The next time you give a percentage point on price to prove your willingness to work with a client, think twice. The single point you negotiated sets a precedent that tells the buyer to never trust your first price. It also signifies, in the buyer’s mind, that you had intended to gouge her to gain extra profit. The irony is that you leave the buyer wondering if she got your best price and perhaps should have received a two point concession.
All these factors pale by comparison to the fact you sacrificed huge profits for your company unnecessarily. If your pre-tax profit is in the range of 5%, a single point represents 20% of the profit!
If you are a recipient of the daily tips I provide to our industry via email, you may recognize some of the ideas below. I’ve compiled some of my favorites to help you protect your profit margins.
- Stop delivering starting points. An astounding number of LBM salespeople deliver bids with the added qualifier to the buyer, “Let me know how this pricing looks.” This tells the buyer you were never delivering a price, but instead offering a starting point. Try to prevent negotiations up front with the confident statement, “You are getting my best price up front and should have no worries you’re leaving money on the table.”
- Create abundance in your mind. Top sales performers know that prospecting provides the power to walk away from combative negotiations. If you lack alternative sales opportunities, you are negotiating from a position of scarcity and fear. Abundance is not a market condition; it is a perception that can only be created by constant networking and prospecting.
- Sales alchemy doesn’t work. Alchemy was the medieval belief that wizards could magically transform base metals into gold, which never happened. In the same way, you will never transform a high-maintenance, disorganized, combative prospect into a loyal, collaborative partner. The key to sales profitability begins by finding the right prospects in the first place.
- If you’re going to give, get. The price objection is not a surprise. A true sales professional is already equipped with negotiation tactics before the heat of battle. One of the best is a low-cost concession. This means asking buyers for a concession that is low cost to them while high benefit to you. If your buyer wants a small price concession, offer it conditionally. Suggest they give you an additional product or allow you to deliver in one load rather than two. Perhaps even getting a good referral is enough. At least try to get something in return if you feel you must negotiate a lower price.
- Stand firm. You will never know the joy and satisfaction of holding your price and winning a sale until you’ve held your price and lost one. If your first instinct when a buyer asks for a better price is to say, “Let me see what I can do,” you will never learn if your price was good enough. The only way to get your price is to hold it and accept that you might lose a sale. At least you’ll gain information on what the market will bear.
If you can’t walk from a bad negotiation, you can’t win. This means preparing before the heat of battle. If you like these battle-tested strategies, then sign up for my “tip of the day” to get a daily dose of advice that will help you and your entire sales team succeed.
