The next time you feel victimized by your “tough market,” pause and consider that the problem might be you. For many salespeople I meet, the negotiation challenges they face are self-induced, a result of false beliefs and poor delivery of pricing.
In meetings with thousands of salespeople, I consistently hear the same laments. The first is, “My market is tough. The only thing builders are looking for is price.” The second: “Buyers just aren’t loyal anymore.”
Both statements are wrong. It can’t be only about price, because some of the most successful brands in our industry are far from lowest. And most LBM dealers have discovered they keep approximately 85% of their business from one year to the next.
If you believe it’s about price, buyers will react accordingly. This occurs when salespeople deliver prices with words that invite the buyer to doubt the initial offer. For instance, “Let me know how this pricing looks.” Or: “Tell me how we compare.” These statements say, “I haven’t given you a price. This is just a starting point.”
To get better margins and create more loyalty, begin by dividing your customers into three categories: combative, compromising, and collaborative.
Combative negotiators instinctively test the waters and pressure for better prices even when you’re already competitive. The best negotiation strategy with the combative buyer is to fight fire with fire. When faced with pressure for a lower price, get a buying commitment first. Let the buyer know you might be able to give something, but you will have to get something in return. Strive for something of low cost to the buyer and high value to you. Ask the buyer if he will commit to volume commitments, delivery concessions, or including additional products in the transaction. You can then offer a better price after the buyer has committed to the new terms of the deal.
Compromising negotiators are looking for a reason not to shop … so don’t give them one. They are focused on a successful transaction and simply want a fair deal. When that deal is struck, compromisers are prepared to do business. Your mindset should be focused on satisfying requests and clarifying expectations. Your standard statement should be, “Yes, I can do that. Here is the price and timeline you should expect.” Be clear and definitive in your capabilities with compromising negotiators and they will agree to a win-win trade.
Collaborative negotiators are even deeper thinkers and are looking for a reason to be loyal. They are focused on relationships that produce mutual benefit. They look at the big picture, analyze your capabilities as a provider, and seek long-term business partners. When dealing with the collaborative negotiator, make the dialogue bigger than the transaction. Your conversation should focus on the collaborator’s challenges, objectives, and profitability. Focus on the actions and statements that say, “We can do this together.”
The market is happening to everyone and, in that regard, it’s a level field of play. The winners are those who prepare better than the competition.