How to Respond to Price Negotiation
Customers who are new to your product or service may occasionally ask for a price discount during your sales cycle. There are techniques that your sales reps can use to respond to these price negotiations and obtain the best deal for your business.
The process of selling your product or service to a new prospect has to be carefully navigated if your sales representative is able to successfully close the deal.
Whether or not you negotiate on price depends on several factors including who the client is, the reason why they’re asking for the discount, your minimum selling price, and how much discount they are asking for. Learning how to negotiate price with customers is one of the most basic sales techniques.
Offering a lower price is up to the individual business to use as a tactic to attract new customers.
The downside to price negotiation
Offering discounts can sometimes be the final encouragement that your prospects need to help them close the deal. However, offering discounts all over the place can undermine your sales strategy – which is why you should be careful when negotiating over price.
Unfortunately with price negotiation, you don’t want to negate the value of your product or service. Often when you agree to a discount, it’s like subtly saying that your product was overpriced in the first place and that there’s room to haggle in your pricing strategy.
Secondly, offering discounts to certain customers then casts doubt on the prices that your other customers have paid. If existing customers find out that you’re giving new customers a discount, they’ll want to know why they haven’t been offered one too.
Finally, negotiating over price reduces the scope of your conversation to only be about considering the cost of the product, distracting prospects from the advantages and benefits that your product has to offer. Your sales reps aren’t able to do their jobs which should involve informing your customer about all the value that your product has to bring to the table.
That’s why it’s important to carefully consider whether your business supports offering discounts.
7 tips for dealing with discount requests
You don’t need to avoid price negotiation if you follow these tips for dealing with discount requests.
1. Understand the reason behind the price negotiation request
There can be a lot of reasons behind why prospects ask for a price discount, and some of them may not always be deal-breakers. Sometimes it can just be an ingrained habit for customers to haggle over the cheapest price, and you can say no while they would still be very interested in your product or service.
A good way to deal with prospects asking for discounts is to ask them “Why?” You’re not explicitly saying no but you are inquiring into the reasoning. You might discover that they were simply curious but would be happy to go ahead with the full pricing. It’s important that you don’t cave in too early out of fear of losing the deal.
Asking a follow-up question can be useful in helping you to find out extra details about the customer and their needs. It will help you tailor your offering to that particular prospect and ultimately lead to more successful deals.
Don’t just dismiss your customers out of hand when they ask for a discount – take the time to investigate why.
2. Communicate the value of your product
Prospects who ask for discounts on your product or service might be under the impression that they can obtain better value elsewhere. It’s your job to convince them of the unique benefits that you can offer and justify why you are asking for a particular price.
Competitors in your industry might not have the top-drawer support that your company consistently delivers. You might offer extra features that your rivals don’t have and be a better fit for when your prospect wants to scale their needs.
When you conduct in-depth conversations with your prospects about how your product is better, they’re more likely to choose your option over others. This is the stage when prospects are open to finding out how your business can help them.
Successful businesses will have honed their pricing structure to perfection, accurately reflecting the value that their product brings to customers.
3. Make your offer time-sensitive
If you do decide to offer a discount, then you can inform your prospect that it’s only valid for a certain period of time. Perhaps they have to sign the deal by the end of the next business day in order to take advantage of your discount.
Closing a deal quickly with your prospects means your sales team needs to spend less time and resources with that individual customer. Lengthy sales processes divert attention away from other potential prospects. And if customers refuse the offer, then at least you didn’t spend any more time with them than was necessary.
Of course, it’s always important to bear in mind that prospects might need to get approval from the decision-makers in their business before they can sign on the dotted line.
Making your offer time-sensitive is a powerful way to motivate customers to make snap decisions.
4. Ask for something in return
When offering a discount to your prospect, you can ask for something more substantial from them in return for your generosity. For example, you might ask them to choose the annual rather than the monthly plan, or purchase a certain number of seats for their business to make the offer more worth it.
It’s called “negotiation” for a reason, and you are well within your rights to ask your prospect to invest more in the deal. Both parties need to be getting something they want out of the deal, and it’s natural to reach a compromise where both of you feel happy.
If you give into a discount too easily, you are giving the prospect too much power and undermining your ability to sell your product effectively.
You might be driving a hard bargain, but you’ll be earning your business worthwhile deals that justify the sales process.
5. Give a reason for saying no
Sometimes, it won’t be possible for you to offer a discount, potentially because it just isn’t your company’s policy to do so. If you have to say no to a prospect, make sure you give them a valid reason for the refusal such as the price accurately reflects the value of the service you are able to provide.
It’s important to let customers know that you won’t be reducing the level of service you can offer, which is what you would have to do if you allowed them a discount. Make sure you don’t simply avoid the question or customers will think that you are being evasive.
