In a “down” economy such as we are currently experiencing, price can appear to be even more important to the buying process because customers more acutely recognize they have three ways to increase THEIR profits:
- Selling more of what they have;
- Reducing their operating expenses; or,
- Negotiating for lower prices with their suppliers.
Typically, the easiest of the three options is #3, and we sales professionals can find ourselves “bargaining” around price much more frequently when our customers realize growth is not coming from the other two options available to them. However, their negotiating lower prices with us, affects our profits and, in turn, forces us to examine our options for growth, sustaining that race to the bottom that hurts everybody and prolongs the downturn.
Therefore, negotiating in a down economy takes on a special significance as a selling skill when we work to defend our pricing and grow our business. More often than not, we get drawn into negotiations without fully realizing it is happening, secure in our belief that our strong relationships will insulate us from that crude exchange that is the refuge of price-fixated buyers. However, once awakened to the need to negotiate terms, we wonder how we got there and resort to defensive measures late in the buying cycle.
Perhaps the first step away from the abyss of negotiating price in a down economy, is to practice some price-pressure prevention with our customers before we find ourselves defending our prices. There are three steps we can take to either prevent negotiating or, at the least, to better manage the negotiations.
- Pay attention to our customer relationships.
- Thoroughly understand our customers’ Needs.
- Demonstrate Value to our customers.
Our customer relationships can be subjected to stress and strain when our focus is on short-term gains instead of long-term success. We do much to position ourselves as trusted advisors when we work to create a trustful alliance with our customers. “You’ll have more fun and success by focusing on helping other people achieve their goals than you will by focusing on your own goals,” says David Maister, author of The Trusted Advisor. The result of other-focused behaviors is to build goodwill and reciprocity in the relationship that ultimately expands the common ground between us and our customers. Research supports the concept that people will find ways to work with you if they like you. Put another way, price becomes less important to the extent that you are more important in your relationship with your customer.
Thoroughly understanding our customers’ Needs requires an other-centered mind-set. But beyond that we must skillfully uncover and develop customer Needs with the approach of a personal physician. “The best salespeople, like doctors, diagnose each customer’s condition individually and prescribe solutions that fit the unique circumstances of each case,” writes Jeff Thul, in his book, Mastering the Complex Sale. Thoroughly understanding our customer’s Needs also requires us to think like our customer and assess outcomes from their perspective so we can determine the urgency of a potential solution, as our customer sees it. A sense of urgency to resolve an identified gap between where our customer wishes to be and where they are, more often than not, lessens the need to discount pricing.
Finally, our ability to demonstrate Value to our customers is highly dependent on our ability to know their Needs/gaps and to remain focused on what they want to accomplish instead of what we want to accomplish. We are at our best as sales people when we are helping our customers make wise buying decisions. Once we’ve uncovered a customer’s Needs, we need to assess the Value our customer places on those Needs so can create a strategy for exchanging things perceived to be of equivalent value. When our customers can see for themselves the value we bring to them, they are more likely to find ways to work with us and rely less on price as a default decision point.
Negotiating price in a down economy is not for the faint-of-heart. The sales professional who lays the foundation for a fair exchange does so by paying attention to relationships, understanding customer Needs, and creating value along the way. Preparing for the inevitable price negotiation can give us tremendous advantages when it arrives. As Michael and Mimi Donaldson wrote in their book Negotiating for Dummies, “Preparation is one of the first places that busy people cut corners.” There is no short-cut to success, just as there are not short-cuts to effective selling. Expend the effort and reap the rewards, even in a down economy!
