By Bill Hellkamp
For many of us in sales we can feel that the buyer has all of the control when it comes time to negotiate the price and terms of a deal. The power of the purse is very high, of course. And the purchaser always has the option to walk away from the deal or buy from someone else. Because of this, the salesperson often feels that they must lower their price or give in on terms in order to get the deal. But that approach can be costly to an organization and isn’t always necessary. Here are a few ways that the seller can increase their negotiating strength.
Have a lot of deals in the works – There is nothing like desperation to damage our negotiating position. If the sale you are involved with is one of very few you have in the works, you will feel increased pressure to “do whatever it takes” to get this one closed. Because there is a chance (although often small) that the customer really does have other buying options, the seller panics and starts to move the deal in the buyer’s favor. But if this is only a small piece of your overall portfolio of projects, you can afford to hold your position and see if the customer is bluffing. If you lose a deal here and there, you can afford it and I have found that the buyer was just checking to see if I would lower my price because it never hurts to ask.
Get the inside scoop – Salespeople often place themselves in a weak position because they lack a full understanding of the needs and issues of the buyer and their organization. It is often the case that the seller is only working with the buyer and therefore has a limited view (only what the buyer will tell them) of the fit of the solution and the level of interest for it in the organization. So we recommend that the salesperson (or others in their firm) meet with interested parties in the buying organization to obtain a broader scope of information. Usually these support staffers (technical people, engineers, logistic team) are more likely to give useful, insider information that can help later during the negotiation. For example, you are selling manufactured parts that will be used to build the end user product. As you are working with the buyer, she tells you that they have a couple of other suppliers to choose from and that you should be prepared to be very competitive with your price. As a part of the specifications process, you have one of your engineers meet with their engineering group. Their overt goal is to make sure the parts will be made to their specs, but you also give them a secondary goal to find out how these “other suppliers” are perceived by the buyer’s company. If your engineers come back with information that the current suppliers are doing a lousy job and that the buying organization is desperate for a new source, you will certainly have more leverage during the negotiation!
Be creative with the terms – While there is a lot going on in a sale, most buyers will push on price as the primary negotiated item. It is easy and obvious and they can brag to their boss about the good deal they got. But for the salesperson, cutting price is the best way to limit profitability. Instead of letting the buyer focus on price, look for other items of value that can cost you little but mean a lot to the buyer, such as:
- — Financing rates or terms
- — Shipping rates or terms
- — Service packages or options
- — Added product (for each 10 X’s you buy you get a Y)
- — Special customer service levels
So when you are the seller, don’t get trapped by the belief that the buyer has all of the power. Make some strategic moves that will increase your leverage and maintain the profit of the sale.