05 Oct Price Fickle Negotiators
Your price is too high
by Sarah Church
Price concerns from buyers won’t ever fully go away and there are numerous emotional and logical reasons why people resist price. I’ve personally worked through three recessions and people use price as an excuse long after the economy stabilises. Most of the time price objection is just a standard reply to their buying routine.
Whilst I work with delegates to train, coach and develop ways they can question their buyers fully to explore and understand their price objection, my main advice is: if sellers spend more time raising the buyer’s perception of their product/service this would reduce the amount of price objections they receive.
In my experience a large number of sellers get into habits of assuming the buyer fully understands the true benefits of their product/solution and will make the dotted line between their current issues and the solution that is being offered. Trust me… very few of them do. When this assumption happens often the buyer just see’s the product and the price tag, the benefits are not always obvious to buyers. Hence the price seems too high as their perception of value is low.
Idea 1 – One way to increase the perception of value is for the seller to fully explore and probe the buyer’s drivers, operational pains, future needs, current issues and their impacts. Once the issues have been identified it is critical that the seller takes their time and summarises the buyer’s current position. Often, it’s not until the seller has summarised the issues and their potential consequences that the buyer hears their own need.
Once the summary has been confirmed by the buyer the seller can start to link their product/service to the buyers needs/issues. Taking time to highlight benefits to be gained and problems solved. When buyers fully appreciate and understand the potential benefits their perception of value increases. It’s not just a price tag, it’s a solution for a problem. If negotiations are focused purely on price there is very little to manoeuvre. Reduction in price (profit margin) and deadlocks are common.
Price fickle buyers will change suppliers purely on price. Once sellers negotiate and are the cheapest price, buyers will usually continue to chase the next lower price in the future showing little loyalty. Do you want lots of these types as customers? Few companies can survive profitability in the long term with a price fixation.
Idea 2 – Another way to increase the buyer’s perception of value is to park price discussions during negotiations to explore other areas of your service/product that could be offered that would make the proposal more attractive and interesting to the buyer. These are known as concessions or value-adds.
Prior to the negotiation and using a large dollop of common sense, mind-map common operational issues buyers in this market place usually have. Then link what concession/value add’s could be added to the proposal without lowering the price that could add value for the buyers. Preparing examples of how other organisations in similar situations have benefited from the concessions is powerful, taking time to link the benefits between the situation and the solution. Having these prepared prior to the negotiation not only offers the seller more confidence but can encourage honest dialogue which leads to more in-depth conversations uncovering more buying signals.
Remember, exploring and offering concessions is on the condition that the buyer accepts the price! It’s not about lowering the price and throwing in more for free.
If you're able to agree on the price and conditions, we can discuss...
All concessions/value-adds have a direct or indirect impact to time and operating costs. When tailoring concessions and value adds it is important to review the costs. Explore the low cost concessions first and trade one at a time until an agreement is made or walk away point reached. A small seemingly non-important concession for the seller could mean a great deal to the buyer. Small concessions can add up to an attractive proposition – each concession needs to fully explained and linked back to issues and drivers so they become something to be desired. By developing a variety of concessions/value adds and understanding how they can add value and change the other parties perception, the seller can build more options and solutions to offer the buyer that doesn’t start on a deal breaker and resulting in Lose/Win or Lose/Lose.
Question: Apart from price – reliability, service, trust, payment terms, credit limits, language, account manager, ease of business, flexibility, delivery options, levels of quality to name but a few concessions. What can you do to hold your price?!