Yesterday, I had a fascinating conversation with an outstanding salesperson. She wanted to brainstorm her approach to a negotiation that had hit a wall.
It was a multimillion-dollar contract renewal. The client had been a loyal customer for years, but now they were pressuring her for massive price decreases.
I asked, “What is their rationale for the decrease?”
She replied, “I don’t know. They think that because they are a large customer, they deserve an adjustment. But what they want is crazy! Their consumption of our product is skyrocketing, but they are being irrational.”
As we continued, she said, “They keep threatening to move to a competitor. They claim they can get the same solution from a competitor at 30% of our current pricing, We will never come close to that number.”
She was surprised by my response. I said, “If I were in their shoes, I wouldn’t be talking to you, I’d just go to the competitor at 30% of your price. That is clearly the best solution for them. Why don’t you go tell them that?”
She was a shocked with that response. That’s when the lightbulb went on.
If the customer truly believed the competitor was equal, they would have left already. Why would anyone waste months negotiating with a vendor charging 3X the market rate?
They were doing something that seemed irrational, which meant there was a hidden reason they needed to stay. The seller just didn’t know what it was yet.
We stopped talking about price and started brainstorming value creation.
- It turned out the customer had used that cheap competitor before. They suffered horrible service levels and missed commitments.
- In the customer’s largest markets, using my client’s product was a massive competitive advantage, analogous to the old “Intel Inside” strategy. If they switched to save money on the contract, they risked losing revenue in their own markets.
Suddenly, she saw how to shift the conversation from “Your price is too high” to “Here is why you can’t afford to switch.”
She asked, “How do I get them to admit this? They keep looping back to price.”
I proposed a risky approach, call them on it, but do it in a very different way. Don’t confront them with these issues, create the excuse that they want to bring them up themselves.
I said, “Go in and recommend they switch to the competitor. Say this: ‘We value your business, but given the pricing differential, if you believe this competitor can serve you better than us, you should take their offer.’”
She started laughing. “They won’t let me walk out the door if I say that! They really want to talk to us, and perhaps this is the best way to start the real conversation.”
This is the problem too many sellers face. We get hypnotized by the price objection and lose sight of the bigger picture. We forget that if a customer is still at the table, value exists. It is our job to find it.
My client’s call is next week. We’ve reviewed the risks, practiced the role play, and management is onboard.
She needed to shift the conversation to the real issues, and sometimes, the only way to do that is to be willing to walk away.
Afterword: Here is the AI generated discussion of this post. At first, in listening to the discussion, I thought, “They have it all wrong, I’m going to have to re-do it.” They drift a little at the beginning. But after the first 3 minutes, they get right on target in discussing the challenges of dealing with complex pricing discussions, and where they take this is remarkable. Hang in there for the first few minutes, it’s definitely worth your time.
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