Wednesday, August 6, 2008

"Sharpening Your Pencil" a Little is Alright to Close a Deal

Many times, when a customer is right on the edge of doing business with you, they might ask you to sharpen your "pencil" just a little. Especially if it is large business deal, you will have to think really hard about whether or not you need to do this. If the deal is still profitable, my advice is to go ahead and get the dotted line signed.

I'm not talking about a huge price drop here, either. When I refer to sharpening the pencil, it requires a reduction in price by less than 5%. While your price might be justified and already strong, it is simply a last bit of leverage the customer is exercising on the "deal". Sure, you could hold your price and still get the business in many cases, but at worse the deal could fall apart if the customer gets the least bit insulted.

By agreeing to this concession, this also puts you in a position to ask for something in return. There will be no better time than now to get the type of quality referral we dream about as salespeople. I'm not talking about a name and a phone number here, either. This will be the best time to ask for a three-way lunch or personal referral letter to a prospect of huge importance that this customer knows. If you ask this in return for your price concession, your customer will gladly help you in this area as this will not cost them anything.

Negotiation is relevant in all aspects in life, and this includes sales. Don't ever be afraid to ask for something in return, especially if you are making a concession on price.

2 comments:

Paul Davis said...

Will,
I wholeheartedly agree. As a junior member of a sales team in a very large B2B deal I sat and watched my superiors loose a major deal $1MM plus because of the unwillingness of the Senior VP of Sales to budge on price. I called the plant manager involved about 2 weeks later and asked if I had given him 1% off on the deal would he have taken it. He quickly and emphatically declared that not only would he have, he wanted to know why I didn't follow my intuition and offer it to him. That lack of speaking up because I was the junior guy cost us not only that sale but multiple millions of sales thereafter due to the fact the company we were dealing with has multinational locales and this was the deal that was supposed to get my company back in their good graces.
Keep up the good thoughts. Paul Davis

From the Author: Will Fultz said...

Thanks for the comment, Paul. Yea, it was probably one of those guys who was taught that you never budge on price - period. 100% gross profit margin on $0 is still $0. Big accounts have to be handled a little bit different than your average customer.