Price Negotiation: (160 - 165) Flashcards
Client Statement:
“Bottom line, your fees are too high.”
(You want to work with these people. You’d just like to see if they would come down a little. Say that they are about 10% too high. If they ask, that is compared to another competitor. With price out of the equation, you would go with them – they have the most experience, and you trust them. If they won’t come down, go with them anyway.)
Consultant Response:
“Compared to…?” “When you say too high?”
“What is the difference?” (Too big or workable?)
“How did they get that number?”
“Logistics? Value? Negotiation?”
Big = Yellow Light language: see Budget Cards; Trade off scope, timing, division of labor in a meaningful way? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Workable – take price out and see what happens.; If they would go with you – for what reasons? Does that justify price? Hold firm? Trade off scope, timing, division of labor in a meaningful way? Other small value exchange? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Client Statement: “Wow. You guys may be good – but not that good. Before we even talk about working together, you’ve got to sharpen your pencil on price.”
(You are inclined to work with these people. At the same time, they have a reputation for being high priced. In today’s economy, you can’t afford to pay any more than is necessary – and they are probably hungry. You want them, but they want you, too. You just really wouldn’t feel good moving forward with some kind of concession, at least 3 – 5% in fees or some other non-monetary concession. Tell them you want a 10% discount and just explain your reasoning straight out. You don’t want to compromise on scope, timing or division of labor. You just want something. Don’t agree to proceed unless they come up with some move in your direction, however small.)
Consultant Response:
“Which means…”
“What specifically did you have in mind?”
Big =
Yellow Light language: see Budget Cards; Trade off scope, timing, division of labor in a meaningful way? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Workable = take price out and see what happens.
If they would go with you – for what reasons? Does that justify price? Hold firm? Trade off scope, timing, division of labor in a meaningful way? Other small value exchange? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Client Statement: “You know I’m on your side. I want you guys in here. I’ll tell you straight up, price is a real stumbling block. For both our sakes, what can you do for me on price?”
(What you said is true. These people are your pick, and you defended them to the Executive Committee. The CEO approved your pick but said forcefully, “For heaven’s sake, see if you can get them to come down on price.” You feel your reputation as a smart business person and good negotiator is somewhat on the line. At the same time, you respect the consultants you’ve been working with. Out of pride you won’t share the real reason. Your gut feel is that anything within 5 – 1-% would make the CEO happy, and any “deal” you can make that at least creates that perception is a win for you.)
Consultant Response:
“I appreciate having you on our side, and we want to be here as well. What were you hoping we could do?”
Big =
Yellow Light language: see Budget Cards, Trade off scope, timing, division of labor in a meaningful way? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Workable = take price out and see what happens.
If they would go with you – for what reasons? Does that justify price? Hold firm? Trade off scope, timing, division of labor in a meaningful way? Other small value exchange? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Client Statement: “Look, if you do a good job on this project, you could end up doing a ton of business with us. Be more aggressive on price on this deal, get your foot in the door. Prove your worth. The possibilities are huge and it’s worth a little investment up front.”
(You are just being a good negotiator. Plus, you believe what you are saying. Be bold; ask for a 25% discount – they can make it up in volume. That number is not based on anything other than the idea you should start high and compromise downward. Say their biggest competitor is willing to “make an investment in a long-term relationship.” At the same time, you want them to do the job, so you have to keep them in the game. Play it out and see what kind of compromise you can get while still keeping them desirous of doing the work well.)
Consultant Response:
“I think what you are saying if good business, and I’m right with your thinking. In fact, that’s how we came up with this price. I gave you a volume discount without the volume. And if we’re both wrong and there Is not more business to come, I’m going to have some big-time explaining to do. In the spirit of mutual cooperation, is there any chance we could sign up a really big chunk of that future business now? If we could, I might be able to squeeze out a couple more percentage points.”
Option: “I heard what you are saying, and believe me, we are truly excited about the potential. I guess I have a concern, and I’d like to get your input. We already have been extremely aggressive on this price. And I’m afraid that when we prove our value and rightfully win more business, people will treat this introductory price as a ceiling, and we won’t be able to get the value that other clients are willing to invest in us. Eventually, that could hurt us both. (They might not attract our best resources.)
Also use Standard Pattern.
Client Statement: “I like what I’ve heard so far. I have to tell you, you guys are expensive.”
(You want to work with these people. They are higher than the competition by 10-30%. In reality, you feel they are worth it. They seem more capable and experienced, and this is a project that has to succeed or the company will suffer and you’ll get fired. This is one of those times where going with the more expensive option actually gives you some confidence. Still, you’d like them to come down in price. If they don’t, you will still go with them. If they give you any kind of discount or face-saving value exchange, accept it.)
