8 Price-Negotiating Mistakes

Although we all go into negotiations determined to come out on top, we often give away more than necessary to close the sale.

It may be easy to jump into the negotiating arena, but winning at the game is another matter. Your effectiveness will increase dramatically if you become aware of the most common negotiating mistakes and then learn how to avoid them.

– Mistake #1 –

Underestimating Your Power

When you want someone to buy your product, it is natural to feel anxious. Before you realize it, you may become preoccupied with how important the sale is to you, both for your ego and for your income. While there is nothing wrong with looking at the situation form your own point of view, you may lose perspective.

In negotiating, your strength and power lie in focusing on what you can do for your customer, not on what your customer can do for you. Keep in mind that your product is going to solve some very serious problems for your customer. To negotiate from a position of power, you must sincerely believe that doing business with you is a plus for the customer.

– MISTAKE # 2 –

Negotiating without the Final Decision Maker

Even seasoned professionals sometimes fail to make sure they are negotiating with the final fund releaser. This is not to say that you foolishly forgot to ask, “Can you make the final purchasing decision?” Very often the answer to this question is “Yes.” When the crunch comes, however, a mysterious committee which has to give final approval suddenly surfaces. The trap is that you are pushed to give your best and final price, only to find out that the committee has to approve. the committee, not surprisingly, wants you to offer a better deal again. Now it’s back to the concessions board.

To get around this set up, pin down all decision makers: “Is there anyone, aside from yourself, who will be involved in making the final decision?” Also establish the rules for negotiating: “If we worked out an agreement that is comfortable for you,, would you be prepared to complete the paperwork today?” These questions will force out the true situation. If you find that a committee must approve, push to attend the committee meeting yourself. If this is not acceptable, you have two choices: either put in your price/term package and leave yourself room to negotiate, or give them your best package and make it clear that you will not make any changes. If you take the second course, stick to what you have said.

– MISTAKE # 3 –

Thinking About Your Price In A Vacuum

Because it’s the fastest, most effective way to get you to lower your price, customers will usually tell you that your price is too high. Since it works, they reason, why not continue to use it?

Price is always too high if the purchaser is not getting anything back for the money spent. If I said, “I am asking $5,000 for a stone I am selling,” you would probably say that I was crazy. But if the price of stone was a one carat unblemished diamond, you might grab at the opportunity to turn a profit. The mistake is in thinking about price in a vacuum.

Always talk about price in relation to the value purchased by the money being spent. Will the purchase increase productivity, improve ease ;of daily operations, increase sales, reduce expenses, or increase the bottom line in some other say? Then when your customer talks about the price being too high, you can talk about how the expenditure will be recovered, or what benefits that purchase will bring to your customer’s company.

– MISTAKE # 4 –

Forgetting To Justify Your Price

If we were not slaves to our emotions, it would appear quite logical to explain the rationale for our prices again rather than quickly reducing the price. after all, when your customer says that your price is too high, he means that he does not appreciate the value of your product. At this point, before you even consider reducing your price, you must review the benefits that your product will provide and the price tag attached to the opportunity to enjoy these benefits.

– MISTAKE # 5 –

Lowering Your Price Too Quickly

To negotiate without dropping your price, you can extend your service contract a couple of months, offer some consultation time to solve a particular problem, provide a free maintenance check, do a small piece of additional work at no extra charge or throw in a couple of additional concessions on your company’s part: add 30 days to the terms of payment, improve speed of delivery or provide product storage. If you can tie it into a problem that your customer needs to solve, whatever you offer will be extremely effective.

– MISTAKE # 6 –

Negotiating Your Price Too Soon

Your customer says, “Your price is too high.” You respond with, “Well, how would a two percent discount sound to you?” You drop your price immediately. In doing so, you probably don’t realize how you have weakened your selling position. Your action says; “This product really isn’t worth very much in itself. It is only worth what you will pay for it. so why don’t we agree on what you want to pay for it, and as long as you are reasonable, we can make a deal.” In the end your customer may lose trust in you for attempting to rip him off with your (initially) high price.

When your customer first requests a price reduction, ask: “What makes you feel that the price is too high?” Let your customer put forth his argument for why you should accept the price reduction request. Make him give you a reason.

– MISTAKE # 7 –

Reducing Your Price Without Asking For A Return Concession

When you do make a price concession, be sure to ask for a concession from your customer in return. “If you give in to a price negotiation once, why shouldn’t you give in again?” your customer reasons. On the other hand, if you ask for a concession from your customer, he will think twice about continuing the negotiation game. It is not as rewarding if he has to give up something too.

In exchange for a price reduction, you might ask your customer to purchase additional quantities of the same product, or some related add-on product. You can ask your customer to extend his service contract with you for three to six additional months, request shorter terms of payment, offer less features, vary the delivery schedule or the product quality.

– MISTAKE # 8 –

Forgetting That You Are Giving Away Your Company’s Profits

Negotiations can become so all-consuming that you can lose the big picture. Every dollar that you negotiate away comes off the profits of ;your company and your own sales commissions.

To stay on top of profits, watch the zeros. Don’t negotiate in round numbers. Never offer a one or a two percent discount. always connect your price concessions to actual reductions made on parts of the deal. For example, if your total package is $62,535 to include product and service, cut it down slowly by saying: “Well maybe we can cut down on the second service call and charge you $___ for our engineer’s time.” By looking at specific aspects ;of the deal, it will be easy to slow down the negotiations and keep your counter-offers low. Again, don’t forget when you make your concession to ask your customer to give you one in return.

Negotiating successfully is a game of strategy and tactics. Although it takes years of concentrated effort to become a master negotiator, you can certainly increase your effectiveness immediately if you realize one thing; you are valuable to y our customer. He wants what you are selling and no matter how much he plays the indifferent buyer role, he would not be negotiating with you if he weren’t interested in your product or service. Use this knowledge to your advantage and stand your ground. You will be amazed at your results.