A sales rep recently told me a great story about how to keep from giving a discount or from having to negotiate the price. He was having the brakes adjusted on his car and the cost was $140. When he asked, "Is that the best you can do" here is how he responded: "If you want to negotiate the price – the break job will cost you $150!"
Think about what a great answer that is. What is he really saying? He is saying that I am already giving you the best price I can. He is saying that if you want to negotiate I will raise the price to $150 and we can see if you can get me down to the bottom price of $140.
Try it. If someone asks if that is the best you can offer, quote a higher price and say that is the price for folks who want to negotiate. Or say that is what everyone else is paying and you have already cut the price.
That brings up a good question: Is it part of a customer's job to ask you for a discount? Should you ask for a discount when you buy something? My answer to both questions is absolutely yes! If the sales person didn’t ask the mechanic for a discount he would never have learned that great strategy.
I am reluctant with everything I buy and you should be too. The only reason I let go of a dollar bill is to get a better grip on it. I work hard for my money and I want to stretch it as far as I can. So do you and so do your customers? I want to get every ounce of value out of every dollar I spend.
It takes practice to be a reluctant buyer but the dividends are great. By being a reluctant buyer you will learn how to buy everything you buy for less. By being a reluctant seller you will be able to sell everything you sell for more. Just as you play poker to win, not just to make the other players like you.
Your price is based on a lot of factors and making a profit is not optional. You have to get paid. When you study the reactions of people who are trying to sell something to you, a reluctant buyer, you will learn the best strategies as well as see them in action.
It takes GUTS to ask for things and the more you do it the better you are at it. You might be called a few names in the process, but so what.
This reluctance should also be used when you are selling something and asked to lower your price. NEVER GIVE IN TOO EASILY! Never lower your price without setting up several roadblocks, speed bumps and detours. Let's say I have a car for sale in my driveway with a $1500 sign. You pull in. I immediately go out to the car and take the price down. I have a new sign that says $2500. I explain that I didn't realize the prices were so high and the car dealership would give me so much for my trade-in. I tell you that I will let the car go for $1500 if you try it out and like it and buy it now. But if you come back tomorrow the price will be $2500. You buy it at $1500, the price I wanted to sell it to you for. You might think that's a little cruel. You can tell that to the person standing next to you in the unemployment line. Or you can get a job at the post office where the price of a stamp is the price you pay! (Sorry, you can probably tell I had to learn all this the hard way).
By lowering your price reluctantly you are actually adding value to your product or service. If you lower your price too easily you will actually CHEAT THE BUYER out of the good feeling they get when they know they got you to come down.
I was sitting on the plane and the woman sitting next to me was in advertising sales. When I asked her what her biggest mistake she ever made in sales, here is what she told me. "I was calling on a pawn shop with my sales manager. He told me the bottom line price for the advertising program was $1,500, but to try to get $2,000 and go down slowly and reluctantly so you "add value" to the program. When the customer asked for the price I made a huge mistake and said $1,500! The customer ended up paying $1,400 and I ended up getting chewed out!"
Here is another reason you should be slightly reluctant when giving a price reduction. An accountant once told me that I should forget the term "gross profit" and replace it with "contribution to overhead." He said that every time I lower the price I am giving part of the company away! The warehouse cost is .04%, the sales department cost is .04%, the transportation department is another .04%, administration cost is .04% and the bottom line should be at least .04%. When you cut your price below .20% think about what part of the company you are cutting out and giving away! Which vacation day would you like to give up? How much do you want you insurance deductible to go up? Which customer service person would they like to tell that they can't buy shoes for their kids this week, etc?
You don't want to appear too hungry for the sale or too eager to give everything away. The buyer will be suspicious and begin to wonder why you are so anxious to make a sale.
When you do have to lower your price never come down in equal increments. If you do you will set up a pattern. The customer will know that to get a discount all they have to do is follow your "pattern" and get a lower price.
If someone asks for a discount, after you've presented your services and quoted a price then you say: "Sure, I can for $400 but that would be without the ___________ and the ________." You actually eliminate things so that they understand that as the price shrinks so does value.
Another good response when asked to discount your price is to use the "fork in the road" response. Our company came to a "fork in the road" and had to decide if we were going to be simply a price seller or if we were going to be a value seller. We chose to be a value seller and the customers we serve know that in the long run, the value of our high quality products along with our service and support, is like an insurance policy that helps them become successful.
