I explained the other day how my older sister, Donna, would use psychology to get me to ask mom for ice cream. She kindly reminded me that I had my moments as well.
My younger sister, Chara, loved what she called "silver money". Coins that were bright, shiny and silver...nickels, quarters, and especially silver dollars. That is where she placed her value.
When it comes to money, I have an affinity for the paper variety!
I remember trading her bright new quarters for ragged, torn and tattered dollar bills (hey, you don't get mad when Warren Buffet does it!). Plus, I always shared my candy with her...what a good big brother!
Now mature, I have seen the error of my ways and realize that manipulating a client can work for one sale, but will wreak havoc on repeat business and referrals - relegating you to having to produce rather than cultivate!
Beyond the Happy Money Conversions we just discussed, there are times you will have to negotiate. To be effective at negotiations, you have to understand the value of your product.
There are two components of value to consider as you build your own negotiating leverage - Objective Value and Subjective Value. Both objective and subjective value are built on the classic equation
Value = Benefits/Price
Or put another way
What I am willing to pay? = What will it do for me? / What does it cost?
Negotiations are an indication that the buyer is ready, but wants to extract as much value out of the transaction as possible.
We live in a world where negotiating is expected and admired as we push for more than our neighbors got - $100 off rust-proofing, a free warranty, upgrade padding - anything that shows we got more for our money. Here are a few things in this chapter that help you with the dynamics of negotiating;
Know the value of your product. What does your product really do? How does it improve the lives of your clients or provide solutions to their problems? If you only quote features, you have not really demonstrated value. Your price becomes the determining factor of if the client will buy from you. When reduced to the commodity level, the cheapest price wins...is your product the cheapest?
No? Then you have to demonstrate value.
Be willing to lower Price or be able to raise Benefits. Price is objective. A dollar is a dollar no matter how you ask for it. If your price is flexible, then you are probably armed with the ability to lower the price to meet their "what I am willing to pay" number. Lowering the price probably impacts your commission...right?. Many sales people quote retail pricing but when price becomes objectionable, they begin to lower the price.
Rather than default to lowering price (objective), a better approach might be to increase your products benefits (what will it do for me) in the eyes of the buyer (subjective). Benefits of most products are subjective depending on needs/desires of the perspective of buyer. If you can sufficiently increase the enjoyment and advantages of your product beyond their price objection then your price becomes more acceptable.
Raising Benefits through Demonstration. Depending on the nature of your product, allow the prospective client to "live" with your product as much as possible. Why do you think car sales people offer test drives? I remember once, the sales person said, "Take it home and bring it back tomorrow". We drove it, went to dinner, put it in the garage...at that point...I owned it!
Even with an intangible service, it is possible to convey that spirit of ownership that makes people receive it before they buy it.
Create buying urgency - The law of Supply/Demand can sometimes defy logic - Beanie Babies come to mind! No doubt that when more people want something and there is limited supply, price is irrelevant.
I don't like cheesy offerings that play on "today only" or other scarcity tactics that aren't real. There are valid ways to create the buying urgency that capitalize on the prospects psyche - find them for your product.
We said several Crumbs ago that many sales people wont ask for the sale (the check). Many fold when it comes to negotiating for the sale as well. Negotiating is a necessary part of many complex sales and the key to success is understanding..
Next Time: Put a Ring On It!
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