Consultant Response:
“And…”
“Expensive compared to…”
Big =
Yellow Light Language: See Budget Cards; Trade off scope, timing, division of labor in meaningful way? Deal Shape: can we structure the deal in another way that would meet their concerns- and our needs as well? If we take more risk we need more reward than just our fees.
Workable = take price out and see what happens.
If they would go with you – for what reasons? Does that justify price? Hold firm? Trade off scope, timing, division of labor in a meaningful way? Other small value exchange? Deal Shape: can we structure the deal in another way that would meet their concerns – and our needs as well? If we take more risk we need more reward than just our fees.
Client Statement: “It’s no secret we’re number one in our industry. If you make this work for us, we both know you’ll get a lot more business because of this relationship. I want some financial consideration for that reality.”
(As a good business person, you believe this is true. Money is one way they can show their willingness to partner – maybe 5 – 10%. You would be willing to accept non-monetary “consideration” as well. You are okay with their price; you are really just looking for a sense of working together and a recognition of the position you and your company hold in the market. Play it out accordingly.)
Consultant Response:
“You’re right, that is no secret. We’ve taken into account on our pricing, and we’re counting on what you’re saying to be true. If anything, we knew we should put more in the price to allow for the fact we are going to do whatever it takes to make this work. The financial consideration we want you to get is the value we both believe is possible from this project.”
Use Standard Pattern.
Client Statement: “Look, I used to work at E&Y. I know what your rates are, what your margins are, how much you guys make each year, and I absolutely know you have room to come down on price.”
(This is true for you. You’ve been out of E&Y for over five years, but rates couldn’t have changed that much. Ask for a 15% discount based on your knowledge of what you feel their margins are. You won’t do the deal if they don’t give you a 10% fee reduction for the same scope. Timing and division of labor. They will give you a discount, they get the business.)
Consultant Response:
“If you were at E&Y, you probably saw partners who were good salespeople and terrific negotiators – and others who were great at delivery but horrible at negotiating fees. I’m one of the latter. I know I should raise all of our prices and let you negotiate me down. I just brought in my best price up front, feeling that the value produced makes this a great deal. Maybe I’ll learn the hard way. Not knowing how I arrived at this price what were you hoping I would do?”
Also use Standard Pattern.
Client Statement:
“I don’t pay full retail for anything. Go work on your price and get back to me.”
(That’s your stance, and you are sticking to it. You have to believe you are getting some kind of discount or you would cut off your nose to spite your face. How much is “some kind?” You choose.)
Consultant Response:
(You wouldn’t pay full retail for anything, anywhere, under any circumstances whatsoever? No matter how good the value?)
Option: “So all I have to do is how you that you aren’t paying full retail and we are okay?”
Option: “Well, rather than me go away, let’s just talk it through together now. I’m willing to be creative. Either we’ll find something that works for both of us – where we can have some fun and make some money – or we won’t. If not, hopefully we can shake hands and part friends. Help me out – what did you have in mind?
Also use Standard Pattern.
Client Statement:
“All of our vendors are giving us a 10% discount. That’s firm-wide, mandated from above. Don’t take it personally. It’s a condition of doing business.”
(This is true. You have to show the discount to get any deal approved. If hey meet the criteria, you will hire them.)
Consultant Response:
“I appreciate that. I’m very aware that’s the case – others in your company have told us the same thing – and we’ve already taken that into account in our pricing. Did you want us to show the regular price and then take off the discount?”
Client Statement:
“Do we want to work with you? Yes. Can we work with you? No. What you are quoting is far more than we can spend on this project. Had I known we were talking these kinds of numbers, I would have stopped this earlier.”
(They are twice what you can allocate. You are laying off people and closing offices. You do believe the project would help the bottom line – if it works. Even though you believe it most likely will, you just can’t take the risk. Three seems to be no way to proceed unless someone comes up with something very different than what is on the table.)
Consultant Response: “Obviously, no one qualified this person on money during the Resources Step.”
“How far apart are we?”
“Is Deal Shape an option?”
Also use Standard Pattern.
Client Statement:
“I don’t know how to break this to you. We won’t be able to proceed at this time because the money we expected to have just isn’t there.”
(This is true. The budget for this project was taken away. Even though you and your team fully believe that the value of the project is huge compared to the investment, you just aren’t allowed to spend money.)
Consultant Response:
“The money is there – it’s in the value of the project. One reason they don’t have the money, is the money they are forgoing by not doing the project.”
“Would they do it if they had the money?”
“Is a ‘Deal Shape’ possible? Can you do it on contingency for a percentage? Do you stand to make even more money if the project works?”
