Your heart soars when the customer says “you have won the business!”
Seconds later your stomach knots up when you hear “Now let’s talk Price!”
How often does this happen?
Even when you do everything right (or thought you did), this “Now let’s talk Price” comes up when you think you should be signing the contract and scheduling the work or shipping the product.
You made sure you understood what the customer wanted, their time frames, their expectations, the problem they want solved and the role they wanted to play in this relationship. You developed an offer to meet the customer’s needs. You reviewed the offer with the customer, and they said you were right on target. Based on the customer’s final feedback, you finalized your offer including all the terms and conditions with the customer, but now you hear “let’s talk Price!”
At this point, you need to be very clear on the difference between “removing cost and giving up margin” and you’d better know the difference between integrity and needy.
First, let’s talk about the difference between integrity and needy. If you did everything right, understood the customer’s goals, problems, engagement model, etc. and developed the best possible offer to meet or exceed the customer’s requirements while making a reasonable return for the value delivered and the price reflects that to remain in “integrity,” you must respond to “Now let’s talk Price” with only one comment “does that mean your needs changed, and you want a different scope of work than the one we gave you?”
Any other response from you like “Don’t worry I think I can get a 10% discount for you,” destroys your credibility and tells the buyer you inflated the price. If you inflated the price, what else is not as represented.
If your relationship and process for engaging the customer has integrity, then so must your price. If you have been working to help the customer improve their business and make more money, why would the customer not expect you to do the same thing? If you gave the customer a fair price based on a value-added offer to meet the customer’s needs, you will earn a corresponding return.
Many buyers use “Now let’s talk Price” purely to test your integrity. The good customers want good vendors / partners not ones they have to watch because they can’t trust them.
For goodness sake, make sure you pass the integrity test!
Next let’s talk about the difference between “removing costs and giving away margin.”
Integrity goes both ways, and every company should be as clear as possible about the integrity of those they do business with. If in the example above you maintained your integrity in your relationship with the customer and they “really” want you to give up your margin to fund their business, you have learned a lot about this customer.
No matter what they say, their behavior is a win/lose model. They want to win, and if that means you lose, OK.
Now, let’s think about ways you can work together to remove cost so both of you win.
The customer needs what you offered, but they don’t have all the available resources for everything you proposed. How can you retain your value received and meet their needs?
If the customer wants you to give up margin for a long-term guaranteed relationship, then the customer is helping you reduce your cost of sales, increase your volume discounts on the products or services you have to purchase, reduce your interest cost if you have schedule payments from them over the long-term. With a long-term agreement, you may be able to acquire things or staff that you are paying a premium for in the short-term under arms-length contracts.
Let’s say the customer can’t do a long-term agreement. Then how about they take over more of the work that you were going to subcontract for anyway or they divide the project between this year and next year or reduce the scope of work to get the core outcomes they need and use the benefits from the core project to fund the additional services.
Every business model is different and provides options for taking cost out of a relationship with clients while maintaining both the quality of the deliverable and your margin.
Developing both revenue and account strategies is part of an intentional offer to the customer that meets their needs and maintains your margin.
No business has the right to ask you to do business at a loss and if you decide to fund someone else’s business by lowering your margin, make sure you get at least corresponding benefits back.
Make sure your price always “stays in integrity.” Do account strategies that include SOW (Statement of Work) options for the various ways to get the customer what they need, while you make a reasonable return. Make sure the customer gets their required outcomes, you maintain your integrity, receive fair margin, and you have ways to decrease SOW costs for the customer for a win/win result.