30. Why should you never make the first offer?
An experienced buyer will very seldom, if ever, accept your first price. An experienced seller knows this and always presents a price higher than they expect to get.
A buyer will feel like they are not doing their job if they don't get a sales person to move down a little on price. As a seller, if you don't give them a price reduction they will feel like you out-smarted them.
When someone asks you for a price on a single item that you know is price sensitive, try and get them to give you the price they are looking for.
For example: As you start looking up the price or waiting for your computer to boot up, you might respond with: “I’ll be happy to give you a price on that, by the way, what price are you looking for?”
If you do get the buyer to tell you how much he or she is willing to pay, act slightly shocked as if their opening price is low!
When you are selling, always start at your highest price whenever possible. No matter what the customer may say (such as "This is a one-time only offer; take it or leave it!"), don't take it! If they really want to make the purchase, they'll move from that price.
Don't be shy when you state your original price - put on a show of confidence. Amateurs almost always hesitate when giving their first price and professionals very seldom do.
The more you ask for in the beginning, the better. You're not being greedy - you're being smart. Eventually you will meet an acceptable compromise, but usually not in the beginning.
When you ask for a higher price, you can always come down. If you begin by asking for a higher price and you know you will settle for the lower price, everyone comes out a winner. If you start low you may end up having to go ever lower.
Here’s an example: I was in Ft Myers Florida taking a tour of Thomas Edison’s winter home and workshop. The tour guide told a story I will never forget.
Thomas Edison had invented the “Ticker Tape” machine and was in the buyer's office in New York to sell it for use in the New York Stock Exchange. The buyer asked Edison how much he wanted for it. Edison said, “How much will you give me?” The buyer said "$25,000". Edison said, “I’ll take it!”
Later they were having dinner and the buyer said to Edison, “you were mighty quick to jump on that $25,000, I would have paid all the way up to $50,000.” Edison said, “I would have taken $5,000.”
That was a great story – but I couldn’t help but wonder. Edison must have been doing cartwheels in his mind thinking that he was getting FIVE TIMES MORE THAN WHAT HE WAS GOING TO ASK! However, what if Edison would have said, “$25,000 – is that the best you can do?” The buyer might have gone up to $40,000.
Now Edison would really have a hard time concealing his excitement! Once again, what if Edison would have said “are you sure that is the best you can do – this is the only one like it in the world – it will do this and this and this?” The buyer might have gone up to $50,000.”
Here is another real live example. I was at a convention sitting next to me was a gentlemen who had recently sold his company. He told me how he started in his garage and built the business in to huge success. When he went to negotiate the sale the buyers offered him thirty million dollars - he immediately took it. One year later they sold the company for SIXTY MILLION DOLLARS.
He said if he had only hesitated and not accepted their first offer he might have added TEN MORE MILLION to the selling price!
Of course, there may be times when you know what the competition has priced a certain item and to get the business you might go in with a lower price right up front. Other times you may be dealing with a regular customer and they might consider it a pain in the neck to have to negotiate a price week after week.
Remember the bottom line of your first offer is to view it as another tool in your strategy inventory. There are times when it would be unwise to give your lowest price first with nowhere to go - and there are other times when it would be unwise to give your highest price first as you might scare off a potential new customer.
However, if they make the first offer, you usually know which way to go on your counter offer.
Comments:
Before the first offer, be sure you have done your homework. Know the lowest price you can offer. To start at your lowest price leaves no room for negotiation, which is probably, is not the smartest move. Sometimes that’s ok, some customers just want your price; they don’t have time or maybe the desire to play the back and forth negotiating game. Unfortunately many customers do not accept the first offer. Customers love to feel that they have got a deal! Start higher, negotiate- You win, the customer wins too.
Brooke Knight
It is true that these strategies are practiced worldwide. When I lived in Saudi Arabia, if you did not bargain with the shop keeper, they had no respect for you and would not come down from their highest price. If you did bargain with them, you earned their respect and their friendship, and eventually the lowest price.
Kimberly Burgess
Ahhhh in Poker (I mean sales) the adage has never been truer: The one who blinks first loses. This phenomenon is not limited to one vertical (sales) – it is true globally from the school yards, and sales offices all the way to World Peace Negotiations!
First Offer: there is NO way to avoid it; one of you HAS to go first.
Here are some strategies to help you through the process.
Strategies:
1) The Preemptive Strike – You go first and ask what price range they are looking in.
2) The Volley- You are asked first about price- use Bob’s technique – lob the question back and inquire what range they are looking at.
3) The Double Volley- This can be a little tricky- They asked first, you lobbed it back and then they lobbed it back to you. If you don’t answer this could go on a while and the end product will probably not be very productive. The best answer will be a range- State your High Number and you MID number. Don’t let them have your bottom line.
4) The Slide: Here you go 1st and list a range (once again High to Medium) and ask where in that range they fall.
Let the negotiations begin.
NOTE: No strategy will work if you have not PREPARED before hand. You need to calculate what the highest (FAIR) profit margin number would be, what your mid point is and what is the lowest you can go and STILL be profitable. It is very important to know when the price/agreement is NO LONGER BENEFICIAL to you and your company. You must be prepared to walk away when you reach this point.
Know when to hold them and know when to fold them,
Teresa Cloninger
I was working with a new salesperson. We went into an account where we knew it was going to be price sensitive. We gave them good prices on almost every item except for their number one item, chicken wings.
I knew from research before seeing this customer that he was getting a great price on this product. We were in the ball park but not where he is now. I knew he was proud of his price he was receiving. The new sales person wanted to go rock bottom on wings but I had another strategy.
I told him our pricing was fair and he would be happy with our proposal. BUT I said, ignore the wing price because I wanted to get more detailed information. After a few questions, he disclosed how much higher we were.
I then told him if we were good on the other pricing, I will need his help with our buyers to get the wing price. I made him feel proud of his wing price.
Our goal is to be competitive on all other items, and keep the same wing price that he is paying now. We could go lower but why?
Roland Degregorio
"Don't be shy when you state your original price - put on a show of confidence. Amateurs almost always hesitate when giving their first price and professionals very seldom do."