Dealing with the Too-Early Price Negotiator

Price is obviously an important part of any enterprise sales package. Prices need to be fair, competitive and most importantly deliver a high ROI to customers. In most enterprise sales situations, price is discussed twice. The first discussion takes place early in the sales process. I call this first discussion the sanity check. The customer needs to verify that your price falls within expectations. I like to communicate whatever price I give at this stage as a ballpark number and ideally not put the price in writing. I also like to verify that my ballpark price is in line with my customer’s ballpark budget. The second discussion takes place toward the end of the sales process. The customer wants the best price possible in exchange for the entire package required. At this stage the customer may make a serious effort using a virtual toolbox of negotiating skills to bring the price significantly below your ballpark price. Such high-pressure negotiations are normal at the end of the sales process. However, every so often a potential customer will want to aggressively negotiate down the price at the beginning of the sales cycle. With little information about the customer’s actual need or situation, such aggressive negotiation tactics can be difficult for the sales executive. Here’s how I deal with such situations.

The Competitiveness Argument

As described above, prices need to be fair, competitive and most importantly deliver a high ROI to the customer. These facts become the basis of delaying the price negotiation. A confident sales executive can make it clear that the final price will fit the above criteria without naming a specific amount below the ballpark figure.

Advocate Normal

At such an early stage in the sales process, your customer has very little leverage to negotiate price. The customer can only threaten to remove your company from consideration at this stage. While that may be a mistake, it is nonetheless also true that you the seller have the least leverage to lower your price. You do not know how much it will cost you to service this account and an unprofitable sale would be a disaster for both parties. Hence, you are truly in no position to provide a solid, reduced price. Your tactic here is to get your customer to realize he is trying to negotiate price at the wrong stage and that there are good reasons why this is the wrong stage.

Explore Low Price, Low Value Solutions

If price is as supremely important as your customer says it is, help your customer out by proposing solutions other than yours that are low price. Do not be afraid to border on the ridiculous here. “Why don’t you just do this is an Excel Spreadsheet?” would be a great example. And do not stop pursuing so easily. You might be surprised how many enterprise software sales are lost to Microsoft Excel. “Do you know how to implement a Pivot Table in Excel?” might be the follow-up. In this line of discussion, you qualify the sale further by finding out why low price solutions will not suffice.

Push the Sales Process Forward

If you are going to make a price concession (especially early in the sales process), you should get something in return. And what you should get is forward movement in the sales process. “Tell you what … I’d like my engineer to speak with the engineer leading the project on your side. After such a conversation, I should know enough to give you a more definitive quote and potentially lower my price to more what you are looking to pay.” The unspoken side of this offer is that the prospective customer’s engineer will potentially be able to articulate how much less it would cost to implement and maintain your solution—hence justify your price that currently seems high. The engineer to engineer call is one way to move the sale forward. Another tactic is the higher executive to higher executive call. This would introduce the potential customer’s economic buyer into the discussion who could provide you with a greater sense of what the company would like to achieve with the project in question.

Tell Them What is Possible

This is the final option and I only use it when a prospective customer will otherwise remove your company from consideration entirely. Usually such quotes require you to get permission, so you will need to make a business case internally. Once I give such an early concession number, I warn that any higher project costs will raise the final price. Your one advantage with this approach is that you will be in a strong position to keep this price as your absolute floor during final negotiations.

Price negotiations are always difficult in competitive situations. They are even more difficult when the potential customer obsesses more on price than on the value of your offering. Confident sales executives learn how to manage this process, for even the most grueling situations. I wish you every success as you face such challenges!