No matter what type of business you are in, at some point, you will likely be faced with having to negotiate for the value that your firm delivers. That negotiation will be on price. Whether you are looking for a price increase for your goods or services or the buyer has decided to cut your prices as part of his cost reduction program, you will be faced with defending your prices and value. The thought of price negotiations is enough for some sales reps to experience anxiety and fear. It’s no wonder. Often times our largest account push back on price and the fear of losing the business can feel very real.
However, having the right mindset can help calm the jitters and level the playing field in tough price negotiations. Here are three things that will help to get what you deserve at the negotiating table.
Buyers perceive price negotiations as a game. Their job is to reduce costs, not buy more product. Treat negotiations as a competition. In fact, it’s been said that pricing is a contact sport. Expect to get your uniform dirty. Buyers try to put you on the defensive with threats that will degrade your business. Don’t let them. Play offense and play hard. And, most of all, play with resolve to win. Having the right attitude can dramatically change the outcome of any negotiation. We’ve seen sales reps completely cave in on buyer’s demands for price reductions before attempting any negotiations whatsoever. In one case, the projected margin loss was $1.2 million.
Are seller and buyer relationships all stacked toward the buyer? Buyers would like you to think so. However, something keeps buyers up at night as well: SUPPLY INTERUPTION. Even more important than reducing costs is maintaining a continuous supply to an operation. Buyers are on the hook for supply at their firms. This is your lever of advantage. You are in control of supply.
This doesn’t mean that you pull the rug out from under the customer. But, slight hints or suggestions of supply interruption go a long way. Consider the sales manager for a large industrial distributor who was negotiating with a major account. The buyer wanted a price reduction on all existing business and suggested that he may look elsewhere for supply if he did not get the reduction. The sales manager simply asked the buyer if he should continue to plan for deliveries for the next month. The buyer quickly backpedaled. Buyers bluff. You can bluff too.
Eleanor Roosevelt once said “No one can make you feel inferior without your consent”. With a slight twist, this applies to price negotiations as well. Have you taught the buyer to expect price discounts? Often, our historical practices determine our future outcomes. If we have caved on price in the past buyers will expect price concessions in the future. We become their “go to” supplier for cost savings. Don’t be on that list. Buyers know which suppliers will cave on price and which ones won’t. This dynamic can be changed fairly quickly just by resisting price concessions and negotiating with resolve once or twice. The buyer will get the message and move on to a softer supplier.
Resolve and the right attitude can go a long way in improving negotiating outcomes. Think of it as a game and play offense. Push back on buyers and understand their risks. In the end, you will likely gain respect and have a healthier relationship with your customer.