A leading company in the warehouse industry has developed different offers for customers with varying levels of price sensitivity. The more the discussion focuses on the value, the better your chances of negotiating a higher price and minimizing discounts.ĭevelop multiple offerings and price points A very effective tactic for handling aggressive negotiators is to have multiple equal offers (MEOs). When faced with a customer who is negotiating aggressively, we have seen many sales people successfully withstand the pressure by highlighting the benefits of the product and quantifying its value proposition. Armed with insight into your customers’ value perceptions, you are able to charge the right price. Lastly, and perhaps most importantly, strong management support is needed to stick to your guns and reject customer discount requests that might sidestep pricing policies.ĭetermine your prices based on the value delivered Product and service prices, discounts and incentives should be set in accordance with the value derived by the customer, not solely by the importance of the customer to your business. However even a 1% improvement in price can typically improve profitability by as much as 12.5%, so achieving payback is usually very fast. Some might say that infrastructure investment can be costly. Pricing infrastructure is comprised of a well knitted unit of processes, people, systems, structure and performance management objectives. As soon as a charge was applied for these non-standard orders the customer ceased to place them, leading to significant savings.Īn adequate pricing infrastructure is essential to ensure compliance. Upon further review, it was found that the customer was placing orders weekly and no delivery charges were being applied. One of our clients had an agreement with a large customer to ship products once a month. One way to deal with the shrewd negotiators is to ensure adherence to the T&Cs. Once a contract is set up, it generally is filed away and both the customer and the supplier lose track of the terms. Most suppliers sign contracts with their customers but have poor policies or practices to ensure compliance with the contract terms (i.e. Here are some recommendations:įocus on pricing policies and pricing infrastructure Protecting your profitability from good negotiators requires ardent compliance to pricing policies, a flexible pricing infrastructure and the ability to say “no” - arguably the most important word for pricing to customers who wish to operate outside of your policies. Good negotiation is a commendable talent, but businesses need the skills to deal with good negotiators. The next issue of Financial Post Top Stories will soon be in your inbox. If you don't see it, please check your junk folder. In dealing with these accounts, the sales team believed that it was more beneficial to look for the pound - another customer acquisition - than to fight for the penny.Ī welcome email is on its way. This pattern of revenue leakage was consistent in both the customer acquisition and post-acquisition phases. A favourite negotiation tactic: provide only a small portion of business at the beginning of their relationship, using the “carrot” of potential follow-up business as an excuse to push for a price reduction.
These customers engaged in tougher and more frequent negotiations with the sales team and relied on a number of tactics. In fact, customers who were better at negotiating with the company enjoyed noticeably higher discount levels than customers purchasing similar volumes. For example, while working for a client in the service industry, we found that the volume discounts extended to customers did not correspond to actual volumes purchased. We have a saying: “It is the best negotiators that get the best price, not the best customers”. This advertisement has not loaded yet, but your article continues below.