Here’s a trick question: Where do most pricing negotiations occur?
Not-so-obvious answer: With yourself, or others, inside your organization.
Now, that may seem like a bold assertion. And, many of the statistics wonks out there are probably asking, “What’s your sample size on that?”
But if you think about your own day-to-day experiences for just a minute, you’ll know—intuitively—that it rings true.
As a product manager, how many internal meetings do you hold about where to price a new product or line? As a pricing person, how many back-and-forth discussions do you have with salespeople about how to price certain pieces of business? As a salesperson, how much debate do you have—in your own mind—about what prices to quote a given customer?
The fact is, a lot of price negotiation occurs before a price is even presented to a prospect in the marketplace. And, whether this negotiation ultimately results in better or worse prices in the marketplace depends on a number of factors:
- Do people in your organization really understand the value your offerings provide?
- Do your people really understand prospects’ motivations and needs?
- Do people in your company understand competitive dynamics and responses?
- Does everyone involved have a grasp of effective pricing strategies, models, and approaches?
- Is the situation free from fear and emotions? (The last lost deal…the quota that needs to be hit…)
The point is that the more you and your organization know, the better. Negotiation for the “right” price often starts long before your customer sees a quote. If you and your team are well equipped with knowledge on your market and on pricing approaches, that pre-negotiation negotiation will be much more effective.
So be sure you’re laying the right foundation within your organization prior to even discussing what the price should be. If you don’t, you could be giving your prospects the upper-hand before they even start negotiating with you.
