22. Why should you seem reluctant to give a discount?
A sales rep recently told me a great story about how to keep from giving a discount or from having to negotiate the price. He was having the brakes adjusted on his car and the cost was $40. When he asked, "is that the best you can do" here is how he responded: "If you want to negotiate the price – the break job will cost you $50!"
Think about what a great answer that is. What is he really saying? He is saying that I am already giving you the best price I can. He is saying that if you want to negotiate I will raise the price to $50 and we can see if you can get me down to the bottom price of $40.
Try it. If someone asks if that is the best you can offer, quote a higher price and say that is the price for folks who want to negotiate. Or say that is what everyone else is paying and you have already cut the price.
That brings up a good question: Is it part of a customer's job to ask you for a discount? Should you ask for a discount when you buy something? My answer to both questions is absolutely yes! If the sales person didn’t ask the mechanic for a discount he would never have learned that great strategy.
I am reluctant with everything I buy and you should be too. The only reason I let go of a dollar bill is to get a better grip on it. I work hard for my money and I want to stretch it as far as I can. So do you and so do your customers. I want to get every ounce of value out of every dollar I spend.
It takes practice to be a reluctant buyer but the dividends are great. By being a reluctant buyer you will learn how to buy everything you buy for less. By being a reluctant seller you will be able to sell everything you sell for more. Just as you play poker to win, not just to make the other players like you.
Your price is based on a lot of factors and making a profit is not optional. You have to get paid. When you study the reactions of people who are trying to sell something to you, a reluctant buyer, you will learn the best strategies as well as see them in action.
It takes GUTS to ask for things and the more you do it the better you are at it. You might be called a few names in the process, but so what.
This reluctance should also be used when you are selling something and asked to lower your price. NEVER GIVE IN TOO EASILY! Never lower your price without setting up several roadblocks, speed bumps and detours.
Let's say I have a car for sale in my driveway with a $1500 sign. You pull in. I immediately go out to the car and take the price down. I have a new sign that says $2500. I explain that I didn't realize the prices were so high and the car dealership would give me so much for my trade-in. I tell you that I will let the car go for $1500 if you try it out and like it and buy it now. But if you come back tomorrow the price will be $2500. You buy it at $1500, the price I wanted to sell it to you for.
You might think that's a little cruel. You can tell that to the person standing next to you in the unemployment line. Or you can get a job at the post office where the price of a stamp is the price you pay! (Sorry, you can probably tell I had to learn all this the hard way).
By lowering your price reluctantly you are actually adding value to your product or service. If you lower your price too easily you will actually CHEAT THE BUYER out of the good feeling they get when they know they got you to come down.
I was sitting on the plane and the woman sitting next to me was in advertising sales. When I asked her what her biggest mistake she ever made in sales, here is what she told me. "I was calling on a pawn shop with my sales manager. He told me the bottom line price for the advertising program was $1,500, but to try to get $2,000 and go down slowly and reluctantly so you "add value" to the program. When the customer asked for the price I made a huge mistake and said $1,500! The customer ended up paying $1,400 and I ended up getting chewed out!"
Here is another reason you should be slightly reluctant when giving a price reduction. An accountant once told me that I should forget the term "gross profit" and replace it with "contribution to overhead." He said that every time I lower the price I am giving part of the company away! The warehouse cost is .04%, the sales department cost is .04%, the transportation department is another .04%, administration cost is .04% and the bottom line should be at least .04%. When you cut your price below .20% think about what part of the company you are cutting out and giving away! Which vacation day would you like to give up? How much do you want you insurance deductible to go up? Which customer service person would they like to tell that they can't buy shoes for their kids this week, etc.
You don't want to appear too hungry for the sale or too eager to give everything away. The buyer will be suspicious and begin to wonder why you are so anxious to make a sale.
When you do have to lower your price never come down in equal increments. If you do you will set up a pattern. The customer will know that to get a discount all they have to do is follow your "pattern" and get a lower price.
If someone asks for a discount, after you've presented your services and quoted a price then you say: "Sure, I can for $400 but that would be without the ___________ and the ________." You actually eliminate things so that they understand that as the price shrinks so does value.
Another good response when asked to discount your price is to use the "fork in the road" response. Our company came to a "fork in the road" and had to decide if we were going to be simply a price seller or if we were going to be a value seller. We chose to be a value seller and the customers we serve know that in the long run, the value of our high quality products along with our service and support, is like an insurance policy that helps them become successful.
It is necessary to discount your price from time to time. However, you deserve to get paid. Ask your customer if they have any employees who work without being paid. What kind of quality would you expect them to produce? What level of customer service would you expect them to provide to your customers? How much do you think they would end up stealing from you over time?
If your customer's business is down and they are trying to "cut their way into profitability" they are doomed to fail. The only way to increase business and get more customers is by doing it the old fashioned way. By selling!