Ask the Expert, Follow-Up on April Webinar: Negotiating on Price

by | May 1, 2012 | Presales, Pricing, Why LeveragePoint?

In our April webinar, Jim Geisman, Founder and Principal of Software Pricing Partners, talked with us about how the nuances of complex sales negotiations and ideas that can save you valuable time, money and aggravation. This is part one in a two-part series in which we review some of the questions which came from the audience. In this installment, we focus on general negotiation tips. In part two, Jim addresses questions related to the negotiation of price. To view On-Demand please visit our Resource Center.

Q: I think tonality and confidence in your value proposition are important. Also, playing out your buyer’s persona in the preparation phase is critical. What’s your take?

Jim: This is an important point. Certainly prospects feel more confident when the sales person is confident. But sometimes there is a fine line between confidence and bluster. I’ve found quiet confidence works pretty well. Preparation – especially before major deal negotiations – is incredibly useful. You are in a much better position to get more of what you need if you are prepared.

Q: Sometimes I find a customer has been negotiating with another vendor and adding requests based on that other offer. Any advice for this situation?

Jim: This is a pretty common tactic used to make apples-to-apples comparisons. After the second (or maybe third) request, you might politely suggest that when the prospect has figured out what they want, then you will quote an “all-in” price. Beware of giving a price that is modified to include the add-on. Prospects have been known to compare the before and after prices and assume the difference is the cost of the add-on. (When that happens, explain that there are economies in doing everything at one time and the price of a separate add-on is higher.)

Q: In your presentation, you advised not to answer every question while negotiating the offering. Can you elaborate?

Jim: There are some questions that are not related to what the prospect is trying to achieve, so you don’t have to answer the question but can redirect it to focus on the matter at hand. I was referring specifically to hypothetical cases, e.g. What happens if we order 10,000? What happens if something goes wrong? In those cases, I would stay focused on what the customer actually needs to get started. Once that is squared away, then you are in a better position to talk about volume discounts, risk mitigation, etc.

Q: A lot of times in negotiations, we hear that we will be “locked out” if we do not meet a customer’s pricing demands. How do you recommend we deal with this?

Jim: It’s true that companies that become the incumbent vendor always have an advantage over a challenger. Therefore, you need to understand the potential for future business to see if you want to get in the door. Watch out for hefty price concessions based on promises. Being locked out is unrealistic in many cases because vendors change, account requirements change, and so do the people who tell you that you will be locked out. Nothing is forever. The threat of being locked out is really an issue of how long the lock out will last and what are your realistic alternatives. Sometimes it is better to be locked out than locked in – to an abusive commercial relationship.

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