As a young salesperson, I worked with a very difficult client who taught me a valuable lesson in negotiation. This particular client scheduled just one meeting with me and after that he pushed me off to his media coordinator. However, he still negotiated every order directly, and invariably we would go ‘round and ‘round in negotiations. I would put together a proposal, he would change it and ask for a discount. I would move some things around and then cut the price. He would still complain and ask for changes, and an additional discount. Under pressure to meet my targets, I needed the business. Perhaps he knew that. He kept pushing and I kept caving. He was not negotiating in good faith, saying that he needed one price, then when I got there, saying he needed it better. His demands usually included an offer to spend more money, but these order size increases never materialized to the levels he promised. All the while, my management wanted to know why I didn’t have the order and why the price kept coming down. I was on a constant merry-go-round and it was time to get off.
Unfortunately, I didn’t have anyone senior to me to go to for advice. Either they didn’t know what to do, didn’t care to understand, or had a habit of being overly critical which prevented me from sharing the reality of my situation. However, from an early age I began a habit of studying people. I learn their mode of operation and preferences. In this case, the guy liked to win, and pushed until I yelled uncle, always with a smile, but a classic bully-type nonetheless. So, I decided to turn the tables on this sadist. Instead of giving him exact what he wanted, I began to include features (programs and time periods) which he didn’t particularly like while simultaneously including some highly desirable programs in my initial offers. When he complained, I told him that the only way to reach his financial goals was to increase the quantity of lower cost programs in order to keep some of the the highly desirable ones. When he pushed back, I made a few minor changes, but I now had a goal. My goal was to increase his average cost by at least 5% over the last quarter or compared to the same quarter a year earlier. If I did that, he would slowly move from a bottom feeder to a desirable account. I also decided I would only cut my price as part of a volume increase. If he wanted a lower average price after that, he would have to take lower cost programs. What happened? The first time I tried this, we still went two rounds (initial proposal and two revisions), and when he asked for additional changes, I told him I couldn’t make any more, that this was the best offer I could give him. The only way he could get a lower average price was to accept additional lower cost programming. After that, we went one round the remainder of the time I worked with this director. In addition, the size of the orders rose every quarter. Why? I can’t say for sure as he played it all so close to the vest, but I think one of two things was going on; a) he increased his spend as his respect for me went up (which I’d like to think is the case), or more likely, b) as my average price went up, he actually had to spend more with me in order to keep his overall media buy price low. My deeply discounted price was helping his overall cable mix, but as my price went up, he had to actually spend more with me in order to keep his average price low. It worked in my favor for the next three years that I worked with this client.
Now your ability to adjust pricing by changing the content of the product offering might not quite so easily match my experience. However, I have seen the same happen when discussing various product features. I even saw this when I was shoe shopping recently. If I didn’t like the price of the highest quality footwear, the salesperson suggested I could reduce my price by selecting a model with less features. When you know your customer, you can begin to identify what is important to them and what is not. One customer might pay for windows with UV protection while another wants triple panes, and another likes the internal blinds. Offering a customer a few items or features in their initial proposal that you know aren’t quite desirable to them will provide you a way to take off features and reduce cost without appearing you are just cutting your price.
I think there are a number of important points you should be able to gain from my experience:
- Know your product. You’ve heard it before and its worth saying again and again. The better you understand the features and benefits of your product offering and how to differentiate and communicate the value it brings to customers, the better able you will be to associate those features to specific elements of your price. That can be critically important when negotiating with your customer.
- Understand the customer’s preferences. To understand our customers’ preferences and priorities, we must become students of our customers, colleagues, and supervisors. When we learn to read other people and respond to them in the way they prefer, we gain a huge amount of leverage (and often goodwill).
- Acknowledge what is outside our control. We need to recognize that there are many variables outside of our control, (and the sales process is no different), and we don’t always know the pressure our customers are under. We can gain a considerable amount of confidence when we stop worrying about those things outside of our control and instead focus on what we can change – our attitude and our responses.
- Have a plan. Saying no to customer demands requires confidence in your position, but for me, to say no without having a plan would have been an empty threat which I might have abandoned under pressure. Having a plan allowed me to confidently say no to this customer’s demands while still responding in a way that moved us closer.