If you have been in sales for more than a week you have encountered someone from Procurement that has told you one or more of the following:
- “Your price is too high”
- “I need a discount”
- “Can you do better?”
- “Your solution is too expensive”
- “You’ll have to do better than that to get our business”
- “Your competitor has a much lower price”
- “You need to sharpen your pencil”
- “You need to be at “X” to earn our business!”
In these circumstances the worst thing that you can do is cave and immediately lower your price. In many cases these phrases are simply weapons in procurement’s arsenal to strike fear into you. Their intent is to lower their overall purchase cost. If you immediately reduce your price you lose leverage and credibility. Remember two basic tenets to discount demands: First, discounting isn’t negotiation; it’s capitulation. Second, just because hospital procurement asks for a discount doesn’t mean you have to give it to them.
The Buyer’s Rules in Procurement
Procurement professionals are taught the following:
- Rule 1: Always challenge the price. Simply challenging the price gets most sellers to offer a discount without any further
negotiation. - Rule 2: Always tell the seller that their competitor is less expensive.
- Rule 3: Always, always ask for a discount because if you don’t you will never get it.
- Rule 4: The only way of knowing that Sellers have reached their limit is when they refuse to discount.
- Rule 5: Prey on the sellers’ insecurity especially if they are facing the end of month, quarter or fiscal year. They may need the sale to make their quota and for most of them their commission.
Why Do Sellers Cave on Price?
There are several main reasons sellers cave-in to price demands:
- You’re on a Performance Improvement Plan (PIP) and need the deal.
- You need this sale to make the month, quarter or year and therefore your commission.
- Your ego won’t allow you to walk away from business that just isn’t profitable for your company.
- You don’t have many accounts and cannot afford a competitor to penetrate a key account.
- There is no reason not to discount. You are paid on gross revenue or percent to quota and not on gross margin.
- There is no penalty to you if you discount.
- You have never been trained to negotiate.
The Seller’s Response to Procurement!
Price objections are a reality for sales professionals. Its human nature to want a discount. No one wants to pay list price if they can avoid it. Within every industry there is movement afoot to drive costs out of the supply chain by squeezing suppliers. Every buyer will ask for a discount and they will squeeze suppliers by trying to commoditize your offering. If you want to get your price:
- Believe in your price—it’s fair and equitable!
- Act like a sales professional and not an order taker!
- Resist commoditizing your product, service or solution! Differentiate your product by giving the buyer a clear and compelling reason to buy from you. In short, your product or service must fix or avoid a problem or accomplish something that is important to one or more stakeholders.
- Don’t create unreasonable expectations for future price accommodations.
Remember: discounting attracts lousy customers and makes good partners into bad ones.
Parting Thoughts
Sellers must understand that it’s in procurement’s DNA to ask for a price discount. It’s in their best interest to commoditize your offering and reduce a value-driven purchasing process into a price-driven decision. To minimize concessions, recognize the type of discount seeking client you are faced with and resist caving on price. Instead, sell the measurable value of your product or service.
Remember that every day we make decisions to buy a product that is not the lowest price. Starbucks sells coffee. They get a premium price because of the perception they have better tasting coffee, a better experience (the process of making it) and pleasant surroundings. They don’t negotiate their price or attempt to match convenience store prices. Either you pay it or you don’t. They have created a cult of loyalty and price accommodation by following providing unparalleled value. You can do the same.
