Price negotiation: What to say when a competitor undercuts you
You have worked hard to reach an advantageous opportunity as a sales manager. You invested a lot of time to qualify a building constructor or planner, to present your product to him and to work on your relationship. The prospect shows interest in you and your product. Thus, you are eager to close the deal swiftly. Suddenly your prospects tell you that he is in contact with one of your competitors and he offered him a better price for his product. You are now in a price negotiation. How should you react? The simple answer: Get out of the price negotiation!
Focus on the product value
58% of buyers want to talk about the price during the first sales call, while 65% of salespeople want to keep the conversation on goals. Try to lead the discussion towards other aspects of your product than the price. For example, you can answer him with your questions. Here is a case: “Let us talk about the value of the product for a moment. Do you think that our product has a higher value and better quality than our competitors? In the case of the price being the only different aspect, you should choose this product for your construction project as this makes more sense to you. My job is to help you to find the best possible solution for your construction site.”
His reaction will now show his real interests. There are two kinds of potential buyers:
1. The tough guy
He doesn’t care about throwing you a curveball. Most likely, he will talk to you like to an old friend and praise the benefits of your product, just to tell you afterward that this doesn’t justify the high price. You should not care too much. You know the value and quality of your product. The price is legit. Never sell your product below the fair value. Once you go down this road, it will be hard to turn around. Besides, you wouldn’t want to discriminate your other clients, who already paid the full price. Negotiating with this type of prospect is challenging. But insisting on your position will pay off in the future. Even if you lose the buyer, for now, he will come around eventually. We’ll dig deeper into this later.
2. The wrong prospect
If he is looking for the cheapest possible product for his construction project, then let him go with it. Of course, if selling to the lowest price is your business model, then this advice doesn’t apply. However, if your goal is valued maximization, you should keep your hands off this prospect. He will change his strategy in the future as the long-term effects of buying the cheapest products are negative. At that time, this type of prospect could become a valuable opportunity again. You should always help your prospect to reach his goal. Building up great relationships can always lead to lucrative opportunities in the future. This is independent of the type of prospect.
Focus on the relationship
It is weird to advise your prospect to buy the product of your competitor, for sure. But adding value to your prospect is the basis of your business. As long as you do not speak badly about your product, you should do whatever it takes to support your prospect. You should even offer him to achieve a further lower price by sending him an offer which he can use in his price negotiation with your competitor.
So what will happen then? That again depends on the type of prospect.
1. The tough guy
He will understand that you try to help him to reach the maximum for his construction project. Your reaction and your confidence in your product will convey to him that your product is worth its price. Additionally, you establish a stronger relationship and a feeling of team spirit. This is the basis for possible fruitful cooperation in the future.
2. The wrong prospect
This prospect is going to buy your competitor’s product. And now he has to deal with its low quality. Construction defects can quickly lead to necessary reworks or claims for compensation. When your prospect understands that the low quality does not serve him well, he will come back to you shortly, as he remembers your firm belief in your product.
Relationship first
Remember to get out of the price negotiation. Avoid chasing prospects who are only looking for the cheapest possible solution. Businesses are not successful when focussing on single sales exclusively. One single deal can never compete with the benefits of a healthy long-term relationship. We hope that these tips help you to deal with the tricky situation of price negotiation. If you have further suggestions or ideas on how to respond in a similar situation, feel free to leave us a comment.
| Read more about the topic time management in our blog post Inbox Zero |
| Read more about the construction site in our blog post EU construction sector in 2018 |
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Awesome article! very useful and informative. I am certainly gonna use these tips in the future to get the most out of it.