You’ve just made a great sales presentation for a great prospect.  The whole sales process has gone smoothly from the beginning.  You like your buyers, and they like you and your offering.  They definitely want to do business with you!  If only you can agree on a price.

It’s easy and natural to get a little discouraged when a buyer asks you to lower your fee.  But don’t assume they’ve applied the brakes just yet.  Price is only 18% of the buying decision.  The competence of the sales rep, however, is 39% of the buying decision.  You may feel uncomfortable, but your customer has just offered you an excellent opportunity to demonstrate a high degree of competence by handling his request correctly.

You can lower your price, but...

If the buyer is really trying to buy and requires a lower price, never lower it without getting something in return. If you cut your price without getting something back, you devalue your offering and encourage even further reductions. The customer will think, “How much are you holding out if you just cut your price? Your offering is not that valuable after all.”

There are three effective ways to negotiate when you’re asked to lower your price.

If you are willing to cut your price, require the customer to give you something in return. It could be that he signs today, or extends the contract two years, or increases the quantity of the order. You may negotiate that the customer personally introduces you to two other key decision-makers in other departments. If you do that, be sure to put those terms in the agreement. The key is to get the customer to give you something valuable in return.

You can also reduce a feature in the offering, like the dealership did with me when I bought a car. “For that price, Mr. Hart, we cannot give you the deluxe model with both the leather seats and the sunroof.”  If you are curious, my wife’s car does not have a sunroof, but it does have leather seats.

One caveat:  if you are going to offer a price reduction, always offer the maximum you’re willing to give first.  Don’t start small and let the customer negotiate higher.  This eats away at your customer’s trust.  He will wonder how deep the well is if you begin with your least valuable concession first.  If you start out offering 2%, then 3%, then 10%, you can claim that is your maximum, but the buyer may not believe you.  You’ve demonstrated that he can get more value if he negotiates harder.

You want to show the buyer that you are negotiating in good faith.  If you must do a price reduction and your boss allows you 15%, give 10% first.  If that does not work, then negotiate for something else in conjunction with a 3% discount, then 2%.  Just be sure to get something in return each time you discount.  You want to show the customer that the value he gets declines every time he asks to pay less. 

Give something of value, but hold your price.  If you’re selling equipment, you can offer an extended warranty and service.  One of my buyers asked me for a discount.  He did not feel there was enough time allocated in my proposal to coach the sales manager.  I did not cut my price, but I offered to add eight hours of time with the sales manager, and I got the sale.

Price negotiations don’t have to be as scary as we sometimes feel when we’re asked to do it.  Handling it well can further confirm, in your customer’s mind, that he’s made the right decision to buy from you.  If you start with your best offer first, you will preserve the trust you need to serve as the foundation of a strong relationship that benefits both of you.