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Articles
Sales Negotiation:
The Salesperson's Dilemma
by Ed Brodow
In
sales negotiations, customer price objections can be seductive. You want
the sale and the customer is giving you an easy way to close it: offer
a discount. However, there are two essential reasons for resisting the
objections and sticking to your price:
First, closing the sale means nothing if it is not profitable. Many fine
companies have gone out of business after deciding to offer major discounts.
Profitability is a more realistic way of measuring success than sales
volume.
Second, the most satisfied customers in a sales negotiation are the ones
who pay top dollar because they appreciate the value of their investment.
Buyers perceive higher-priced items to be more valuable. (Think Mercedes-Benz,
Rolex, and Giorgio Armani.) In my selling career, the best customers have
always been the ones who have paid full price, and the most unhappy ones
have been the buyers who received a discount.
Shortly after I started my speaking and training business, I received
a call from Susan, a manager at a Fortune 500 company. "We want you to
train a large group of our key employees in negotiation skills," she said.
"I've seen your work and I think you're the best."
I was certainly very excited, as this account would be worth about $50,000.
I was about to ask Susan where I should fax the contract when she dropped
a bomb. "You should know," she went on, "that my boss likes somebody else,
and that company is less expensive than you are. If you lower your fee,
I think we can get you hired."
I was faced with the classic sales negotiation dilemma: I wanted the deal,
but did I have to drop my fee to get it? What, I wondered, was really
going on? I could envision the following scenarios:
a. The buyer was telling me the truth. If I lowered my fee, I might have
a better chance of beating out the competition.
b. There was no competitor. The buyer was using the "squeeze" tactic ("We
can get a better deal elsewhere") as a negotiating ruse to move my fee
downward.
c. This was a test of my own negotiating skills. The potential client
wanted to find out whether I practiced what I preached, and how I would
respond when challenged on price.
d. The company had already decided to go with my competitor. They wanted
a lower number from me to give them leverage in negotiating the competitor's
fee.
What would you have done? Would you have caved in and lowered your fee?
I admitted to myself that I didn't know exactly what the situation was.
Fortunately, I had enough prospects and clients "in the pipeline" to justify
the decision I made on what to do next.
I decided that, if I lowered my fee, the client's perception of my services
would almost certainly drop, but that if I held to the price I had offered,
I would at least send a positive message and have some chance to do business
with Susan's company in the future.
When I called my contact back, I politely refused to play ball. "I'm really
sorry, Susan," I told her. "I'd love to work with you, but I can't destroy
the credibility of my fee structure. My other clients will be upset if
they find out that I gave you a discount." (This was certainly true.)
Susan said she understood and would get back to me.
A week later, Susan informed me that they had selected my competitor.
"That's too bad," I said. "Please call me if I can help in any way."
Two weeks after that, Susan called back and said that management had experienced
a change of heart. The job was mine.
After the first seminar, I sat down with Susan and talked with her about
the decision-making process. "Was there really another company that your
boss liked?" I asked. "Oh yes," she said. "In fact, they wanted to do
business with our company so badly, they offered to put on the first seminar
for nothing."
"For nothing!" I repeated. "That's quite an offer. If you were so concerned
about the fee, why didn't you accept?"
"For the best of reasons," Susan replied. "When they offered to do the
seminar for nothing, our perception of the value of their seminar was
that it was worth the price. Namely, nothing."
My seminar had been perceived as being more valuable, thanks to my confident
negotiating posture. The lesson is clear: If you present your price with
confidence, and you are willing to walk away if necessary, the prospect
will often conclude that you must be worth it. Like everything in sales,
this approach will not work all the time. But it will work often enough
-- if you are negotiating from a position of strength. To do that, of
course, you must make prospecting and new business development a part
of your daily routine.
The bottom line: Brodow's Law says, "Always be willing to walk away
from a negotiation." In other words, never negotiate without options.
For salespeople, this means that you must have enough prospects so that
you can comfortably say the magic word: "Next!"
Ed Brodow is a keynote speaker and negotiation guru on PBS, ABC News, Fox News,
and Inside Edition. He is the author of Negotiation Boot Camp:
How to Resolve Conflict, Satisfy Customers, and Make Better Deals (Doubleday).
For more information on his keynotes and seminars, call 831-372-7270, e-mail
ed@brodow.com,
and visit Brodow.com.
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