Negotiation Challenges: 3 Price Reduction Pitfalls
One pressing issue we’ve heard recently from multiple clients has to do with negotiation challenges – and more specifically – with too many sales reps relying on price as their only negotiation tool.
A reliance on cost reduction is a popular way to overcome objections, but that doesn’t mean it’s the correct way – or even an effective method.
Consider these points:
• The more you use cost the more you commoditize your product.
Focusing on cost reduction instead of valuable benefits can make it difficult for customers to distinguish you from your competition. Especially if you’re not known in the space as the low price leader, price should not be leading the discussion. Why go there? It just leaves you somewhere in the middle without a distinguishable benefit.
What’s worse, reducing cost without a fight so to speak can actually lead customers to devalue your product.
• It’s a proven fact that customers are willing to pay more if they believe a product or service is better.
Examples of this are everywhere – from computers and cell phone service, to bottled water and granola bars. The difference is, many of the products in these spaces utilize big marketing budgets in order to communicate the (sometimes exaggerated) benefits of their products. Your company may only have you…and your gift for communicating the features and benefits of your product or service.
When you’re able to demonstrate a true value (not pricewise) for the customer, cost will become less of an issue.
• Cost may not even be a customer’s top concern.
This is where Need-Based Selling comes in. While you’re busy slashing prices seemingly to save face, your customer may be in his own world stressing about how long it will take for your product to arrive. If you don’t have the advantage of already knowing your customer’s top priorities, start asking open-ended, need-based questions to discover them.
This methodology also applies if cost is a concern, but other concerns take precedence. For example, if you said “I apologize as the price is what it is, but I did hear you mention that time was of the essence…what if I could guarantee you a faster turnaround time? Would that help?” Another example: “Perhaps I can check with my manager about reducing the length of the term since you said there was concern over the monthly commitment. Would you like me to find out for you?”
When you know the things your customer values – things that you are able to negotiate – it doesn’t seem like you’re avoiding the price discussion or dancing around it.
In the end, if you have been able to achieve what the customer feels is a win-win solution (hopefully while maintaining your own price margins) you’ve done your job.
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