Too many sales teams think (and maybe some are told) to close the deal means caving in to customer’s demands on price. And that might have been true when “buyers” were buying a ton of aluminum or palates of paper. Maybe giving in on price meant landing a big sale.
Now that buying organizations have sourcing strategies, commodity segmentation and partnerships with OEM, single and sole source suppliers, it’s a whole new negotiation paradigm. Price is no longer the guiding factor—supplier performance is. And, that is also where your company can add value.
Why do negotiators for both customers and their suppliers miss that point and focus almost exclusively on price? According to negotiation expert Keld Jensen, “Poor negotiations skills are probably the biggest single cause of major costs and lost opportunities to any organization. And what´s more –most companies do not even see it!”
The very people who are tasked with negotiating agreements day in and day out are stuck in a price paradigm. And, buyers and sellers are waiting for the “other guy” to change the conversation.
I want YOU to be that “other guy”.
Define Price to Include Value
Sales teams – you need to re-think price. You must recognize that price means different things to procurement than it does to sales. To the sales team, the “price” often incudes—at least implicitly—value. To the procurement team though, price connotes “cost to my organization”.
Knowing that procurement doesn’t immediately recognize value, embrace the opportunity to guide the procurement team to negotiate on value. There are a myriad of reasons that you can take the lead ranging from the level of knowledge you have about your organization’s product or service, to motivations for conducting a value analysis in the first place, to having a deep understanding of the industry’s use of your products or services. These (and other factors) will help you take the lead on a value conversation.
Change Your Mindset
I suspect some of you are thinking, “yeah, I’ve heard this before – talk about value.” Well here is the missing piece that you have not heard. Approach each negotaition from the point of view that everyone (each stakeholder) comes to the bargaining table with positive motivators for doing business with your organization. This is true even when the “buyer” doesn’t tell you those reasons. So, as you prepare to negotiate with procurement, keep in mind that it is by understanding their organization’s positive motivations that you can negotiate a great deal.
This really is the missing link. Know the positive reasons that your customer wants to do business with you. And, start talking to them about those reaons. And, when negotiating, stop talking about the features, benefits and whiz-bang effects of your product or service, unless you have quantified their value.
The next time a customer starts to talk about price, price reductions, or year-over-year price reductions, take the lead and shift the conversation to value instead.
Jeanette Nyden, author of Negotiation Rules! A Practical Approach to Big Deal Negotiations, is the president of J. Nyden & Co., Inc, a negotiation skills training company. For more information about her coaching and training services visit www.jnyden.com. Ms. Nyden can be reached at 206-723-3472 or email@example.com.