How to Negotiate a Sale by Understanding Your Customer’s Needs
Discover how to take control of the sales process by knowing your customers inside out
Negotiating a sale is always tough, whether you are doing it for the first or the thousandth time. However, every negotiation offers an opportunity to learn something new, and with practice, you can train yourself to rise to and accept the challenge with relish.
This guide will help you to understand the wants and needs of the customer and help develop your negotiating strategy allowing you to take control of the process. You will then be able to recognise when to set a high price and when to make concessions so you can reach a mutually beneficial conclusion.
How can I understand what the customer wants?
The more you know about a customer, the better negotiating position you will put yourself in. Aim to understand a number of things.
- Their wants. What exactly are they asking for? Do they want all the features, or just select ones?
- Their supplementary wants. Are there any extras you can offer that they might want (i.e. free delivery/shipping)?
- Their position. How much can they realistically pay? How urgently do they need the product/service? Are their alternatives available to them?
- Their priorities. Is a low price a priority? Do they need delivery?
- Their other options. Do your competitors offer anything for the customer that you do not? Are they cheaper? Is their product/service of a higher quality?
How do I decide what to negotiate on during a sale?
Before you begin negotiating, establish and set your objectives. The areas you decide to negotiate on will depend on your business priorities when making a sale.
Price. What sort of price are you aiming to sell at? What is the lowest you would accept?
Volume. How much stock do you need to shift? Would you concede on price for a larger order?
Timing. Are you selling in a commonly profitable period, or a quieter one? Would you concede on price to make money in a difficult patch?
Cashflow. Do you need cash immediately? How will a sale affect your cashflow?
Repeat business. Would you concede on price to establish a good, long-term customer relationship?
Decide which of these areas you are prepared to negotiate on, and to what extent.
Cost your negotiable areas. Always know the limit of what you are prepared to settle for in any area.
Decide a pricing policy. Ensure none of the sales you make violate this.
Liaise with your partners and suppliers. You need to know that the possibilities are for them in advance.
Know the implications. Will more customers demand a discount if you begin to offer them in select cases?
How do I develop my negotiating strategy?
Sketch out an overall approach and set your objectives and priorities down in writing.
Know your strengths. What are the most attractive aspects of your offer? How will you highlight these?
Know your weaknesses. What are the least attractive aspects of your offer? How will you defend these?
Organise your negotiating team. Partner your most senior salespeople with the corresponding importance/seniority of the customer or account. Recruit specialists to act in areas that you are unfamiliar with (i.e. certain overseas markets).
How do I take control of a negotiation?
Set an agenda. Set out the terms and conditions of any offer you will make. You might want to ask the customer to itemise areas on which they are prepared to negotiate. Agree ground rules with the customer – convey the understanding that, until all the elements of the deal have been discussed and agreed up, nothing is final.
Ask questions and find out the customer’s position, and listen carefully to what they have to say and offer. Clarify points of difficulty and make sure your understanding of a point is mutual before settling.
Veil your position. Don’t let your customer know the limits of what you are prepared to negotiate – if they know your minimum price, they will demand it.
Recognise negotiating tactics and match any tricks or strategies your customer uses.
Take breaks and don’t be afraid to take your time to think about difficult points, or to consult anyone in your employ for advice.
How do I negotiate a high price for my offering?
Start high and highlight the beneficial component parts of the deal to begin with – don’t discuss the price immediately.
Set a psychologically attractive price as certain prices look much more reasonable than those only slightly higher – £99, in contrast to £100, for example.
Normalise the price by showing that it’s a standard for the industry/market, and that others have paid it. Indicate that discounts and concessions are unusual.
Offer non-price concessions by suggesting other concessions such as better payment terms, customised specifications, free delivery – before compromising on the price.
Finally, be reasonable. Seem judicious, but not obstinate. Customers will not want to deal with an uncompromising seller.
How do I know when to make concessions?
Concessions should only be made as a method of getting the things you truly value out of a deal.
Start out firm. Don’t let on immediately that you are prepared to make concessions.
Stay firm. Don’t concede on points too easily. Test your customers’ own limits.
Bargain with concessions. Only make concessions in return for settling another point of difficulty. This will put the customer under pressure, and help settle the deal.
Discount, judiciously. Offer bulk discounts to encourage larger orders, and retrospective discounts to encourage repeat business and customer loyalty. Don’t offer discounts just to curry favour, since the customer will soon see this discount as standard.
Don’t be scared to refuse discounts. The customer may have a great need for your product/service – be prepared to refuse requests for a discount if you feel they can’t afford to lose out on the purchase.
How do I conclude a sale?
Make sure both you and your customer have a deep and mutual understanding of every aspect of the deal. Summarise the agreement and make sure you both agree on all the points, and confirm this mutual understanding in writing.
Sweat the small stuff and make sure not to offer any unnecessary concessions as a way of speeding the deal to a close – negotiate over every detail, no matter how small.
Cope with last minute changes and don’t conclude the deal until every last detail has been settled and agreed upon, and you are both satisfied.
Finally, shake hands and make the agreement personal – the customer will honour it more.
How do I deal with contract issues?
Always write up a contract. Make sure it includes any clauses pertaining to your rights in the event of non-payment (the retaining of legal ownership, the right to delay delivery), as well as those limiting any liability you have.
Seek legal advice and request a quote from a solicitor, and balance this against the value of the deal, in the event of any issues arising.
How should I negotiate with repeat customers?
Meet them regularly and affirm why you are giving them a good deal, and dissuade them from looking abroad for a better deal.
Keep a record of sales and correspondence and use this to get an idea of their views and concerns. Offer them a separate contract and give them the guarantee of a fixed price for a year in return for a regular repeat order volume.