Posts Tagged ‘price’

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How To Use The “Pivot Technique” To Defend Your Price During A Sales Negotiation

Friday, June 4th, 2010
Image Credit Good Sales Negotiators Know How To Move Around A Fixed Issue

Good Sales Negotiators Know How To Move Around A Fixed Issue

I just love Ferris wheels. They are generally huge, have the ability to take you way up into the sky and then always bring you safely back down to earth. If you’ve ever taken the time to look at how a Ferris wheel is built, then you already know about one of the key negotiating techniques that top sales negotiators use when they need to defend a price…

How Ferris Wheels Are Like Sales Negotiating

Many sales negotiations get hung up and fall apart when the discussion finally gets around to the issue of price. The reason for this is pretty simple: one side of the table wants a lower price and the other side either doesn’t want to or can’t lower it. End of discussion – both sides shake hands and walk away.

It turns out that things don’t have to end this way. The “pivot technique” is one way that experienced sales negotiators have found to meet this issue head on and not derail the negotiations. One way to mentally picture the pivot technique in action is to think of a Ferris wheel with a center hub and passenger holding cars (gondolas) distributed in a circle around the hub.

The Pivot Technique In Action

Think of the price of your product or service as being the hub of a Ferris wheel – it’s both fixed and unmoving. However, a Ferris wheel with just a hub is no fun at all. That’s why it has gondolas to carry passengers. In the pivot technique these gondolas represent other negotiating points that you can use to make sure that the negotiations continue even when you have a fixed hub.

Although this may seem obvious, during the heat of a negotiation it’s not – you don’t focus on the hub, you spend your time talking about the gondolas. There are a lot of different ways to do this: the number of gondolas and just exactly what is in them is completely up to you.

Don’t get me wrong: neither you nor the other side is going to forget that this is all being held together by an immovable hub. However, as the number of gondolas increases and their contents become more desirable, the hub will cease to become as much of a significant issue.

What All Of This Means For You

A sales negotiation that falls apart because of price is a tragedy that didn’t need to happen. Yes, price is important to both sides; however, the total value of the deal is much more important.

The pivot technique is a tool that experienced negotiators use to get around the problem of having to negotiate with a price that can’t be lowered. By adding additional points to negotiate to the table, we have the ability to build a complete package to be negotiated and this makes the price only a single component of a much bigger deal.

There are no silver bullets in sales negotiations. However, the pivot technique is a powerful tool that can help you avoid having your next sales negotiation come to an end because you couldn’t change your price.

- Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Help For Technical Staff

Question For You: How many additional negotiating points do you think will be required in order for you to be able to maintain your product’s price?

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What We’ll Be Talking About Next Time

So let’s say that you were going to drive to some place far, far away. Let’s go a step farther and say that you sorta knew where you were going to go to, but that you had never been there before. Can you imagine yourself just jumping into the car and driving with doing any planning? Believe it or not, this is exactly how some sales negotiators jump into a negotiation…

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Get Your Armor On! 4 Ways To Defend Your Price During A Sales Negotiation

Friday, April 16th, 2010
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Sales Negotiators Need To Be Able To Defend Their Prices

Sales Negotiators Need To Be Able To Defend Their Prices

Much has been written (some of it by me) about what a sales negotiator can do when the other side of the table has set a fixed price and just won’t budge. We’ve come up with all sorts of ways to turn a fixed price into not such a fixed price. This time out, let’s switch sides and spend some time talking about what you can do to defend your price when you are the seller – how do you counter all of those clever tactics that the other side has?

It’s Not All About The Price

When you are trying to sell something to the other side, clearly both of you have different goals. You are trying to get the highest price for your product while at the same time the other side is trying to get the lowest price. Something’s got to give.

The other side will probably be hammering you on price. A common tactic is to point out that they can go to other suppliers and get the same product for a lower price. They want you to give in and lower your price.

If you hear this often enough, you might actually start to believe it – don’t! Instead you need to realize that what you are offering is unique in some way. Maybe it’s how you deliver the product, how you stand behind it, or any one of a number of different factors. These make your offering both unique and valuable. Don’t give in!

Stop The Brainwashing Immediately!

When you are involved in a sales negotiation, you enter a strange little world. In this alternate universe how you see what you are trying to sell to the other side is shaped not by what you think about it, not by what all of your other customers have told you, but rather by what the other side is telling you about it right now.

This means that if they tell you something over and over again, there is a good chance that what they are saying will soon shape your view of your product. If they say that there is nothing special about your product and that the price that you are charging is too high, then you’ll start to believe them after awhile.

You need to make sure that this doesn’t occur. There are lots of ways to do this. One of my favorite ways is to bring a folder along with me to the sales negotiation which contains clippings and notes on why my product is so valuable. During breaks I’ll leaf through this folder quickly just to remind myself why my product is not only the best product available, but also why it is worth the price that I am charging for it.

Make The Other Side Want To Date You

There are lots of ways to treat the other side of the table during a negotiation and I’ve seen all of it done at some time or another. Over and over again what has worked the best is when you show the other side that you appreciate them and want to do business with them.

