What if salespeople were barred from negotiating prices with their customers? I ask because I have been in offices and watched salespeople leave big profits on the table. One time, a buyer of $20 million of roof products told an anxious sales representative, "You are within a dollar per square." Without hesitation, the salesperson assured the buyer he could cut an additional fifty cents off the price. What the salesperson did not know was that he had already been a dollar lower. And now he had priced his goods $1.50 lower per square for the entire year.
I am not naïve. I recognize there are times to negotiate. But in the last few years, this has become the rule rather than the exception. At a time when we all have experienced layoffs and cutbacks, it is important to get the profits that protect the jobs of deserving employees.
If you couldn't negotiate, what would happen? I predict you'd see dramatic improvements in your effectiveness.
Sales prospecting skills improve One underlying reason for lowering price is a perceived scarcity of alternatives. When each sale is viewed as an all-or-nothing, win-lose proposition, fear sets in. The only way to overcome the fear is to create an abundance of opportunities in your pipeline. Even in boom times, good Sales Leaders recognize that you aren't supposed to win them all. Prospecting is the essential activity that enables you to create proper closing ratios and find builders who will pay fair margins.
Decision-making improves Yes, there are times when it is worthwhile to offer some builders a better price. That's why you should have guidelines established before the negotiations that enable you to reduce the price when builders agree to buy in larger volumes or buy a wider variety of products.
Negotiation skills naturally improve If you have the courage to establish benchmarks that spell out when to offer reduced prices, you will have a calmer approach to price objections. Rather than panic and hustle into a reactive selling mode, you will proactively explain the conditions that will bring the customer a better overall price.
Your client is satisfied A price concession usually leaves clients wondering if they left money on the table. Moreover, they wonder why the best price was not offered in the first place. And a new precedent is set. From then on, every future price you offer is a wish instead of a firm offer. Having a matrix of fixed prices removes suspicions.
You might get the sale! I have worked with thousands of salespeople and hundreds of managers. It is apparent that many of them have never experienced that pivotal moment in a career when they nervously tell the client, "You have our best price for this project. It is a fair price." Hoping the client doesn't hear the rattling knees or notice the sweat beading on his forehead, the salesperson is relieved when the client says, "That's what I wanted to hear."
Here's a final benefit of making a fixed-price offer to your clients: Everybody wins! At lunches where salespeople from competing companies share the same table, someone invariably asks me how to overcome lowball pricing by their competitors. That's when I look around the group and ask, "OK, which of you is the lowballer?" As expected, nobody raises his hand.
Maybe we owe it to each other as an industry to hold our prices so we all can win. If you want to find out whether it is possible to get your asking price, simply hold your ground. If you don't try, you'll never know.
Rick Davis is president of Building Leaders Inc., an LBM advisory firm specializing in sales management training. He is an international speaker and author of Strategic Sales in the Building Industry, a BuilderBook publication.
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