Have you ever been in a competitive situation where your price is raised before there is a discussion about you having been chosen? Maybe you presented, did well, and then were immediately told you need to sharpen your pencil? The negotiations have begun. Or have they?
This happens all of the time, but it’s a mistake to enter into negotiations before you are chosen.
One Against the Other
Some buyers like to pit sales organizations against one another when it comes to price. They may not exactly share what your competitor’s prices are, but they make very clear you are in a contest over price. There are number of problems here.
First, if you haven’t been chosen, you are being used a leverage against your competitor. You may not be very friendly with your competitor, but you don’t gain any business by helping them find their way to the bottom (and it’s likely they don’t need your help getting there). Or maybe it’s the reverse of this; your competitor’s price is being used to get you to lower yours.
Second, by shifting to a competition on price, you are allowing the contest to shift from value being to price. You don’t want to win on price. You aren’t competing on price. And this puts you smack in the middle of a contest over price, if there is a contest.
You don’t want to participate in a contest on price. There is nothing for you to gain.
First Things First
To protect your pricing, you need a commitment that you have been chosen before you enter into pricing negotiations. You also need this commitment to protect your clients from underinvesting in the results that they really need.
When asked about price, you ask the question: “Have we been chosen?” If the answer is “no,” then you have to say something that sounds like this: “We’re happy to negotiate a final agreement. But until you decide that we are the right choice for you, we believe it’s premature to start negotiating price. We want to make sure you get the outcomes you need, including the right price.”
I’m not from the school that suggests that buyers are trying to hurt you. They negotiate price because they believe it benefits them to get the most for the money. You might have language that is every bit as direct and even less adversarial. But until you are selected, negotiating price can only hurt you.
If you are pressed to negotiate price before being selected, you can always push back and say something like this: “We’d love to begin final negotiations. We know we can reach an agreement. If we can’t, you can always choose someone else. Have we been selected?”
Negotiate once. Only after you have been selected.