YBC Academy : How To Handle Price Negotiations
THE 3 KEY STAGES – HOW TO HANDLE PRICE NEGOTIATIONS
Has a prospective customer of your services ever said to you:-
“Your price is too high or can you do me a better price”?
Giving a discount in the right way, may well be the most appropriate thing to do.
Conversely, giving a discount in the wrong way, can not only lose you a sale, you could also potentially lose all possible future sales.
If you said “yes” and immediately give a discount, what do you think that person would now be thinking?
1. That you seem desperate for the sale!!
2. How much further would they/you have lowered the price or worse, maybe they should have asked you for an even bigger discount.
3. The price they/you originally offered was not the real price. Are they/you tryingto trick them? Can they really trust you?
4. If I come and buy from you next time,I’ll ask for an even bigger discount.
The problem here is that you’re not setting a very high ‘value’ for your services if you are prepared to discount so quickly, in effect you’re agreeing that your price is too high!! Another thing to consider, is that you have given something away without asking for anything in return. You’ve just created a win/lose situation.
The potential client has “won” a discount and you have “lost” some of your bottom line. In addition to this, because you have lost margin it will over time result in you resenting the client for having discounted your offering and thus you may not want to go the extra mile for them which in of its self will result in them not purchasing again further down the line…
The bottom line is that in giving a discount you are training your client to expect a discount in all future dealings with you. Why wouldn’t they ask again?
You may even have damaged your credibility to the extent this person no longer trusts you or wants to do business with you again.
So what do you say when someone asks for a discount?
When someone asks for a discount, just reflect back and ask,
“Why do you want a discount?”
Listen very carefully to the response they give you. That will help you understand what is behind their request as you need to understand whether money really is the issue before you can respond.
When you respond, take the focus away from discounting the price to changing the value.
HOW TO HANDLE PRICE NEGOTIATIONS
Have a value discussion by using one of the following three strategies.
This strategy is to be used when money really is the issue i.e they really do not have the budget.
Instead of giving a discount, you lower your price by taking out something of high perceived value. This is a win/win choice. They get the lower price and you still maintain your price for a certain value bundle e.g.
1. 1. “If price is an issue for you, then perhaps we take out this particular element of the service.”
2. 2. “If price is an issue for you, is there an element we can take out to reduce the cost?”
What you are now doing is essentially training your prospective customers and clients that, in order to get a discount, they have to give up something of value. They need to understand that there’s a price for reducing the price.
With this strategy you maintain your price. You effectively say “If you agree to my price, then I will add in this service.” The service that you ‘add in’ needs to have a high perceived value by them and be a low cost item to you. This way it is a win/win.
“If you agree to my price of £20,000 for the whole service, I will also include this additional item.”
What are some high perceived value (low cost to you) products/services you could include in your offer?
With this strategy you reduce your price in exchange for a larger sale. You effectively say
1. “If you give me a larger commitment, then I will give you a reduced price.” That’s a win/win.
2. “If you commit to 1000 hours of consulting, then I’ll reduce my rate from £250 to £200 an hour.”
What are some financial commitments your prospects/clients could give you in exchange for a reduced price?
I hope you’re starting to see that when people ask for a discount, it creates a great opportunity for you to focus on VALUE.
The next time someone asks you for a discount, and money is NOT the ‘real’ issue, try increasing the total value of your sale.
In fact go one step further. Be proactive. Don’t wait for your prospects/ clients to ask for a discount, approach them with your own “If…then” offer to increase the value of the sale, you’ll be surprised at just how easy it can be to get larger sales with minimal extra effort!