Sure there are lot of “tough guy” approaches that you can take (“I don’t need this sale”), but I’ve found that you’re going to end up making more concessions when you take this path. Play it straight, show the other side some love and you’ll make a better deal every time.

Defend Your Price By Bringing Up The Total Cost

Often when we are selling a “thing” or a service, the negotiations can come down to focusing on the price of the “thing”. As the selling side of the table, you need to steer the discussion to consider the total cost of the “thing” .

This means that you need to get the other side of the table to sit back and consider the entire ecosystem that your product will be used in. Things like installation, maintenance, replacement, reliability, and servicing need to be included in the consideration. If you are careful to include the right components, then you can easily justify your price.

What All Of This Means For You

When you are on the selling side in a sales negotiation, you need to understand that the other side will be doing everything in their power to try to get you to lower your price. Don’t do it!

There are a number of different ways that you can defend the price that you are offering your product or service at. Expanding the negotiation and making sure that it doesn’t just focus on price will allow you to justify the price that you are asking.

In the end, your ability to defend your price plays two roles. It will, of course, determine how successful you will be as a sales negotiator and it will also raise the value of the product that you are selling in the buyer’s eyes.

Question For You: What do you think is the one thing that you should NEVER do when you are defending a price?

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What We’ll Be Talking About Next Time

When a seller is standing firm and appears to have no desire to make any concessions to you on the price of the product or service that they are selling, what’s a buyer to do? I don’t care how charismatic you are, you can spend all day talking and still not make any progress on getting a better price. In this case, the best thing to do is to stop and take a different angle: try the total cost approach…

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Follow The Bouncing Price: What Sales Negotiators Need To Know

Friday, March 19th, 2010
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During A Sales Negotiation, A Price Can Go Up Or Down Many Times

During A Sales Negotiation, A Price Can Go Up Or Down Many Times

A Price Is Not A Fixed Thing

Inexperienced sales negotiators often enter into a negotiation thinking that the price of something that they are trying to buy or sell is fixed – it’s set in concrete and cannot be changed. They think that their goal is to “discover” what this price is through negotiating. Those of us who have been doing this sales negotiating thing for awhile know differently. It turns out that the price of just about everything is constantly in flux – and we need to understand what can make it go up as well as go down…

It’s All About Expectations

Although I love talking as much as the next person, the goal of any sales negotiation is to eventually reach a deal that is acceptable to both sides of the table. In order to reach that goal, the other side of the table needs to feel that they’ve reached the best deal that they’re going to get – that it’s pointless to continue to negotiate.

This brings up the issue of expectations. Whether we’re willing to admit it or not, we’ve always got a price floating around in our head when we are negotiating. This is the price that we think that we can buy or sell something for. During the course of the negotiation, depending on what is going on, this price is going to go up or down.

Since the very same thing is going on in the heads that are on the other side of the table, perhaps it would be a good idea to take the time to understand just what makes this imaginary price go up or down.

There has been a fair amount of research done on how people manage their expectations. Specifically, the researchers have taken a close look at what makes our expectations go up or down. Here’s what they’ve found:

  • It’s All About Success (and Failure): It turns out that our expectation of what we think that we can sell something for or what we think that we can buy something for goes up or down after we experience a success or a failure during a sales negotiation. In other words, if the other side makes a concession to us, we feel that we will be able to sell at a higher price or buy at a lower price. Likewise, if we have to make a concession to the other side, then we start to feel as though we’ll have to sell at a lower price or will end up paying more for what we are trying to buy.
  • Let Them Be Successful Slowly: This understanding of mental prices leads us to the understanding that if you slowly make concessions to the other side, then their expectations for being more successful during the negotiations will only go up a little bit.
  • We Just Don’t Get Failures: Much like small successes, small failures have even less impact on the other side of the table’s mental price expectations. This is why when you are trying to get them to lower their expectations for what they’ll walk away with, you may need to get them to make the same compromise over and over again so that they finally get the point.

Where You Aim Is Where You’ll End Up

With all of this new understanding about what makes us expect more or less from a given sales negotiation, you might be wondering if there is any way that you can protect yourself from all of this up and down stuff. It turns out that there is.

The same researchers who studied how success and failure affected our expectations also too a look at what it takes in order to be more successful. It turns out that the people who set higher expectations for themselves were almost always more successful during a negotiation.

When you set high expectations for what you want to get out of a negotiation, then all of a sudden that sets the mental price that you are shooting for. Everything else gets measured against this. You can’t help but to walk away at the end of the negotiation in a better position that you would if you had set your expectations lower.

What All Of This Means For You

Like it or not, every time that we start a sales negotiation we have a price in our heads that we want to buy or sell at. The other side of the table is exactly the same — they have their own mental price. The key to a successful negotiation is making sure that you mange the other side of the table’s expectations during the negotiations.

Successes and failures during a negotiation are what cause our mental prices to go up and down. This means that you need to manage how concessions are given to the other side of the table – give too much and their expectations will shoot up.

