In last month’s column, I wrote about the difference between price and cost, and promised to come back this month with a discussion of negotiation strategy. There are two key points I want to make, first that you should welcome an invitation to negotiate, not fear it. Second, when a negotiation occurs, there are three things on the table: value, cost and price.

Invitation

I am hoping that the word invitation will help to change your perspective on negotiating. I know that most salespeople view negotiation as an exercise that favours the buyer. They hear the buyer saying: ‘I will not pay the price you have quoted me. If you want my business, you have to lower your price.’

Here is what I want you to hear instead: ‘I am not convinced that the price you have quoted me is the lowest price I can pay to get what I want/need. But I am willing to give you an opportunity to tell me why it is.’

As I wrote last month, you may also be hearing this: ‘I am not convinced that you have the courage to stand behind your price. I am going to see if I can intimidate you into lowering it.’

Now, it is true that you might be hearing a Price Monster statement. But you may also be hearing one of the other two options. Two of the three possibilities are opportunities for you to win the negotiation outright. All three provide opportunity to expand the negotiation beyond price, into value and cost.

Negotiating Value

The most important thing to understand about value is that it is defined by the buyer, not the seller. Yes, you produce great quality, provide great service, and are committed to your customers’ success, but consider this scenario. You quote a price, the buyer objects to it, so you say: ‘But we are committed to your success.’ Does that solve your problem?

Here is better strategy. Before you quote a price, ask the buyer about pain, problems and risk. If this is a prospecting situation, ask about the performance of the printer-in-place. Have you been happy with the quality? The service? Is there anything, no matter how small, that you would change if you could?

Now consider this scenario. Armed with knowledge that there has been some pain or problem, you are positioned to negotiate value, which basically means telling them why you think they should buy from you anyway, even though your price may be higher than a competitor, or more than what they were hoping to spend. ‘Do you remember those questions I asked you’, you might say, ‘and how you told me about pain or problems? I considered all of that in preparing my quote, and the solution to those problems/the relief to that pain/the insurance against that risk is contained in my quote. Yes, it is not the cheapest price you may be offered, but I think it is the lowest price at which you can be sure of getting what you want/need.’

I have observed that most people will pay what they have to pay to get what they want/need. The complicating factor is that they do not know exactly how much that is. Your opportunity is to explain that the lowest price is not always the best price.

Negotiating Cost

Sometimes all it takes to win a negotiation is to defend your price. Just understand that the best defence is connected to their pain or risk tolerance. If they do not have pain, problems or risk, there is little justification for a higher price. Negotiating value should always be Plan A, though, because sometimes they do, and sometimes a price objection is simply a tactic to see how good a negotiator you are.

And if Plan A is not successful, that is not the end of the world. It simply means that you move on to Plan B, negotiating cost, which is about the application of product knowledge. Here is an example. You were asked to quote on a specific brand of paper, not something you stock, so having to special order this paper put you at a price disadvantage. If you could quote based on paper you do stock, you would be far more competitive. And that could result in a win-win scenario, which is the essence of negotiating cost. They get what they want, a lower price. You get what you want too, which is to preserve your profit margin. The price reduction comes as a result of a cost reduction, which also preserves the integrity of your original quote.

What if neither Plan A nor Plan B works? Then you may need to lower the price to win the order, giving up profit and possibly undermining the integrity of your original quote. I will write more about that next month.

For today, I will be happy if I have at least established that Plan A and Plan B should come before Plan C.

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