By: Ray Makela on April 26th, 2019
Maximizing Your Negotiation Leverage with Power Sources
Learn how to develop a stronger value proposition. These reasons will help you improve your negotiation leverage to sell on value rather than price.
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***Video Script ***
We often hear the complaint in our sales training workshops that the customer has all the power and they really only care about price. Really? If that’s what you believe then your only option is to lower your prices, and you’d better be the cheapest option or you’ll lose. The other option is to work hard to develop a stronger value proposition than the competition and convince yourself that you have a unique offering that solves the customer’s problem in ways that no other solution can. Why else would the customer choose your product or solution?
Selling has been defined as the transfer of confidence – when everything else is said and done, you need to convince yourself that you have the best solution and then transfer that confidence to your customer – enthusiastically and clearly. If you can’t, you should expect to get embroiled in a price war.
In the pressure to get the deal done, and especially if you haven’t convinced yourself of your superior solution, you may often give the customer more power than the situation warrants. They obviously have the power of the final decision and they often hold that over your head. “Do what we want (lower prices, provide additional services, accept our terms, etc.) or we’ll go somewhere else.” Yes, you will often need to negotiate on key items, but our goal is to reframe the conversation so that we’re on more equal ground. One tactic for doing this is to brainstorm all the reasons that you have more power than you realize, and perhaps the customer is limited in their power in ways you haven’t yet considered.
In preparing to improve negotiation leverage, it’s helpful to ask yourself a few pointed questions:
- “Why do I have more power than I may think?”
- “How is the customer’s power limited?”
- “Why would they need to go with us and our solution?”
The customer isn’t going to offer to disclose these issues to you – it’s your job to do our research, leverage customer coaches, ask great questions and figure out the two or three sources of power that can help you build confidence and support our negotiating position. When considering these power sources, it’s helpful to ask the questions “compared to what?” In other words, what are the customer’s alternatives (competition, do it themselves, do nothing) and how do you compare with these alternatives? Some examples of unique capabilities that give you more power include:
- Best solution or unique features they need (help them win).
- Ability to meet deadlines (need it now and we can deliver)
- Delivery capabilities (mitigate risk)
- Issues with competition (competition failed to deliver)
- Ability to tailor or customize the solution (address their unique needs)
- Customer relationship (listen and earn the business)
- Industry knowledge or expertise (we know their business)
For existing customers where you are already doing business, there are a few additional power sources that come into play, but you need to be very careful about when and how you use this leverage. You don’t want to abuse your relationship, but it is also helpful to consider why they went with you in the first place, and why it is probably easier, cheaper and more convenient for them to continue buying from you as opposed to bringing in someone new. This is why it is so critical to continue to deliver exceptional service to existing accounts – typically they would like to continue to use you unless you give them a reason to go elsewhere. Some of these power sources with existing customers include:
- Cost and difficulty switching to another vendor (time, effort of vetting other vendors)
- Existing contracts already in place (easier to use existing vendors)
- Status quo (too much effort to switch)
- Support for a previous decision (don’t want to look bad for switching)
By spending the time brainstorming and considering the unique components of your offering compared to their other alternatives, we can bolster our position and develop more confidence in your solution. You need to first convince yourself that there is no other solution that is more relevant or valuable to the customer than what you are offering, and then work very hard to help the customer see that you are the only viable option that meets their unique needs. If we are the only option available that truly solves their problem, price becomes much less important.
You may also enjoy these articles on Negotiations:
- Five Sales Negotiations Tactics to Use with Procurement
- 5 Counter Negotiation Tactics When Buyer Makes the First Offer
- 3 Types of Negotiation Tactics and How to Respond
- 13 Tactics to Prevent a Heated Price Negotiation
- Effective Sales Negotiation Process to Increase Leverage
About Ray Makela
Ray Makela is CEO and Managing Director at Sales Readiness Group (SRG). He oversees all client engagements as well as serves as a senior facilitator on sales management, coaching, negotiation and sales training workshops. Ray has over 20 years of management, consulting, and sales experience and writes frequently on best practices for coaching and developing sales teams.