Ernesto, like many sellers, tends to use the resource of the lowest price he can offer too often (or too early) in a negotiation, practically transforming the "floor" price into the virtual list price.
Ernesto is a salesman for a company that manufactures electric generators. The list price for each generator is $ 1,000.
For your company, the total cost of producing and having one of these generators available to the public in the store is $ 800. The company goes on the market charging a profit of $ 200, 25%.
Ernesto closed a deal this morning with a client, and sold him a generator, giving him a 10% discount on the list price, which is the maximum discount that his manager allows him to offer.
The customer paid $ 900, which is $ 100 less than the list price.
Now, the question is: Where did that $ 100 come from?
They obviously came out of the profit your company hoped to make.
$ 100 is 10% of the final price paid by the customer, but for the company it is 50% of the profit!
And how much does Ernesto lose?
Ernesto gets a 6% commission for each generator he sells, for which he would receive $ 60 if the price were the list price. In this sale at $ 900, your commission has been $ 54.
$ 6 doesn't sound like a lot, but Ernesto sells an average of 40 kits per month. If you took a 10% discount on half of your sales, you would be losing $ 180 per month in commissions, about the same as you pay for your car share. It is not little, is it?
Ernesto, like many sellers, tends to use the resource of the lowest price he can offer too often (or too early) in a negotiation, practically transforming the "floor" price into the virtual list price.
What can we do?
- Recognize if we have this tendency. A discount is a necessary resource to close some sales, so in many cases it would be a mistake not to offer it. Of course we are not referring to those occasions. We are talking about the tendency to offer it more times or to a greater extent than necessary. Remember that price is often a much bigger concern for the seller than for the customer. If the client considers that the price is expensive, you have not yet convinced him. Keep working so that the customer finds more value in your product, and your customer will be willing to pay more!
You have to do two things:
- You have to give the customer a reason to pay more. You have to convince them that they are not going to get a better buy than what you are offering.
You must ask and inquire into your client's priorities. Price might not be in the first place, as we tend to assume. Some things may be more important than money to the customer: Trust in you, in the product, and in your company; the quality of the product and service; counseling; the foundership; the guarantee; the prestige; the delivery time; the professional, respectful and personalized treatment; safety; not having "headaches" with the product, and so on.
Even if you get the well-known answer "I would like to buy from you, but your price is too high", it may have nothing to do with your price! I assure you, you could lower your price by 30% and you would continue to listen to that objection.
- Take into account where a discount comes from, and who loses each time an unnecessary discount is granted: The company and the seller. Do not self pity or justify ourselves with the market, the recession, our area, the competition, or the cold. Train ourselves and develop our negotiation skills. Discuss this with our colleagues and our boss to share experiences, and develop an individual or group action plan.
