Recently we were asked by a client to develop a brief but interactive negotiation workshop that provided insight into handling the objection “your price is too high…we need a lower price.” In preparation for the session we developed a detailed case study that outlined the exact business scenario that their sales force was experiencing daily. The workshop participants were instructed that they should read the case study, take notes and come prepared to negotiate the case study with procurement.
In preparation for the workshop we wrote out a detailed response to assist them in their preparation and execution. In our slide presentation in the workshop and before the role play we discussed several key actions that they should embrace and model. After the workshop and role play several individuals told us that they thought the tips we provided should be placed into a checklist for easy reference. We thought this was a great idea so here is an abbreviated version of what we shared in the negotiation workshop. We hope that you find it useful.
10 Tips for Handling Discount Demands
- Pose questions that engage and probe the Buyer’s needs and interests!
Why? You want the negotiation to be collaborative. You will need to discover all the issues that may drive discounting demands so you can appraise your options realistically.
2. Avoid addressing any financial demands at the onset of the negotiation!
Why? You need discussion time to share your value proposition and explain how your product/service can be differentiated from the competition.
3. Never negotiate with yourself!
Why? Never volunteer a concession because you think that’s what the Buyer wants. Wait until the Buyer requests a discount and then explore the underlying rationale for their demand or expectation. Do yourself a favor: never openly volunteer a willingness to reduce price.
4. Never match their number!
Why? If the Buyer says, “I need a 10% decrease in price” are they likely to refuse a counter offer of 8%? Probably not. Most numbers (whether percentages or prices) reflect a range of acceptable offers. Your job is to discover the more favorable end of that range.
5. Offer a quick anecdote or story to illustrate your solution’s non-financial value—then pose a question.
Why? Quick stories are great ways to introduce value or benefits without appearing to lecture the Buyer. Think of a real life story that resonates with your buyer and portrays how your Buyer can become a hero in his/her organization by implementing your solution.
6. Make them work—never close quickly!
Why? Even when your Buyer suggests a price that is acceptable to you, they will respect a settlement more if they have to work for it.
7. Defuse threats & ultimatums—never panic!
Why? The purpose of many threats and ultimatums is to panic the Seller. The Buyer wants the Seller to believe they will lose the sale if they don’t concede quickly. Take a breath. Relax. Reassure the Buyer that you want to get them an acceptable price. Then pose questions to escape their trap.
8. Disregard all competitor quotes from your Buyer as self-serving exaggerations.
Why? Every experienced Buyer will attempt to create an atmosphere of intense competitive pressure. They are likely to overstate prices, guarantees, delivery timelines, etc. in order to achieve the best possible terms from the Seller. If you try to match these exaggerations you’ll find yourself in serious trouble.
9. Build your Total Cost of Ownership case to include more than price alone!
Why? You want to portray your product/service in the most favorable light and illustrate different ways to calculate financial value by including replacement costs, equipment maintenance or replacement and liability.
10. Beware of extreme offers or demands!
Why? Because often a Buyer will suggest an extremely low price in order to divert discussion away from your proposed price. Once they have you refocused on their lower price, the Buyer can make a small concession. Now the pressure is on you to match their concession with price adjustments of your own.
Even for experienced negotiators, it can be a challenge to handle price discount demands. Sales professionals should role-play different scenarios in their head and with a colleague or manager and think through their response to different price demand situations—extreme demands, competitor comparisons, ultimatums and threats, and quick closes. Remember you are setting expectations that your customer will expect you to live up to in future negotiations. While brief interactive negotiation workshops are beneficial in improving individual skills they do not replace a more thorough and formal negotiation program.