Customers will respect you if you politely say no, rather than stringing them along when they won’t be able to pay full price.
6. Sweeten the deal
You might have to refuse the customer a discount but it could be possible to offer them additional products or services that make the full price seem more worth it. You could add on a month’s free premium support or an extended free trial to entice them to seal the deal.
It probably won’t cost your business much to sweeten the deal but leads to the customer feeling like they are getting a better offer. Freebies can often entice customers to sign up to your service, even though they didn’t get the discount they originally asked for.
Offering free gifts enables your business to keep to its original price point while giving the customer a more persuasive deal.
Customers will appreciate being able to get free stuff, even though it doesn’t really cost your business anything.
7. Set up a call for a later date
If customers aren’t opting for your deal – even with a discount! – it might be that they simply aren’t ready to buy yet. It’s unfortunate when a deal falls through, but it doesn’t mean that your prospect is lost forever. You can reschedule a call for three or six months when the client might have more budget available to spend on your service.
If you treat prospects well and nurture genuine relationships with them, then they might be open to your sales pitch in the future. Sometimes the timing isn’t right and customers just don’t have the money to invest in your business right now.
And you never know – sometime in the future you might be offering all prospective clients a discount.
How to respond to price negotiation – examples
“How much of a discount were you thinking?”
Customers who ask for excessive discounts on your service probably don’t appreciate the value you are able to offer. It’s advisable to nip these kinds of requests in the bud quickly before you feel yourself committed to a deal that won’t be worth it for your company, since you don’t want to sell below your product’s minimum selling price.
“We’re happy to inform you that we can offer a 10% discount.”
If a customer is an important prospect or a potentially valuable account, it can be the right move to offer them a better price to trial your products or services. A decent discount can be a good incentive to get them to take a risk on your business.
“Is cost your only obstacle to moving ahead?”
It’s crucial to find out whether pricing is the only hurdle in the way of the customer closing the deal. If pricing is the only reason, then you’ll confirm that offering the discount is the way to winning your customer’s business.
“I’m very open to discussing pricing but let’s discuss how we can benefit your business first.”
Customers need to understand how your product or service will benefit them first before entering into price negotiations. If a prospect brings up the subject of price straight away, then you’ll need to dial it back to make sure they understand whether your business can meet their needs.
“We don’t usually offer discounts but would you be interested in a week’s free trial instead?”
If your company is in a position to offer a free trial, this can be a great way to introduce potential customers to the value that your business can bring them. Free trials are good for customers at the beginning of the sales funnel, and smooths the path for making the deal at a full price later on.
“Sorry, we can’t provide you with a discount.”
This is a last-resort response when you have already explored all other avenues. It’s a hard conversation to have but many prospects may proceed with the deal anyway. It’s important to emphasize to the customer that the price truly reflects the value your product will bring to them if they buy.
Template response to a customer’s request to reduce the price
Accepting a request for a discount
Thanks for being so patient with me while I followed up on your request. Following on from discussions with my supervisor, we’re pleased to be able to offer you a [15%] discount [if you buy the comprehensive suite/choose to opt for the annual subscription].
If you accept this limited-time offer you will have full access to our complete range of features and our product’s capabilities for helping you to market your business. 24/7 customer support is available for our platform as well as a full onboarding service.
It would be great to hear your thoughts and find out if you have any further questions. Feel free to schedule a call with me if that’s more convenient. [Schedule call link]
Refusing a request for a discount
I’m following up with you about the discount you asked for during our last phone call. I had a conversation with my supervisor and I’m sorry to report back that we can’t offer any discount right now. [The reason for this is that the pricing structure I shared with you already reflects the value of our service and we can’t reduce the price any further without underselling our product.]
Sorry that this isn’t the answer you wanted. Please get in touch if I can help you with anything else, and let me know if you would be happy to proceed with the deal anyway.
Negotiating with customers over pricing is an important part of the sales process. If you prepare yourself ahead of time, you can set yourself up for productive conversations with prospects that ultimately lead to more closed deals. Make sure you’re clear on your company’s policy on offering discounts so you are in a good position to haggle with customers.
If your company never offers discounts, that’s perfectly fine. Just make it clear to potential customers that you are already providing them with the best price. You feel it’s only fair to your product or service if you stand firm behind your pricing plan.
Sometimes, if customers refuse to buy your product without a discount then it might be that they couldn’t afford it in the first place.
Sure, some customers will be disappointed with a lack of discount and drop out of your sales funnels. But many customers will proceed anyway even if you deny their request. It’s up to you to decide which prospects are worth nurturing as long term customer relationships and invest your resources wisely.
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