You know the situation. You have a great product, you’ve become best friends with the customer who is really excited about buying and the deal is just about to be signed. At which point the purchasing department takes over and your best friend is replaced by someone who looks like the bastard child of Simon Cowell and Sir Alan Sugar:
- I’m sure you can do better than that
- We just don’t have the budget
- If you give us a discount, we may well be interested in buying more in the future
- We’ve been talking to your competitors too, of course, and they are asking a lot less
…or some variation on the theme.
Some of us don’t even need this level of pressure. A raised eyebrow or a short silence and we submit. “It’s yours! Have it all for nothing! Here take my Primark shirt too!”
Sometimes we even start discounting before we start the negotiation! “What’s a reasonable price here? £1000? Hmm, don’t think they’ll like that, I’ll ask for £800. Well, £700 just to make sure, don’t want to scare them away. Oh, hello Mr Customer, does £600 seem like a fair price to you?”
If any of this sounds familiar, if its ever happened to you before, read on. We have the answer.
Charge on value, not price
The key is to charge on value, not price.
What does this mean? It means you should be able to persuasively demonstrate to your customer the financial benefit that your product or service is going to bring them. If you can build an equation, based on their business, where you can input measurable figures to get a bottom-line financial value return, your position will be unarguable.
To do this, you need to understand your customer’s business model, their revenue drivers, their costs, the value-add for their customers and so on. And you need to be able to plausibly quantify how your offering will help each or any of these.
And the beauty of this approach is that it requires you to stop being a salesperson and start becoming a business partner. Your customer will appreciate it as you create an ROI tool for them specifically.
The three types of customers
Great, that is the first step. The second step is to know who you are dealing with and how to respond accordingly.
Broadly speaking, there are three types of customers:
- Those who buy on value
- Those who buy on relationship
- Those who buy on price.
For the first two, your demonstrable ROI case will be sufficient. For the third type, you need to do more.
Provide options and allow them to choose
So they love your proposition but say they don’t have the money or your competitor is asking less or some such thing.
Please note: DO NOT GIVE THEM A DISCOUNT!
Instead, offer them alternatives that are within their price range. For example:
- Option A: Full model, full value, full price.
- Option B: Stripped down model, minimum value, minimum price.
- Option C: Something in between, either just below A or just above B depending on what you think you can get. (It is Option C they are most likely to choose).
Be prepared to tweak these, but always stick to value. As you haggle, the more variations that you have for adding/reducing the offering/price, the greater flexibility you will have in any negotiation without conceding on value.
This multiple offer/price strategy means your customer will be happy and you will be happy and you will never have to discount again. And you can have this information for free!