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Sales Strategy
10 Tips to Navigate Price Traps in Business Negotiations!
May 30, 2013 | Patrick Tinney lock

“Price is what you pay. Value is what you get”. Warren Buffett

Recently, I read a column on business negotiation that suggested that one of the ways to navigate the buyer’s price tactic of “You are too expensive” is to simply shrink the quantity of the seller’s offering to fit the buyer’s price. Is this a bad idea? Not really.  The challenge is that price is so much more complicated than a “scale to fit” equation.

Price is also about quality, time, brand, uniqueness, demand, supply, risk, innovation competition, and hidden value. If you are able to ask the right questions of potential buyers prior to and during negotiations using the above topics in the right combinations, you will be much more successful at navigating price traps.  You will also be much clearer about the buyer’s true objectives and intentions toward you and your company.

So let’s explore 10 tips to navigate price traps in negotiations:

1. Quality
The overall quality of your offering is key, relative to price.  If quality can be adjusted, then price definitely has the potential to be adjusted up or down.

2. Time
If you can alter your delivery timelines, then it is very likely that price can be altered.  I once told a printer I was working with that his company could print our products on off-shifts if he preferred, to help him manage his time production and scheduling better.  I just wanted good quality at a great price!  We both got what we wanted!!

3. Brand
To some buyers, brand means nothing.  To others, it is paramount.  Understanding your brand and its positioning in the market has a huge bearing on price.  Try not to get too caught up in all of the noisy definitions of brand.  The clearest meaning of brand is:.”What are our consistent, repeatable, promises that the market expects us to execute flawlessly?”  When you can articulate your brand promises effortlessly, you will talk clearly to the market and avoid more price traps.

4. Uniqueness
This is just a pretty way to describe your “Point of Difference”. If you can confidently describe your point of difference the negative price discussion stands a much greater chance of being neutralized. 

5. Demand
Markets of all types are driven by need and demand.  If there is great demand in the market, expect prices to rise!  In everyday life, think of the lack of fresh drinking water in many parts of Africa and the Middle East. At the opposite end of the spectrum, think of asbestos.  Who uses asbestos products anymore?

6. Supply
The overall availability to your product in the market has a great bearing on price.  If your product is scarce and in-demand, prices may go up.  Think Apple products.  However, if there are too many sellers in the market of your product and not enough buyers, think commoditization and lower prices.

7. Risk
Most businesses do their best to manage and control risk.  Upside risk exposure usually demands insurance or higher prices.  Risk off environments where there is little monetary exposure generally ushers in lower prices.  To illustrate, when hurricane season is on in the USA there is always a chance that oil exploration rigs in the Gulf of Mexico could be damaged when these huge storms erupt.  If storms are tracking toward oil exploration rigs at harrowing speeds, expect the market to price in upside risk and higher prices for oil.

8. Innovation
Buyers love creative ideas.  Businesses readily buy innovation that puts them ahead of their competitors even for a short period of time.  If your company thinks innovation when it develops and markets its products, it can ask for higher prices in an otherwise stagnant market.

9. Competition
The marketplace loves and depends on competition to keep negotiated prices in check.  However, if you develop a product with unique expertise required to operate it, you can demand remarkably high prices.  Not so long ago there was no such thing as a website.  Most companies just used traditional media such as brochures, flyers and newspapers to speak to their customers.  When the first websites were introduced to the market banks, the western world instantly realized e-commerce potential and spent enormous amounts of money getting their brands up on the internet.  In those days, there were very few technology companies who had the knowledge to write complicated code to power websites.  This quorum of unique internet development companies with great programming and database manipulation expertise created a sellers vertical market that regularly tested just how much the market would bear for the build out of websites. It was a technology banquet!  Sellers ruled negotiations and pricing!!

10. Hidden Value
Many businesses have purchased equipment, buildings, licenses, technology and data that are fully paid for.  In a negotiation where price is at the forefront, many of the above items may be of great interest to your negotiation partner and neutralize the importance of price.  Again, you have to ask the right questions to navigate price traps in business negotiations!!

 “What is a cynic? A man who knows the price of everything and the value of nothing”.- Oscar Wilde

About the Author:
Patrick Tinney is a Certified Print Production Practitioner (CPPP). He is a double graduate of Sheridan College, a founding Director of the Flyer Distribution Standards Association of Canada and a member of the Canadian Society of Training and Development. Patrick is also an active Advisory Committee member for the Sheridan College, Advertising Program. Patrick is the founder of Centroid Training and Marketing. For more information or to comment, please contact patrick@centroidmarketing.com.

Disclaimer: The views and opinions expressed in this article are strictly those of the author. CPSA does not endorse any of the companies, products and services mentioned within this article.


Recommended Reading:
How To Negotiate With The Four Personality Types
Assess Your Negotiating Profile
Three Strategies to Being Masterful When Negotiating With People of Authority

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