Price negotiation is a critical part of nearly every sales process. Understanding how to properly prepare for a price negotiation over the phone can be valuable in reducing stress and improving results, especially if you are new to the process.
To create a scenario where both you and your prospect can come to an agreement in a reasonable amount of time with as few surprises as possible, you need to prepare. Here are 10 strategies that can help you run a successful negotiation with as few surprises as possible.
Please note: Pricing negotiations are different than legal negotiations, which are best left to your legal team or senior executives. A price negotiation defines the product value for the prospect, product selection, pricing and payment terms, and a start date to begin a new relationship.
1) Confirm that there is actually a deal to negotiate.
Make sure you are not rushing into a closing call or trying to leverage a discount as a way to prove value or need or force the deal’s timing. Salespeople who do this think that pricing is the distinguishing factor for a purchase. It is easy for salespeople make this mistake, as pricing is discussed on nearly every deal, but pricing is rarely the key trigger to buy. Before you can prepare for a pricing negotiation, the prospect needs to be able to see tangible value that your product or service can bring.
2) Understand the prospect’s purchasing process.
In many cases, this includes talking directly to someone who can make the economic decision and sign the deal. In some select situations, it is working with an advocate who can get all of the details and relay the information to the economic buyer.
This is not insignificant and one of the reasons a price negotiation can go sideways — it’s rarely a good thing to negotiate with someone who can’t buy. Determine the level of influence your point of contact has. Good questions at this stage include:
- What have you talked about during this process?
- Who besides yourself is part of the decision?
- How will you make this decision together?
- Have you done this type of purchase before?
- How do you actually buy products and services (payment method)?
- What do you think your boss will be looking for?
- Will your boss be able to commit to purchasing on the call?
3) Explain what a good outcome looks like in advance of the call.
Set the correct expectation of what the call will cover before you have it. Here’s what this could sound like:
“We can set up this call to talk about pricing, but for me to get a discount approved it’s better if we have all the people on the call. This way, everyone who can make the decision is in one place and we’ll be able to finalize the deal on the call or shortly thereafter.”
If you can set this expectation and agree in advance that the prospect is positioned to start as soon as the pricing discussion is concluded by defining exactly how they’ll buy (whether it’s filling out a payment link, providing a purchase order, starting legal negotiations, etc.), you can double-check your knowledge of the buying process and make sure your prospect is committed.
4) Make sure your prospect is aware of your product’s ballpark price.
The inbound sales process suggests that you introduce general pricing during the discovery process to set the right expectations. It can be awkward when the prospect has a completely different range expectation for your solution than your standard pricing, and it’s not a good use of your time to run through an entire sales process only to find that despite a need, the absolute most your prospect can pay is far below the deepest discount you can give.
5) Familiarize yourself with your company’s standard discount guidelines.
Standard discount guidelines are typically in place for a reason and can give you an idea of whether it will be easy or hard to get through the final process. Remember, you have a responsibility to both your buyer and your company, and slashing prices far below what’s suggested will hurt your business in the long run.
6) Come to the table prepared with multiple discount options.
Don’t think about discounts as just 10% off sticker price. There are other creative options available to you — changing payment terms to quarterly instead of a year upfront if your prospect has cash flow issues, for example. Other options include flexibility on payment type and the amount of upfront investment you require, and you can design these based on what you know about the account’s bottom line and their business needs. Also, you don’t have to jump to round numbers — something like an 8.5% discount can be effective in some scenarios.
7) Set an agenda and start with a strong opening question.
If you can set the agenda when you set up the calendar appointment, it can help set the right expectations. Here’s an example agenda I would use on a closing call:
- Welcome and Introductions
- Prospect’s Current Status
- Options to Get Started
Asking everyone to state their name, title and level of understanding of your product/service is a great way of knowing if you have the right people on the call. A price negotiation call rarely requires a lot of rapport-building. Most clients want to get through this process as efficiently as you do.
After this initial introduction phase, start with a direct opener: “Michelle, what’s your team’s current status?” This gets the prospect talking and gives you an indication of where they are at in the process. Over time you will be able to tell via their voice tone whether a prospect has come prepared to get a deal done.
8) Leverage your team.
Price negotiation calls are a perfect time to practice team selling. When you are new to the process, bringing another person to the call to lead, especially with a manager or executive, so that you can concentrate on the discussion at hand, can help accelerate your skills.
9) Set up a preparation call the day before.
If you’re new to closing, I am a big believer in setting up a practice call the day before to review — kind of like batting practice. Review with your manager the details of the deal, prospective discount, and potential objections. You should run through the three reasons why the client will buy, the three reasons they might be hesitant, and understand how you will address those remaining issues if they come up.
10) Have a method of payment ready to go.
In the event that you can close the deal on the pricing call, have a payment link or invoice ready to go that the prospect can fill out over the phone or shortly thereafter so that once negotiations are concluded, you don’t waste time getting started.
How do you prepare for price negotiations? Let us know in the comments below.