1. Price Waterfall Analysis
Firms must understand how sensible the prices are that your current negotiation process is leading to.
1.1. Action plan.
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Plot the price paid against the number of units bought by the customer. Often it becomes evident that your best (high-volume) customers are paying more per unit than your less profitable customers. This is not a recipe for happy and long-term relationships.
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One often-recommended solution is to construct a ‘price waterfall’ chart. This allows you to work out the true net price for each customer.
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Start with ‘Transaction price’
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Net Rebate
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Net Allowance
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Net Discount
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Calculate final ‘Pocket Price’
2. Negotiation
Price often looms larger in sales reps minds than in repeat buyers minds. You do not know if the price is too high until you lose the sale
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Establish economic value before discussing price
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Be the first person to bring up price: If you dont talk price, your customer will.
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94% of sales reps do not talk price until their customer does
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1/3 will not say price ever, will only write it down or point
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B2B NEGOTIATIONS
2.0.1. Implement Pricing Policy via a Price Menu.
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Establish consistent, transparent criteria for discounting -Fixed prices, Flexible offers
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Never give ad-hoc discounts to repeat customers
• Reward loyalty and trial, not sheer volume
Study of 64 firms who dropped vendors
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Price was reason vendor was dropped 8.1% of the time
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70.2% delivery problem
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9.4% quality problem
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6.2% service problem
2.1. Say: Our price is X. Be firm. Do not be descriptive. Ban Phrases like:
• Regular, normal, list, book, lowest, best, reduced, basic, usual price The best I can do
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We can work a little on this price
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Our price is lower than anyone else
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Our price is less than a bag of chips per widget
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How does $100 sound to you? Am I in the