Sales Negotiation Essentials for Competitive Pricing

sales negotiation essentials to maintain competitive pricing
When I work with freshman sales reps, I usually have to untrain them from an odd, but consistent habit.

In coaching new reps on their phone style, I’ve found that they have a misconception about sales. They will invariably use some kind of price reduction as their solution’s main feature.

I’ve worked with sales reps performing purely transactional sales, and I’ve worked with sales reps making major deals. And I can say, without reservation, that to offer a price reduction without fully understanding what the prospect wants cheapens the sales process as well as the product offering. It smacks of some of the high-pressure sales tactics that were prevalent back in the Mad Men era of sales. The unspoken message is, “We don’t care about you or your issues. We just want to move product as quickly as possible”.

Furthermore, during my time developing an inside sales team, I’ve had a chance to observe a few inside sales people. I’ve noticed that the sales reps who link customer issues to unique benefits seem to stick around longer.

Those that lean on price reductions as a working strategy seem to move on to do something else relatively quickly.

Discounts in The Field

This phenomenon isn’t just an inside sales issue. Here’s another experience from our director of technology.

When I worked in the field as a system engineer for an enterprise storage company, my sales rep and I were involved in a deal that would have brought in over $300K for the company. After I brought all the pieces together, configured the system, created the proposal, and generated the price, she suggested that we include the standard discount as well.

Against my strongest arguments, she went ahead and stuck in her standard 10% discount.
When we presented our proposal to the customer, the decision maker immediately “sharpened his pencil” and went to work.

He began dissecting it and said that he wanted to take certain pieces out because he could get them elsewhere.

He wanted other items cheaper.

He said that he could shop around and get the same equipment at a lower cost.

He threatened not to buy.

He stalled and said he needed to run it by the owner of the company.

At the end of our protracted sales negotiation, he had the price reduced to our cost because my sales rep folded at every counter-offer just to move the deal forward.

Naturally, our sales manager did not sign off on the discounts and we lost the deal and the time we invested in the project.

What to Expect in Your Next Sales Negotiation

When you present your proposed solution to your client, you can count on them “sharpening their pencil”. Expect them to ask for reductions, discounts, and preferred rates. And unless you’ve done a good job of differentiating your offering, expect them to use your competitors pricing against you.

In creating your proposal, look for every opportunity to provide unique value that no one else can provide. That way, when they do hit you with the “I’m gonna check out the competition” argument during the sales negotiation, you’ll feel perfectly justified answering, “Go ahead. You’ll find that no one can provide you with the tailored product/service that we just discussed.”

Scarcity may be one of Robert Cialdini’s principles of influence. But when you take this principle and put it into your negotiation strategy without any forethought, the entire experience comes across as manipulative. Make your solution scarce in a strategic way by showing its uniqueness during your presentation, not with a quick price reduction that expires at the end of the week.

Your prospect is expecting you to start at the top of your pricing model. Don’t disappoint them. Lead with value and uniqueness. Avoid leading with discounts or concessions.

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