Do you find yourself having to discount to win business? What would discounting 2% less mean to your business? Relatively speaking, that might not sound like much, and that is what your customers want you to think. However, your company is unique because of its capabilities, products, expertise, and value despite what others say or think. Some may even describe your services and products as a commodity.
If your average sale is $20K, 2% is an additional $400. If it's $1 million, you'll reap an extra $20K. You can do the math.
Another way to look at the 2 percent is to ask yourself how much you would have to sell to make up the difference. For example, if your profit margin is 15%, you would have to sell an additional $2,667 to net another $400 profit. Even more startling is the $20K at 15%. You would need to sell an additional $133,334 to make up that difference!
Two entities have a vested interest in ensuring you think of your products and services as commodities, your customers, and your competitors. When you think of your products and services as commodities, most of your conversations will naturally focus on price and discounts. This causes many salespeople to feel like they are simply "order takers" with little power or influence. If that were the case, many companies would encourage customers to order online, avoiding the costs of salespeople and their associated salaries and expenses. One of your main jobs as a salesperson is to protect your company's margins!
While there are always customers who will buy the lowest price regardless of any enhanced value, there are certainly enough others who recognize the extraordinary benefits that your company provides. Look at all the expensive cars on the road if you need a reminder. As illustrated above, you must ask yourself: "What would an additional one or two percentage points in revenue do for my bottom line?" One or two percentage points would be a conservative expectation should you re-orient your mindset, strategies, and tactics by distinguishing your company from the other so-called "commodity" suppliers.
Two key factors in negotiating, power and influence, are both a state of mind. They are perceptions. If you perceive your customer has all the power and influence, then they do. If you believe you have the power and influence, then you do. Remember, you can ultimately walk away or choose not to make a deal.
Changing an individual or team's mental approach to negotiating is difficult. Two critical factors play into the perception of value in the minds of you and your customer. The first is your ability to financially justify the benefits of what you sell to your customers and the second is the ability to defend your price with appropriate negotiating strategies. The two go hand in hand, and executing one without the other is challenging. How would an additional 2% or more impact your company's bottom line?
So help your team protect your company's margin. Check out our Financial Justification and Value-Added Negotiating courses.