Five tactics that really work (Part 1 of 2)
“I’m interested but the price is too high.” Sound familiar?
These five tactics ensure you stay in control and never give too much away.
Tactic 1. Say NO
"Cut your price to £85,000 and we can do business." The buyer obviously wants to buy from you, but is this a ‘take it or leave it’ demand? There are two things you should consider:
- Is the buyer hand-cuffed?
- Is the buyer trying it on?
Is the buyer handcuffed?
Senior managers sometimes instruct their buyer to only buy from one particular supplier but allow them to negotiate the best terms. They won’t tell you that you are a nominated supplier, that would ruin their game. So how can you tell?
The only way to find out is to say NO to their price squeeze and see what happens. But do it nicely, “I understand your need to get the best possible price, but our order book is strong and my Chief Executive won’t let me reduce our price.” Then shut-up and see what happens.
If you’re concerned that saying no will risk the order, don’t worry. If the buyer doesn’t back down you can fall back on the magical phrase, “But there may be something I can do.” But do make sure you plan what that ‘something’ is before you meet.
Are you their best supplier?
What if you are the only supplier that can deliver on time? What if your product or service is far superior to others? What if you are the only one that can meet their specification? There's only one way to find out. Say NO to their price squeeze. The trick here is to say NO in a way that leaves the door open to negotiate further.
“I am right on the limit with the price we quoted, I can’t go any lower without reducing the specification (or quantity, quality, time, support, etc.). Is that something we can discuss?
Tactic 2. Never give anything away
If you give away a concession, professional buyers will see it as a weakness. They’ll demand another concession, then another and another, until you have nothing left to give away but your shoes. It’s called nibbling. Each nibble may be small, but when you add them all together you can suffer a massive loss.
How do you stop buyers nibbling you? It’s simple. Every time they ask for a concession, ask for something in return. Use the most powerful word in negotiating, IF. “IF I give you this, will you give me that?” You’ll hear kids say this a hundred times a day in the school playground. Unfortunately, when we grow up and get into business, we forget.
The trick here is to trade things that are ‘low cost to you and high value to the customer’ with things that are ‘low cost to the customer and high value to you’. “We can bring the delivery date forward IF you can arrange to collect the parts from our factory, is this a possibility?'' If the customer is desperate for delivery and has empty vehicles going past your door, it makes sense, doesn’t it?
Plan what you are prepared to trade before you meet a buyer. Prepare two imaginary baskets.
One holds the concessions you are prepared to concede, the other holds what you want the buyer to give you in exchange. Write the contents of your baskets on a sheet of paper and take this with you to your customer meeting.
Do make sure you trade everything, even the smallest concessions. Buyers will respect you.
If you enter the lion’s den without your baskets full of tempting trades, expect to be eaten alive.
Tactic 3. Focus on outcomes
No one actually buys what you sell. Customers buy to achieve an aspiration or resolve a nagging problem. For example, customers don’t buy mobile phones, they buy a way to keep in touch when they’re on the move. Some mobiles are better at this task than others. Some phones are more desirable than others, an iPhone for example. Everyone understands this, until they meet a buyer who wants to squeeze the price. The buyer makes a straight comparison between your price and a competitor’s, “Your competitor’s price is 15% lower, are you prepared to match that?”
What buyers rarely consider, or like to discuss, is the difference in the outcome their company can achieve. What if your office computer system increases the customer’s staff efficiency by 80% and your competitor struggles to achieve 30%. Switch the discussion to talk about the outcome value to the customer.
“I do understand your need to keep costs low; it was a discussion I had with your Operations Director last week. When we evaluated the difference between our system and the competitor’s, our system gives you 40% higher staff efficiency, which is expected to save your company around £230,000 in admin costs over the next three years. I can meet your competitor’s price, but only IF I re-quote our system to match the competitor’s specification. If price is critical, is that something we can look at?”
If you suspect that your product or service is better than your competitor’s, you can also say, “I do understand your need to keep costs low and I‘ll be happy to look at our price, but only IF our marketing services are comparable with the competitor’s and are expected to deliver similar sales growth for your company. Can we compare each specification to see IF they both deliver the same value for your company?''
Notice that you haven’t agreed to reduce your price, only to look at it.
‘Take you time’ and ‘Question, question, question.’