It is necessary to discount your price from time to time. However, you deserve to get paid. Ask your customer if they have any employees who work without being paid. What kind of quality would you expect them to produce? What level of customer service would you expect them to provide to your customers? How much do you think they would end up stealing from you over time?
If your customer's business is down and they are trying to "cut their way into profitability" they are doomed to fail. The only way to increase business and get more customers is by doing it the old fashioned way. By selling!
“Just today, I called and placed an order for Direct TV. The salesman went through the whole speal and at the end said I need to give him $300 today. I said thank you, but no thank you because I knew he was full of crap. Then he said hold on, let me think, then he magically gave it to me for $19.00. I knew before I ever made the call that this is how the call would turn out. Had I of charged the $300, he would have laughed all day at my stupidity. I said that to say this, it’s all a game. Sure some people may feel good after having bargained you down to a fair price, but others would not. I didn’t feel any better, I just felt like he was insulting my intelligence.”
“I am such a penny pincher it would be hard for me to give a discount. I always want to get my monies worth. I am willing to give a “Small” discount to make them feel good about getting us to go down on our price some. I usually can talk them into paying our price because we do deliver what we promise. I know every company has a budget but I have one too. I believe if we have a successful meeting we can come to terms to where I am not losing money and they will think they are getting something for nothing. You have to have your mind set on how far you are willing to drop your price and make sure it is worth it. You must be willing to come to each other terms. They have their mind set just like you have yours. It is like I said they will try to get something for nothing. “
“Bob, this is one of the lessons from your in person course that I am now using every day. “Is that the best you can do?” I use that daily as a consumer. My husband finds it embarrassing but he likes the fact that many people will actually give you a better deal. On the flip side, when a customer asks me a price, I am no longer lowering my price. I keep it at regular cost and if the customer repeats the cost, I act surprised. I have added several dollars to my bottom line in just the month since I have returned from your training.”
“I have started using this approach more and more with my customers and for the most part it seems to work however you do get those 1 or 2 customers that don’t fall for it and say never mind I don’t need it. But what I have found out is that the next week that they ask about the same product to see where my price is at, I would usually take it up about .20 and would you believe it they take it. They realize that they better get it now because the price seems to be going up and should have taken up on it the previous week. Live and learn and I say.”
“Very good information. I’m in the process of looking for a car right now and I think this will come in very handy for me. I need a car so badly that I was willing to just take what I could get, but now I feel armed with a good bit of valuable information. I will try this tactic when I sit down at the table with the sales person. I’ll let you know how it goes.”
“Being reluctant to give a discount makes the buyer feel like he has won the battle after the sale has been made. Also, if the buyer is happy then he will most likely turn into a repeat customer. When someone asks for a discount and a number pops in your head to take off the original proposal, split that figure in half or even thirds and see where it leads. Example: Seeing certain figures on paper or anywhere for that matter is all a head game. Which looks better…$4,000.00 or $3,900.00? Just by reducing the price by $100.00 can make it look much more appealing to a buyer. “
“A day late and a dollar short! I needed this lesson two weeks ago. I am normally fairly good with negotiations; this one client wanted to go straight to the bottom line, which I did. NOTE TO SELF: Don’t give out your bottom line number!!!! I gave him the bottom line number and 2 days later he came back with a lower price. They were adamant on not paying what we bottom lined. Moral of the story- I lost $$$. Ouch- expensive lesson. Been there, done that and it won’t happen again.”
“Automatically reducing your fee is making a statement that you are not confident in your own ability to deliver a good/better product or service to the potential customer. I feel it says that a person does not value their own self worth. I’m a firm believer if I going to work hard to deliver an excellent service that I should be compensated for my effort and diligence in providing that service. On numerous occasions I have encountered sales people that just give it away without a fight, resulting in loosing money not only for the company, but themselves. The number #1 reasoning I hear is “we have to lower our prices because our competitors are” My thinking is if the customer is taking the time to discuss their needs with you, then the competitors they are currently working with at a lower rate must not be doing something right, otherwise the customer wouldn’t be talking with other vendors. Sale people should not focus on “all” the reasons why they need to reduce their fee, but concentrate on all the reasons why they “shouldn’t” reduce their fee.
Bob Oros www.BobOros.com