How to turn a sales negotiation from cost to value?
I am sure that anyone here that has been in sales knows that clients typically want to negotiate cost. Most clients tend to dwell on cost because that is what they know to negotiate. Does anyone here have any tips on how to swing the negotiation away from cost and over to value?
Good Answers (7)
Philip S.
Business Coach at Minutecoach Business Coaching | PAYG business coaching
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I'm not altogether sure you should.
You say clients dwell on cost because they know how to negotiate on cost; they're comfortable. Moving from cost to value can remove comfort and raise questions as to motive. It 'feels' to a customer as though you can't (or won't) negotiate on a level playing field.
Instead, alter your price and value proposition, change your offer. You should not need to move from negotiation on cost, as the _immediate_ perceived value of your offer should be more compelling than another's.
You're in a service industry, a relationship-based account business, so unlike a widget which cost 'x' and _needs_ to sell for 'y' you can slice and configure your services to suit a market segment. Design services to upsell other services, develop incremental repeating add-ons that take no time and little effort to sell. Bought once, they are a simple tickbox, not even questioned on the next sale or contract.
Don't look for margin on a single competitive sale, but accrue value for the client in bite-size pieces they understand, and engineer it so your final builds over the relationship provide the profitability from that sector that you can reasonably expect.
No trickery, little technique. More trust.
Philip
Daniel J.
Division Leader with Primerica Financial Services
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Here's a question to ask that I got from Tom Hopkins:
"There are three factors that are important when making a buying decision: lowest price, highest quality and best service. In my experience, you can achieve two of the three, but you can never get all three. So if your decision is based on getting the lowest possible price, which of the other two do you want to give up: quality or service?"
Most of the time, they'll say "neither", and you can respond "Good, I'm glad you agree that sacrificing quality or service doesn't make sense. So let's talk about the overall value I can provide." If they insist that they must go with the lowest price no matter what, then there's really nothing you can do except say, "I'm sorry, but I'm not willing to lower my standards." And then move on.
Bryan C W.
Seeking a new opportunity in B2B technology; global experience
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I always focus on the total solution. After all, a poor solution is worthless no matter how low the price, whereas, a terrific solution that works better than requested is worth more than they paid!
When it comes right down to it, many times it is best to blame the "company" and state that "policy" does not permit discounts except for volume. This is useful if you are selling a premium product.
A fall back position may be to get something of value in return. Perhaps a testimonial, a written case study, better terms (cash up front), etc.
In negotiating, make it a WIN-WIN situation, not a 1-way street where you get beat up over price. Sell your solution, not a product or service.
Todd N.
Introducing Broker, Alternative Investment Specialist & Author
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The PosiDyne Group process that Marty Wolff teaches I think is very good. Basically theclose is the same one of natural consequeces. it kind of goes like this in brief. Six months from now how would you know you made the right buying decision?
What would that give you that you do not have now? "Gap"
What are the obstacles or barriers you see that might keep you from achieving those goals?
On a scale of 0-10 where are you now on achieving these goals?
What happens if you don't achieve them?
How committed are you to eliminatiing theese problems and attaining those goals?
Key is to really allow them to develop the "gap"
When this is done and you are able to provide a service or product that will let them achieve their goal.
What do you think you should do?
Clearly there is more but this is a general overview. If you contact Marty tell him I said hello.
Panos T.
Strategy Executive
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Hello Jason,
The answer to your question is not the same for every product or situation. You (or your client) must answer these questions:
Is your service providing a unique/distinct benefit or value to the customer than your competition? Is it a commodity? (if yes, concentrate only on price.)
Is the value you offer a top priority for the customer? If it is not, how can you make it a top priority?
Usually, the negotiation starts only after the sales process has ended. It is the point where your client accepts that you offer something of real value, and he/she is ready to acquire it at a cost.
Analyze your client, always know what motivates him/her. Value comes through long term business relationships, not one-off transactions.
Last, I would suggest you tried Solution Selling a total sales approach.
Good Luck
the sweetness of a great price is far outweighed by the long lasting bitterness of poor service.
Ask your client which they value more...price or profit.
They will say profit....then say that their profits will be cannibalised by taking the lower priced solution due to decreased service and quality...
