. Whenever you want someone to do something for you (in this case pay me my asking price) show them why it’s good for them. (in this case paying me my full price allowed me to focus 100% on his sales team)
Here’s another thought for you…when someone substantially drops their price to me I feel like they’re a thief. I bought a snowblower a few years ago. I went to a local store and inquired about a model they had on the floor. I was told the price would be $600. I asked the owner if he could do any better and after a few seconds he replied, “If you buy it right now I’ll give it to you for $450.” I shook his hand a left the store without buying the snowblower, drove to Sears and bought one there. Why? If he could that quickly shave $150 off the price then he was ripping me off at his asking price of $600. What if I hadn’t asked if he could do better and had accepted his asking price of $600? I don’t do business with thieves.
Get good at defending your price and you’ll find that you’ll end up negotiating more effectively. You’ll be happier, your company will be more profitable and your clients (if they’re anything like me) will probably feel like they’ve been treated fairly.