My post, “But Your Price Is Too High,” has spawned dozens of comments. One of the themes that has come up is “Walking Away.” We all know we are supposed to do it, but walking away is something we rarely do. It’s really not that simple to just walk away.
We’re supposed to walk away from bad deals, whether it’s because of pricing or other issues. But it’s far easier said than done.
As we work deals through the pipeline, we become emotionally committed to them. We’ve invested so much time, so much resource, we often fool ourselves. We believe our sheer force of personality, our “salesmanship,” the ability to leverage other resources will overcome everything. We believe in ourselves, our products, our companies and can’t imagine walking away.
Or we hang in there, we need this deal! We need any deal! While it’s a bad fit, we’re work on it because we have nothing else to chase. Our managers are on our backs. They need the business, we need the business, we forget our qualification criteria and chase anything that fogs a mirror.
Or we get into the final negotiation. It’s like being “4th and 1 yard to the goal.” We’ve come so far, we can just taste it, the customer tells us, “all you have to do is reduce your price by…..” or “throw this in and the deal’s yours….” We’ve done it before. It’s just a little lower than last time–we’ll do it just this one time.
Or there’s the wonderful coaching our managers provide. “You need to get this deal whatever it takes!”
Walking away is never as easy as it sounds, but we have to walk away.
“Wind fast, lose fast!” Walking away early is easier than walking away late. This is why qualification is so important. Better to disqualify those bad or marginal deals no matter how badly we need them. It’s far better to spend our time prospecting and finding high quality deals than to pursue those deals we won’t win–at least the way we want to win them.
We need to start positioning pricing, terms, conditions early in the sales process. What are the customer’s expectations in pricing? How will they justify this? What has been their past patterns or history in doing deals?
No price discussion should be held without being in context. Ideally, we’ve positioned pricing in terms of business value and the return they will get from this investment. Is the customer really going to forego all the benefits because you won’t meet their price?
“Well your prices is higher than the competition!” Have you failed to differentiate yourself? Things are NEVER equal. As much as the customer tries to make everything equal between vendors, so price becomes the differentiator, in reality they are NEVER are. It’s our jobs as sales people to establish our differentiation early on, to maintain and build it in ways that are important to the customer (not what we think is important.) It’s our job to make our solutions and ourselves the benchmark of comparison. Doing this in final negotiations is always too late.
But there are times we have to take pricing actions. We have to discount. Ideally, we remove value as we discount, but sometimes we can’t. We have to have a clear rationale for any discounts we provide–both for ourselves and with the customer.
We need to understand our walk away point. It’s easily said, but not easily done. This is where strong management and leadership is necessary. Managers and leaders must be 200% behind sales people that walk away from bad deals. They’re doing the right thing for the business. While no one likes to lose, it’s worse to win bad business.
If managers don’t set the tone, if managers don’t set the example, if managers beat sales people up for not getting a deal, “whatever it takes,” then eventually all the deals will be bad deals!
Walking away, as painful as it is, is good. It maintains the quality of your business. You work with high quality customers who value what you provide. Sales people should never walk away from a deal alone, but with the full support of their management.
David,
Your series is one of my favorites and this is an important post. Walking away from a bad opportunity was the most difficult lesson for me to learn, the most difficult to train, and IMO, the most important discipline in sales. It was a tyrannical sales manager who instilled in me the value of cutting bait.
Early on, when he ordered us to walk away, I thought he was out of his mind. Some salespeople were under the threat of losing their jobs if they did not comply. I was very young and eager to learn. He really knew sales I listened. and he never had to threaten me.
Your metaphor of 4th and 1 expresses there is something to lose; more time and effort that can be invested in new opportunities.
The salespeople who hang on are unaware they are throwing good money after bad money. As you said, they’re trapped in the idea that their near the finish line. They don’t see the damage from winning a bad sale and the negative precedent established with that customer. They don’t see the negative cycle of large investment in weak opportunities. Instead they convince themselves they pulled a rabbit out of a hat.
Sales managers under duress to maintain numbers facilitate bad deals and poor sales habits. Do you think it takes the VP or CSO to set guidelines for quality? Are executives with heavy P&L responsibilities unable to break the cycle? I know there isn’t one solution, but isn’t the cap on the sales pyramid ultimately responsible for setting standards? Do you think they are just setting the bar too low?
Great comments and questions Gary. While they demand a comprehensive answer, I’ll save that for a blog post. But I will offer some thoughts here. I think too often, all of us get caught up in the press of day to day activity. It causes us to lose site of what we really need to achieve. Consequently, momentum becomes the rule. We chase after bad deals, we continue to do the things we’ve always done because it’s easier than changing. We become blind to the need to change.
Each of us needs to step back periodically and really look at what we are doing. Does it fit with our strategic direction or is it just filling time? Do we need to change? Are we consumed with activity versus purpose.
It’s critical to do this at all levels, but top management needs to set the example and continue to inspect for the right things.
Thanks for the great comment!
Here is another thought.
One thing that sales is not taught by legal is that the negotiation over the delivery of goods/services in exchange for money is also a negotiation about the rules of the game, embedded in the contract.
I can always give you a lower price, if you agree to waive all warranty claims, never seek legal action, etc.
Of course this is an extreme example, and no rational buyer would accept these conditions – unless they were paying with counterfeit money!
But, sales can always walk down the hall to legal and say “For this price, what should be in the contract? Or, what should we remove from our standard contract?”
Don’t forget that you are negotiating over the rules of the game, not just the price/value mix.
Great observation Michael. Looking a little more broadly, we can often fit the customer’s budget/price objective by modifying our solution. In the case of a services business, that’s very easy–reduce the scope of the project, change deliverables, etc. For a product that’s sometimes more difficult. but we should always look at tradeoff’s that allow us to adjust the value to fit the price.
You cite some great examples, others include payment terms, periods of exclusivity, and so forth.
As sales people we need to understand the objection, addressing it may mean we adjust our solution to fit their target criteria.
I agree that both reducing price is a first response most sales people use (and in some instances / dealing with some cultures it is part of the “process”, but the biggest issue I have seen is related to knowing when to walk away – either related to price or T&C’s. A major failing I have seen is for a company to either not place a value or constraint on the deal – simply what is the pinch point where the deal is no longer of value if won. Some companies can effectively do this, but many times I have seen the pricing analyst coming back and advising “You should have come back – I could have done something” even when the deal was at the 3rd or 4th counter-offer position. If you are going to set a pinch point then stick by it – and do not lower the level after the deal was lost (or worse after the deal was won advise that the pinch point should have been maintained.
Len, thanks for the great comment. One of the things your comment brings up is the necessity to review the opportunity early in the sale cycle–ideally in qualifying to assess, “Is this good business for us.” As much as possible, you have to anticipate the price points, the quality of the opportunity, etc. to determine, “Do we really want to compete for and win this business, because if we do, we have to deliver it.
At that point we can begin to set some strategies for negotiating and establish a better positioning through the entire sales cycle.
Thanks for joining the discussion. Regards, Dave
Great comment Len. Too often, we get “emotionally” attached to deals, continuing to chase deals when they turn bad, because we can’t let go– or our managers won’t let us let go. We have to make sure we are chasing profitable business–abandoning those that will be bad.