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Negotiation Strategies
February 2019
Negotiating Price From a Seller's Perspective
Dear Clients and Friends,

Negotiating price from a seller's perspective is often a conversation fraught with tension. In this February 2019 edition of Negotiation Strategies, we offer some tips to conduct those talks with great effectiveness, while easing that tension and maintaining integrity.

For your reading convenience, this column is also summarized in the Lessons Learned bullet points at the bottom of the page.

With Best Wishes

Raphael Lapin
Negotiating Price From a Seller's Perspective
Introduction
In the sale of non-commoditized products and services, price negotiations can be a conversation fraught with tension. Buyers want the best deal possible and fear exploitation while sellers fear objections, push-back and potential loss of sales.   In this equation, the buyer is usually in a stronger position due to his ubiquitous supply of alternative providers.

A frequent mistake that sellers make is allowing the price conversation to occur too early in the process. There are tactics that purchasers will typically deploy in the hope of engaging in the price talks prematurely.

A common tactic for example is to pressure the seller for a “ballpark” price too early in the process. The danger is that out of eagerness to get the work, the seller risks under-quoting, and having to come back later with a significant price increase is much harder. 

Another potential pitfall is feeling anchored to your “ballpark” figure despite scope creep beyond what you accounted for in your initial “ballpark” calculation. A further risk is that the buyer makes a snap decision based solely on price before having had a chance to really understand and evaluate the value of the product or service that you are offering.

It is vitally important for sellers to be skilled at navigating the price talks effectively!
Sales Versus Negotiation
From the moment that a potential buyer has acknowledged a need and is talking to the seller, the process has transformed from lead generation and sales to one of negotiation. The skills that need to be deployed at this time are no longer sales skills but negotiation skills.

In a negotiation process, price should not be addressed prematurely, before the competence of, and trust in the sales person has been established; or before buyers true needs have been adequately explored and understood; and not before quality and service have been demonstrated.

Price that is presented too early in a negotiation will be heard in a vacuum and will almost always be met with a flinch followed by an objection. Price can only make sense to a buyer when it is put into the context of value, quality, fairness, confidence and service.

How then should a seller conduct the price negotiations effectively in a way that protects him while maintaining his hard earned integrity?
A Three-step Process
When the potential buyer says "So give us a ballpark figure of what this might cost us?” or some other tactic designed to trap you on pricing, we recommend a three-step process.

The first step is to pretend not to have even heard the question and to continue asking and probing about the customers' needs, concerns, constraints, requirements and specifications.

A good question to ask is: "Other than price, what are other priorities for you in implementing this kind of initiative?"

Generate dialogue and make sure that you are demonstrating a sound understanding of the customers’ goals and needs. The importance of conducting the dialogue of negotiation towards further information development cannot be over-emphasized. As Plato said: "Truth is revealed in dialogue"! Furthermore, dialogue fosters trust when an authentic exchange of information from one another occurs.

The second step is to collaboratively explore solutions that would seem to meet their needs, specifications and constraints, based on the information gathered in step one.

By engaging the customer in this discussion and asking for his input also, he will feel ownership and investment in the solution. Make sure to spend sufficient time in these two phases - more is less in this case!

The third step is to speak about your key differentiators. For example you might say: "Because of our unique position of being at the cutting edge of academic research and also embedded in the practical world of client engagement with Fortune 100’s, we are able to provide superior consulting services. We believe that this would provide your organization with a significant competitive advantage".

Only after implementing these three steps can you then talk about price in a comprehensible and meaningful context of value, quality and service. (If your price is higher than that of your competitor, it would be prudent to preempt that by saying: "Because of the value, quality, service and superiority of our product and our reliable support, we are a little more expensive than others in this market").

By putting it into such context allows the customer to make sense of it and be less likely to object, absent any reasonable or compelling argument.  
Lessons Learned
  • Never talk about price in a vacuum - only in context of value, service, quality and differentiators.
  • When price is brought up too early, redirect the discussion using the three step process outlined above.
  • Spend adequate time probing for their needs, goals and concerns.
  • Engage them in the exploration of potential solutions and ideas.
  • If your product or service is more expensive than others in the market, preempt and qualify.

Lapin Negotiation Services offers training, consulting, advising and executive coaching in negotiation, business diplomacy and dispute resolution services.

Our proprietary and aggressively results oriented services are designed to help your leadership, teams and individuals master the essential negotiation, relationship-building and conflict management skills that increase revenues, decrease the high cost of conflict and build strong working relationships.
Learn more about Raphael Lapin's book, "Working with Difficult People" by clicking on the image above
Our Skilled Specialists will:
  • Help your organization build a highly effective negotiation competency and culture which translates into increased revenue and strong business relationships.
  • Train and prepare your sales teams using our propriety "Investigative Selling" approach.
  • Provide advice, strategy, guidance and representation in live negotiation challenges
  • Facilitate, mediate and advise in dispute resolution.
  • Create a culture of collaboration by guiding, facilitating and training teams and divisions to engage in dialogue, to negotiate and to partner.
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