Standing firm

10 tactics buyers use to secure lower prices, and how to stymie those efforts
CHRISTINE McMAHON
For SBT
Question: What tactics do buyers use to get lower prices?
Answer: Buying and selling is the core of business activity. In today’s competitive marketplace, buyers are compensated and given incentives to negotiate lower prices. Purchasing departments often have productivity goals that they are expected to meet. Sellers are being pressured to decrease prices so savings can be passed on to customers.
We have observed 10 general tactics buyers use to secure lower prices. Those include:
1) Refusing the first offer – The purpose of this strategy is to lower the seller’s expectations and imply that the buyer is willing to walk away from the deal. From the seller’s perspective, this can be threatening if the sellers presented their best offer first. We do not recommend doing this as it leaves little to no room for negotiating.
2) Saying “no” and offering compelling reasons for not accepting the first offer – The buyers’ intent is to give the impression that they want to buy but certain factors are inhibiting their ability to say yes. It is the buyer’s expectation that the seller take this information back to the company’s decision-makers in hopes that concessions will be made. In this situation, the seller must be convinced of the legitimacy of these reasons and be willing to make an investment of time, energy and potential profits to secure this business.
3) Visibly flinching or physically showing dismay – This reaction recalibrates the seller’s expectation of the buyer’s sense of value. As a seller, beware; this is often an act. Do not be quick to respond or offer concessions. Instead, wait for the buyer to make the next move. Validate the issues behind the reaction and, only when you have something substantial to work with, plan your strategy.
4) Comparing a quoted price to a competitor’s price – The buyer’s intention is to put pressure on the salesperson. Inexperienced sellers become intimidated and yield to price concessions.
Rather than negotiating price, we suggest taking things off the table to meet the buyer’s price point or add some things that cost you little to no money but that have high perceived value, such as offering a free additional one-year warranty.
It’s always better to maintain the value of your offer than give away value.
5) Counter-offering a good offer by stripping away some value-added features – Sometimes a buyer will remove items from the original quote that are “nice-to-haves” rather than “absolute must-haves” in order to meet a specific price point. Once the agreement is signed and the project is under way, the buyer will attempt to renegotiate the items back one by one — free of charge.
Unsuspecting seller’s are often caught off guard and find themselves giving in, not realizing how much it is costing the company. Every time a buyer asks for an additional product or service, it is the responsibility of the salesperson to tell the buyer that his/her request falls outside of the terms of the original agreement and if he/she is interested, a new quote will be developed reflecting the additional items.
6) Requesting special rates, promotions, or free services – Buyers know that, unless they ask, they may not be offered the best rate. This is particularly true when buying airfare, hotel, or cellular phone services. As a consumer, when you ask for the lowest or best rate, you often receive unpublished special offers, upgrades or value-added extras.
7) Taking the seller’s proposal to a higher authority (his/her boss) to negotiate a better option – Buyers often succeed in lowering prices by going around the seller and negotiating directly with his/her supervisor. This tactic undermines the integrity and trust between the seller and buyer. The buyer’s justification is: “If it gets me a better price, then I did my job.”
When a sales manager or other top decision-maker closes a negotiation without the involvement of the seller, he or she is, in essence, undermining the seller’s influence and relationship with the buyer. The seller is compromised because the buyer doesn’t perceive the seller to have the authority to make critical decisions. That is a strategic mistake many companies make.
8) Looking for a cheaper model and getting excited about the features of that model – When a buyer finds something cheaper and is inferring that he/she is interested in purchasing that model, the salesperson has two options: 1) walk away from the sale or, 2) find middle ground. We always suggest doing some exploratory work first to determine what the buyer wants and needs.
9) Getting proposals in writing before making final commitments – Products and services today are more technically involved and more people are involved in the decision-making process. Often times there are undisclosed costs associated with a project; it’s important to have all the facts upfront before making a decision. As a seller, it’s good practice to put your discussion and agreement in writing so both parties are clear and in agreement about the deliverables and outcomes.
10) Asking for a lower price: “Can’t you do better than that?” – As a seller, this is the time to qualify what “better” means. Is it 3% better, 5% better or 20% better? Understand what the buyer is looking for and why. This information will help you qualify the buyer and strategically craft your response.
With intense pressure to deliver higher profits, every segment of business is striving to improve productivity and reduce costs. Sales professionals today must be more effective than ever in qualifying selling opportunities and not be swayed by skilled negotiations strategies to lower price. Sellers today must be able to define their value and know what makes them better and different than the competition from the customer’s perspective.
The concept of the baker’s dozen, 1 free with 12, is very much a part of the buying culture today. Buyers expect “free with purchase.” Both the sales professional and buyer want the same thing for their companies: higher profits. Knowing how to sell strategically, position value and protect price are essential skills for today’s top sales professionals.
Christine McMahon is the owner of Christine McMahon & Associates, a training and coaching firm in Milwaukee. She can be reached at 414-290-3344. Small Business Times readers who would like a negotiating situation addressed in this column can send a fax to 414-290-3330, or e-mail her at: ccm@christinemcmahon.com. Her column appears in every other issue of SBT.
August 31, 2001 Small Business Times, Milwaukee