In order to make sure that your rising and falling expectations don’t doom your negotiations, make sure that you set high expectations for yourself before starting any negotiation. If you can do this, then you will always be successful.

Question For You: Do you think that making a single big concession or multiple smaller concessions would have the largest impact on the other side’s expectations?

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What We’ll Be Talking About Next Time

As I work with sales negotiators and teams of negotiators I am constantly surprised by just how hard it is for them to say one simple word: “No” . Normally, this is no big deal – I mean who wouldn’t want to hang out with somebody who is always agreeable. However, this inability to say “no” can spell disaster when you are in a negotiation…

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Video: Negotiating With Vendors

Tuesday, August 4th, 2009

So this time around, we’re going to do things just a bit differently. There’s a video that has been going around on YouTube that does a pretty classic job of capturing just how ridiculous negotiating between vendors and clients can be.

The video is just a bit over two minutes long, but in three different situations it does a great job of capturing the vocabulary that we hear over and over again when clients try to negotiate with vendors solely on price.

We’ve talked about it before, but this video is a great reminder that when you are getting ready to enter into a sales negotiaton, you need to have identified ALL of the different points (including price) that are up for negotiation.

Here’s the video, enjoy!

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What We’ll Be Talking About Next Time

In the quest to do a better job at negotiating deals, sales negotiators have been known to do some pretty wild things in order to condition themselves to perform at a high level -- extreme exercising, exposure to hot / cold temperatures, and even eating some pretty weird things. However, is it possible that they’ve been overlooking the most important thing -- how happy they are?

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Posted in vendor | 4 Comments »

Real Deals Use Real Money And Sales Negotiators Never Forget It

Tuesday, July 21st, 2009
Although Funny Money May Look Like Real Money, It Isn't! (c) - gaymay

Although Funny Money May Look Like Real Money, It Isn't...! (c) - flickr / gaymay

My daughter is currently learning about how to add fractions in school. The trick to doing this right is that you have to make sure that the denominator (the number on the bottom of the fraction) is the same for both numbers before you add them. She’s struggling with this concept and it reminds me of a key sales negotiating point – never try to do a deal using funny money.

Just What Is Funny Money?

We all have heard the phrase “apples to apples” right? Well funny money is something that can either sneak into a sales negotiation or be slid into it by one side of the table. When this happens, all of a sudden you aren’t comparing two equal things such as how much a product costs and how much you are willing to pay for it. Instead, all of a sudden you’ve got apples, oranges, and bananas on the table in front of you.

A great example of funny money in real life is what happens when you gamble in a casino: you don’t use real money, you use chips instead. There are a number of reasons for this, but a key one is that chips don’t “seem” like real money. That allows us to gamble more and not feel as bad when they all go away (although it still hurts when we get the bill later on!)

Examples Of Funny Money In Sales Negotiations

Whether intentionally or not, funny money can slip into just about any sales negotiation. It’s the careful negotiator who keeps his / her eyes open and spots it when it shows up. Here are a few examples of what funny money can look like:

  • Price Per Unit: If I’m asking you to lower your blue widget price by two cents per unit, that seems like a small matter, right? It is until you realize that I’m trying to buy two million blue widgets and so what I’m really asking for is a $40,000 discount. Now that’s real money!
  • Price Per Lot: This is the flip side of the previous tactic. If I’m laying mulch in my yard and you tell me that you’ll sell me 10 bags of mulch for $20, that sounds like a fair deal. Until I realize that since I need 200 bags of mulch, we’re really talking about me paying you $400 for mulch. The total quantity needed and its price is what we need to negotiate.
  • Interest Rates: This is exactly what built those credit card companies into the powerhouses that they are today. If I borrow $60,000 at 10% on a 5-year loan to start my business, then I’ve just agreed to pay the bank $16,489.20 for the privilege of using their money. Sure seems like I should try to negotiate a lower interest rate.

Final Thoughts

It is the job of every sales negotiator to train yourself to always be asking the question: what is that worth. Just like my daughter is trying to learn to remember that she always needs to convert the denominator of two fractions to the same value, so too do sales negotiators need to learn to always “map” funny money to real values.

No matter what the other side of the table says, always take the time to translate funny money into real dollars and cents (or whatever currency you are using). If you don’t take the time to do this, you run the risk of making a bigger concession than you intended to. Learn to deal with funny money correctly and this will allow you to close better deals and close them quicker.

Questions For You

Have you ever been in a sales negotiation that included funny money? What form did the funny money take? How did it get into the negotiation? Did you take the time to map it to real money? Did you end up making a larger concession than you would have if you had been dealing with “real” money? Leave me a comment and let me know what you are thinking.

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What We’ll Be Talking About Next Time

The basics of sales negotiations are pretty straightforward; however, it can be easy to lose sight of them as we talk about tactics, preparation, and detailed sales negotiation skills. Maybe it’s time that we took a step back and got an expert to remind us about what we really need to be doing in our next sales negotiation?

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