Negotiation Shouldn't Be A Concession

When a customer says “I want to negotiate” that usually means “I want a deal on the price”. We all understand, because we all do it sometime. Nobody wants to pay more than they need.
For the salesman this is definitely a pain in the rear. It means he’s between a rock and hard place, again – the rock of a customer; the hard place of revenue and margin. If he’s followed the guiding principles, he’s only arrived at this situation when the customer is ready to sign. Here it feels even worse. All of the hard work is done, the cost of sale spent, and at the last minute the deal’s at risk again.

What’s the typical response? Cave in, offer the customer the biggest discount possible, plead poverty and the need to pay the kids college fees, and hope for the best. Well that’s one way of doing it, and its also the reason most business can improve their bottom line more through selling skills than by cutting costs.

This isn’t negotiation; its concession, and the way one party achieves advantage at the expense of the other. It’s destructive to the relationship. It doesn’t matter how much of a concession customers get, they always think they could have got more. Worse still, they wonder why what they wanted to buy was priced so high in the first place – were they just being ripped off? Now the sales guy’s got the worst of both worlds – revenue down, margin down, commission down and at the same time the customer doesn’t trust him anymore. Next time he calls to sell something it’ll be much worse.

Let’s start at the beginning.

If the price is that far out of line, the deal wouldn’t have got this far, and anyway, the only time people buy on price is when they don’t care what they are buying – more on that elsewhere. When the customer says he wants to negotiate, he usually means he wants to get more value, and that doesn’t have to mean a lower price.

Negotiating should be a process that increases the value of the deal to both parties. It’s constructive to the relationship and leaves both parties satisfied. It’s business, not bullying. Negotiating is about each party giving up something that isn’t worth anything to them, but is worth something to the other party. Counter intuitive? Of course, but then the best stuff usually is.

The application of this concept is necessarily unique to each set of circumstances. It isn’t possible to decide which is the appropriate response without the specific context but some examples might be helpful.

Firstly helping the customer understand that negotiation can be constructive for both parties is a good start. It takes the initiative and demonstrates a willingness to work together. So let’s explain – you give me something that is valuable to me but doesn’t cost you anything, and I will reciprocate. That way we are both better off.

Here are some examples of ways to respond to a request for a lower price:

Reduce the scope, taking out anything that isn’t needed now. You can always go back and sell it later.
Increase the scope to include elements that don’t have a marginal cost.
Bring forward the delivery date in order to meet your quarterly number.
Get the customer to provide references to help other sales.
Get the customer to provide leads/introductions to other accounts.
Get payment up front, reducing cash cost.
Get a longer term contract to cut future cost of sale.

But this is too prescriptive and really just tactics to defend a price- there are plenty of others discussed elsewhere.

The real value add, and the fun, come out of the customer and salesman working through the process together, with each finding out how to add value to the other, without incurring additional cost.