Pricing for a market that negotiates

Jun 13, 2019

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Pricing for a market that negotiates

In markets where buyers expect to negotiate, a price list is not a statement of what you charge. It is the opening position, and it should be designed as one.

Discount discipline beats price level

Most companies set a reasonable list price and then lose margin through undocumented discounting. Nobody decided to reduce the price by fifteen per cent; it happened one deal at a time, each justified individually.

The fix is not a firmer list price. It is a written discount ladder: what a salesperson can give without asking, what needs approval, and what is never given. Then measure realised price, not list price, by customer and by salesperson. The variation will surprise you.

Give something for the concession

Every discount should buy something: a longer commitment, faster payment, a larger volume, a reference. A concession given for nothing teaches the buyer that the next one is also available for nothing.

This is the difference between negotiating and conceding, and it is mostly a matter of preparation rather than nerve.

Know your walk-away before the meeting

Calculate the price below which the business is not worth having — including the cost of servicing that customer, not just the cost of goods. Some customers are expensive to serve and the accounts rarely show it.

Having that number written down before the conversation is what allows you to stop. Without it, the pressure in the room decides.

Watch what gets priced to zero

Delivery, installation, training, support, urgent turnaround. In negotiated markets these are routinely given away to close, then become permanent expectations.

Price them separately from the start, even at a nominal amount. It is far easier to discount a stated charge than to introduce one later for something the customer has always had for free.

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