Discounting is expensive. Learn how to prevent a heated price negotiation by maximizing the value of the deal using fundamental principles and tactics.
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Discounting is expensive, yet in many sales transactions today it’s still the norm. All too often, salespeople give discounts as a matter of course or they offer discounts as a last-ditch effort to win the business. In either case, they destroy profit margins and, moreover, typically are not necessary to close the business.
Many times discounts are given because Reps don’t fully understand the impact of a discount on the bottom line. Each dollar of discount may take three or four additional dollars of revenue to replace that margin dollar. If margin dollars aren’t part of their incentive plan, then it’s easy for the salesperson to give away a few points to get the deal done. Discounts may have minimal impact on the Rep on achieving their quota, while it may have disastrous consequences to the bottom line of the business.
Discounting also signals to the buyer that your prices are negotiable and undermines the premium value you have worked so hard to demonstrate with the customer. Discounting may also demonstrate a lack of confidence and set a bad precedent for future negotiations. The buyer may say to themselves, “If I got a 5% discount off the bat, what else can I get?” Once you’ve lowered your prices, it’s hard to get them back up. Customers will naturally expect a discount on future deals. The easiest way to avoid the slippery slope of discounting is to just not do it. Practice saying “We just don’t discount our prices, but I’m sure there are ways we can make this work.”
Price negotiation becomes important to the customer when they believe all the options are the same. If it’s hard to differentiate between the solutions, then price may win – but all solutions aren’t the same! In numerous surveys and research conducted on buyer behavior, price consistently comes up relatively low on the buyer’s priority list. In most B2B transactions, understanding the customer’s needs and having a better solution to address that need will win over the lowest priced option.
Even if Reps do a good enough job selling value, and price becomes less important, they may still go through a lengthy negotiation process to get the deal done. Items such as agreement terms, delivery dates, additional training, customer support, and warranties, may routinely come up as negotiable issues when closing the deal. With a well-thought-out negotiation plan, Reps can avoid discounting and maximize the value of the deal using appropriate negotiation principles and tactics.
Here are 13 tactics to successful negotiation that can help you avoid discounting and improve the value of your deals today.
With an understanding of negotiation principles and thoughtful planning, Reps can come into a negotiation with more confidence, better options, and the ability to trade value instead of discounting the price. These principles provide the backbone of a successful negotiation.