Sales managers, here’s something I've noticed that may be frustrating you when your new salespeople start their sales negotiations.
When coaching new reps on their sales negotiations strategy, I’ve noticed many of them will start with a price reduction. Now, I’ve worked with inside sales reps performing transactional sales, and I’ve worked with outside salespeople making major deals. And I can say without reservation that offering a discount without fully understanding what the prospect wants will cheapen the sales process and your product offering. It smacks 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 the product as quickly as possible”. And that is not the message you want your sales team delivering to your potential customers.
Here’s something else I observed in coaching these teams and in leading a company. The salespeople who can tie customer issues to unique benefits stick around longer.
Those salespeople that rely on price reductions as a working sales negotiation strategy have a higher churn rate.
An Example of How Price Reductions Fail in Sales Negotiations
Here’s an example from our director of technology of how price reductions can work against your salespeople during sales negotiations.
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 the standard 10% discount. When we presented our proposal to the customer, the decision maker immediately “sharpened his pencil” and went to work. Here are the objections he had:
He dissected the proposal and said he wanted to take certain pieces out because he could get them cheaper elsewhere.
There were items in the configuration he wanted out because he felt he could do without them.
He said that he could shop around and get the same equipment at a lower cost.
He stalled and said he needed to run it by the owner of the company.
When the sales negotiations had ended, he had the price reduced below our cost because my sales rep folded at every counteroffer just to move the deal forward.
Naturally, our sales manager did not sign off on the discounts and we lost the deal along with the time we invested in the project.
Coach Your Team on What to Expect in Their Negotiation Process
Before your salespeople present their proposals, let them know that their prospects are going to ask for reductions, discounts, and preferred rates. And unless they’ve done a good job of differentiating their offering, their prospects will use the competition’s price against them.
Your salespeople should look for every opportunity to provide unique value that none of their competitors can provide. They should avoid commoditizing their solution by focusing on price reductions. Instead, have them use the knowledge gained in the diagnostic phase to highlight the prospect’s hot issues. Have them present how their solution is uniquely qualified to address those concerns.
When they take this approach, there’s less incentive to focus on price as the sole selling feature. And when their prospects do hit them with the “I’m gonna check out the competition” argument in their sales negotiations, they’ll feel perfectly justified in answering, “I think you’ll find that no one can provide you with the tailored solution that we just discussed.”
Scarcity is one of Robert Cialdini’s principles of influence. When used with no forethought, the entire sales experience becomes overly manipulative. But when you get your salespeople to make their solution scarce by highlighting its uniqueness in their presentations, they begin to use scarcity strategically. And what your prospects perceive as scarce will command a higher value and a higher price.
Let your team know that their prospects are expecting a battle over price. Tell them to surprise their prospects instead by starting with points of agreement. Get them to show how their solution is uniquely tailored to address the stated needs of the prospect. By redirecting the prospects’ attention on their main issues, your sales team can make price a secondary consideration and turn their sales negotiations into solution discovery discussions.
Need More Ideas on Instilling Your Sales Reps With Better Negotiation Skills?
To learn more about how away-game selling can improve your team's negotiation abilities, contact Tyson Group here.