Lesson Learned #41
The temptation to negotiate price is big, but after more than 20 years and hundreds of project proposals, we’ve learned that it is a cardinal mistake to negotiate price too early in the sales process. In almost every transaction, a buyer first has to weigh the product’s benefits against the consequences to determine whether a purchase is necessary, and finally whether it is affordable. If you negotiate price before a buyer has decided that they need the product, you will give away a price concession too quickly.
Most proposals, wins included, are rife with complications and objections – objections that more often than not have nothing to do with price. Strangely, sales executives almost universally have a reflex that can’t be suppressed: they can’t help but tinker with the price to make a sale more attractive. It doesn’t work. When we introduce price too early in the close of the sale, we introduce two possibilities.
- It is quite possible that the real objections to a positive result will remain hidden, resulting in an unfavorable decision.
- If we are required to handle additional objections afterward, there is often a second price negotiation that eats up important profit.
This is a lesson taught to us by many clients over the years (over, and over, and over). We expect a negotiation of price, as it is generally good business practice to do so, but if we negotiate an acceptable price and lose an opportunity or negotiate a price twice on the same opportunity, we know we’ve just been taught the lesson again.
If you find yourself in the sales process and the thought of price negotiation comes to mind, ask yourself whether you have handled all your customer’s issues EXCEPT price before you proceed. Then ask your customer the same question. Then proceed.