If you are a master salesperson..you should pitch the deal from the beginning in a way that means cost you quote is perceived as excellent value so that you do not even have a price objection.
There is a quick technique we teach in our negotiation seminars to counter someone who says that they see your value, but cannot pay the price. We teach people the following sequence of questions: "If we were the same price as the competition, who would you choose?" Assuming that they are honest in seeing the value you bring, they typically will say "yes" You then ask: "And why is that?" What you want them to do is tell you what they value about what you are selling. If they talk about quality or service, then ask them: "And how much is good service worth?" Maybe they say 5% over the competition. You can also ask, "and what is the value of quality? What if this product breaks down, what economic impact would that have?" Again, their giving you a number is more effective than you giving them a number. You probably can overcome a 10% -20% pricing differential with a competitor using this technique, depending of course on the industry, pricing, etc. Note, however, if your product is 50% higher than the competition, unless you are delivering significant quantifiable value, it is very hard to overcome the price objection.
I hope this helps.
Mark
mark@shapironegotiations.com
More Answers (7)
Deven K.
Data Management Consultant at the Healthcare business of Thomson Reuters
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Delivery time, Quality, & Cost
You can pick two.
In the real world though, it isn’t quite as simple as that. Working for a company that provides high quality components I’ve seen the sales people try to keep the focus quality, engineering services, and customer support, but at the end of the day, it usually comes down to cost. In this Wal-Mart world in which we live people no longer look for products that last a lifetime. If you can’t compete on price, make sure you can convince your potential customers they need the services that come with the product.
Well why is usually done is to upmark the product, for ex: if the product cost you 10$ and you want to gat 16$ for it, mark it 20$, this way when a client negociate you can down the prize by 4$ and still obtain the prize you wanted, of course to di this you need to do a market research this becouse up-marketing your products too much can cost clients to leave with out even trying to negociate. If you want a more delait explanation or nedd help with anything, e-mail me at veronica_soca@hotmail.com
Carson M.
Corporate Trainer, Speaker and Digital Media Consultant
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Hi Jason,
As "value" has migrated farther and farther away from product/service - it commoditizes the sales process, no matter what you sell.
In response to this, the sales person and sales process they utilize has to provide the value. To answer your question directly, at the sales stage you are describing, it's likely too late the "swing" away from cost at that point.
Understanding key value drivers and delivering on them throughout the sales process can help avoid the price driven sale. There's a lot too that - more than can be summed up and digested in a forum like this...
Contact me to discuss more if you like...
carson@directcontact.ca
I would say you should be able to highlight how the solution fits the customer's problem, and why you are the only one who can provide the solution. Otherwise you will keep dwelling on price, and rightfully so
Nicolas M.
Associate Strategy at Booz & Company
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One of the easiest solutions to swing from cost to value is to be able to put a dollar figure against the benefits that you claim. This is called "dollarising" the benefits.
Fox Publications has 2 great books on this topic
Hope this helps.
Nicolas
Links:
Rick S. P.
Vice President, Sales and Market Development - BI Worldwide
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That is a tough one... Here are some thoughts...
If you are dealing with the person who owns the outcome of the business (purchase) decision, then you would focus your proposal and presentation entirely about THEM. Start by demonstrating an understanding of their business, needs, marketplace, organization, goals, objectives, strategies. Then bring forward the relevant aspects of your company, specifically around how you will leverage your core competencies to help them achieve measurable results. Having done that you bear down on the "fit" between the solution you are recommending and their specific needs.
By taking this approach, you have led an interactive discussion (hopefully not a "talking heads, PowerPoint pitch" that is squarely focused on them, their needs, goals and outcomes. If you can get to the person who owns the outcome of the decision, s/he is going to be more invested than anyone in the results (with costs being subordinated to outcomes).
However, if you find yourself dealing with someone in the Purchasing Department, you are going to have to deal with the pricing to their satisfaction. One consideration to remember: If you get to the Economic Buyer (the one person who actually controls the spend) and if you do a good job of demonstrating the ROE on your proposal, you stand a chance of having him/her override the recommendation of Purchasing. You have to be competitive, but you don't need to be the cheapest.
I have never worked for a company that sold on price. Frankly, there could be nothing less stimulating than that (IMHO). Far better to know your true competencies, the efficacy of your products/services, and to stay centered on delivering results.
