Checklist: How do I negotiate prices and discounts with customers?

The features of the product are the tangible things that set the product or service aside from other products. For example some cars include features such as in-car entertainment or heated steering wheels and car seats. It is these features that differentiates your product from the competition. 

Features are all well and good but are pointless as a sales tool unless you explain the benefits of them to the customers. A salesman can point out all the mod cons in a new car but unless he can explain to the customer the benefits to them of having these features he will struggle to achieve his target price. For example a benefit could include low emissions, safety etc. Show the value to your customer.

Show your rationale in determining the sales price and do not drop the price instantly just to get the sale. It shows that your initial price wasn’t justified and you lose credibility. Explain the variables to the customer that would lead to a lower price e.g. ‘We can only reduce to that if you buy 200 units’ or ‘We can do it for that price, but it would have to be in a different colour or without a certain feature’.

It is possible that you may be on completely different pages in terms of price and product and so further discussions may just waste your time. Start discussions with an opening question like ‘What sort of price did you have in mind?’ or ‘Who do you currently use as your preferred supplier?’ In terms of the product, the features may add lots of value to your other customers who gain lots of benefit from these features, but unless this customer sees the value, they won’t want to pay extra for it.

Don’t be too pushy and don’t be too needy. It can come across as desperate. Following up from a meeting with a potential client straight after a meeting will lead them to think that the ‘deal’ will bring more benefit to you than to them. During the sales meeting, agree a ‘checkpoint’, something along the lines of: ‘We will leave you to look over the proposal, our details are all in there, do contact us if you have any questions but let’s catch up next Friday to see how we can take this further.' Then stick to it.

Be up front in relation to discounts. Most discounts require some sort of qualification i.e. buy 10, get one free. Stick to it, otherwise customers will take advantage of it. If you have to provide a discount to get them on board, explain that this is an introductory discount to allow you to prove your product or service to them, but agree at that point the ‘normal price’ once the introductory period is over. This may not be ordinary ‘commercial price’ but unless the normal price is agreed, the customer will think the introductory price will last forever. Discounts can be linked to cashflow, i.e. the price is 2% cheaper if part paid upfront or if the account is settled more quickly than your ordinary terms.

Don’t overpromise just to get the sale if it’s going to be impossible to deliver. You are just delaying the problem until later and you will lose credibility. Be honest in terms of deliverables. They will appreciate it more in the long term.