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Three key strategies for handling price negotiations

01 Oct 09

Has a prospect for your technology products or services ever told you your price is too high and asked for a discount?   What did you do? Here are three strategies to help you get the sale and even get more money.

Before we begin, let me say giving discounts in the right way may well be the most appropriate thing to do. Get it  wrong, however, and you could not only lose the sale but could also lose all possible future sales from that potential  client.

Just suppose you say “yes” and immediately give a discount. What do you think this prospect now thinks?

  • You seem desperate for the sale.

  • Maybe I should have asked for an even bigger discount.

  • Perhaps the first price was not the real price. Are you trying to  trick me? Can I really trust you?

  • You don’t set a very high value on your own technology services and products if you are prepared to discount so  quickly.

  • You agree your price is too high. This is a problem.

  • Next time I come to buy anything from you, I’ll ask for a discount again – an even bigger one.

The problem with just giving a discount by itself is that you have given something away and have asked for absolutely    nothing in return. You’ve just created a win/lose situation. The potential client has won a discounted fee and you have lost it. Also because it is a win/lose, over time you may start to resent this client and may not want to go the extra mile  in service for them, so eventually the win/ lose turns into lose/lose.

Plus you have now trained your client to expect a discount in all future dealings with you. And why wouldn’t they? Just  because you’ve agreed to a discount doesn’t mean you’ll get the sale; in fact, quite the opposite. You may have  damaged your credibility to the extent that this person no longer trusts you or wants to do business with you.

So what do you say when someone asks for a discount? Firstly, ask them why they want a discount and listen very  carefully to their response. This will help you understand what is behind their request, as you need to know whether  money really is the issue before you can respond. When you reply, take the focus away from making a discount to  changing the value, and have a value discussion by using one of the following three strategies:

Strategy one
Use this strategy when money really is the issue.

Instead of giving a discount, lower the price by taking out something of high perceived value. This is a win/ win choice.  Your client gets the lower price and you maintain your price for a certain value bundle.
Try one of the following responses:

“If price is an issue for you, then I suggest that we take out this XYZ product or service.”

 “If price is an issue for you, then I suggest that we take something out. What do you suggest?”

This will help to train your prospects 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.

Strategy two
With this strategy you maintain your price.

Do this by offering a bonus product or service for the same price. The technology product or service that you add  needs to have a high perceived value for your client and be a low-cost item for you.

Try wording it like this:

“If you agree to my price of $20,000 for this software, then I will also include XYZ additional software  module.”

Be prepared: create, and have easily to hand, a list of products and services that you sell which have a high perceived  value but have a low cost to you.

Strategy three
In this case you reduce your price in exchange for a larger sale.

Ask the client to commit to a larger sale in exchange for a discount.

For example:

“If you commit to 1000 hours of computer consulting, then I’ll reduce my rate from $250 to $200 an hour.”

Your opportunity
Consider some financial commitments that you would be willing to accept from clients and prospects in exchange for a  reduced price.  When people ask for a discount, it creates a great opportunity for you. Next time you are asked for a  discount, and money is not really the issue, try increasing the total value of your sale. In fact, go one step further: be  proactive. Don’t even wait for your prospects and clients to ask for a discount; approach them with your own scenario  to increase the value of the sale.You will be surprised at how easy it can be to get larger sales with minimal extra effort!

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