Negotiation: from price to value
The negotiation between seller and buyer can be defined as the meeting of the balance point between the two parties. As a rule, the selling party focuses on obtaining the maximum possible profit from the transaction, while the buying party focuses on what maximises the offer value. As the value to the customer is the difference between utility and price, the usual focus of the sales teams is price, sometimes neglecting the value component. How to change the negotiation focus from price to value and utility?
When buying essential everyday goods, it takes minutes or even seconds to make the decision to take product A of brand X instead of brand Y. Remembering that Value = Utility – Price, some consumers only take into consideration the price they will pay for the product, since they consider that both options deliver the same utility. An alternative example may be the choice of products from organic farming or from a local brand, to which a higher price is associated, which some consumers are willing to accept for the increase in value that these products provide them.
In any purchase situation, whether it is a product in the supermarket, a car for the family or even a house for own accommodation, there is a process of analysis inherent to every man-made decision. As a rule, the greater the monetary value you must invest to meet a need, the longer it will take for this process to be completed. Regardless of the situation in question, the weight of the two components is always present, and a correct exposure of the value offered can influence the buyer to make a higher investment.
Business to Business Negotiation (B2B)
These concepts also apply in the B2B universe since the buyer goes through the same rational process. In this context, whenever the non-assignment or negotiation of something focuses on the price to be paid, it means that the buyer perceives that the value of the product/service offered is not equivalent to the established price. In most business negotiations, from the buyer’s point of view, the seller is a figure that generates some discomfort, due to the perception that he/she only aims at the maximum profit. To counterbalance this perception, the commercial teams often assume a public relations approach, where their main goal is to ensure a satisfactory relationship with their customer portfolio. With this approach, the commercial teams do not challenge the customer, they do not seek to understand their hidden needs and are therefore not able to maximize the real value of the offer under negotiation.
Change to value discussion
The secret to a favourable negotiation, which does not neglect the relationship with the customer, is to build a win-win situation, i.e. a point of balance where both parties gain from the agreement reached. For this to be possible, the sales teams must radically change their sales behaviour. This change is essentially based on devoting time and effort to planning and preparation of interactions with potential customers.
The members of the sales teams must aim to be those who know best the product or service of their organisation. They must be able to describe their differentiating components and characteristics, as well as their bottlenecks and weakest points. Additionally, they must know the products of the main competitors and understand how these differ from the offer to be made. When preparing the negotiation with the potential customer, it is necessary to combine this product knowledge with their profile.
Knowledge of the customer’s profile includes the previous relationship with the organisation, purchase history, preferences, and hidden opportunities. By integrating this information, it is possible to define the specific purpose of the meeting, build the argument around the benefits of the solution that will be presented and, above all, prepare arguments for potential objections that may arise. With this preparation, you also begin to learn how to challenge and teach the customer in everything related to the use of your offer, suggesting disruptive and differentiating solutions.
Monitoring the evolution of the different leads and analysing the reasons for success and failure should be part of the commercial teams’ routines. With this retrospective analysis, it is possible to draw valuable conclusions that may help to correct behaviours or acquire new skills that will contribute to improve the conversion rate.
Negotiation is not a comfortable time for either party, as it often ends in a price discussion leading to frustration for those involved. However, it is up to the commercial teams to turn this moment into something of added value. This requires changing habits and behaviours, focused on what really matters to the customers – the value and utility. Working so that each salesperson can challenge and surprise their customers, will allow them to become true business partners.
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