5 Tactics Buyers Use to Get Better Terms and Lower Prices
By: Jason Murray, Chief Sales Officer, RAIN Group
The phrase win-win negotiation has such a nice ring to it. It appeals to our better instincts. If we adhere to the tenets of win-win negotiation, we not only get the best results, but also do it while maintaining our values that we can expand the pie, and everyone can come out better for it.
True, except when the person on the other side has their hand in your pocket.
Now, lest you think buyers are ‘good’ or buyers are ‘bad’, almost half of sellers say their buyers are neither, both, or something in between. In our Top Performance in Sales Negotiation Benchmark Report, we analysed data from 449 buyers (247 business buyers and 202 procurement professionals) who represented $2.59 billion in annual purchases made. We learned that buyers are mixed motive—employing both positional and win-win negotiation approaches in the same negotiation—somewhere between 37% and 45% of time. And about half the time, their approach is purely positional.
You should, indeed, think win-win. Always look for ways to add value to buyers. However, in those moments when the buyers themselves are looking to drive your prices lower, it’s often best to let them know that tactic might work on less experienced and skilled sellers, but it won’t work on you.
Note that it’s not best to simply call them out on it and say, “It won’t work.” The best way to express that is by simply responding in a way that puts you both on a better path, and signals you know what you’re doing.
The Most Effective Buyer Negotiation Tactics
On average, buyers admit to using three tactics in each negotiation. While some of these tactics are used to gain leverage or control the process, the most common and effective tactics have to do with gaining price concessions.
Of the 16 negotiation tactics that buyers use on sellers, these five rose to the top as the most effective from the buyers’ perspective:
1. One Last Thing: The buyer catches the seller at their most vulnerable point and the seller’s eagerness to get the deal done to wring out final concessions.
The buyer says: “I can get that signed today if you give this one last concession…”
2. Whack Back: A common buyer tactic where buyers ALWAYS push back on the first price offered.
The buyer says: “Your price is too high.”
3. Split the Difference: The buyer asks you to meet them in the middle, even though the middle may not be fair for you.
The buyer says: “Just meet me in the middle and let’s call it a day.”
4. Anchoring: The buyer shares a low budget up front to set the stage for bargaining to start at a low price.
The buyer says: “We’re looking to spend no more than $500,000 for this.”
5. Time and/or Competitive Pressure: Time and competitive pressure tactics can be real when a buyer wastes time and leaves little time to negotiate, or manufactured when a buyer suggest others may accept their offer if you don’t take it first. They can be used to either waste time or create urgency.
The buyer says: “I’m talking to your competitor, and I’m confident they’ll go for this.” Or, “I need the 50-page RFP response by midnight tomorrow.”
Responding to Buyer Negotiation Tactics
While each tactic requires its own response strategy, it’s always best to keep the 6 Essential Rules of Sales Negotiation in mind. Here are a few tips for responding to buyer tactics geared specifically to lower your price:
- Don’t cave on price. Our research shows that many sellers cave and give pure price concessions to buyers. Don’t be one of them. If you must lower the price, also lower the product or service agreement. Adjust the terms and conditions. Find something you can trade that justifies the price adjustment.
- Ask why? Whether it’s an outrageous request, unreasonable time pressure, a budget cap, or push back on price, always ask why and seek to understand what’s behind the request. While a request may be a ploy, it may also be the reality, or it can be a what-is-possible-today reality.
- Focus on buyer objectives and possibilities. Often buyers don’t yet know the value they’re going to get from working with you. Build value by focusing on buyer objectives and the possibilities for how to get there. Create value and price will become less of an issue.
- Know your BATNA. BATNA is an acronym for, best alternative to a negotiated agreement. When you know this, you know when it makes sense to continue to trade, make concessions, hold your ground, or walk away.
- Understand the buyer’s alternatives. Knowing the other options the buyer is considering will help you respond and position your offer, terms, and pricing favorably.
- Go first when it comes to sharing price. Don’t wait for buyers to anchor the price low. A best practice is to generally go first in a negotiation.
As a seller you are going to experience one, if not all, of these buyer tactics at some point in your negotiations, but especially right now given the current economic situation. Be prepared and know how to respond to come to fair agreement for all involved.
Find out more about AIM Sales short courses in partnership with RAIN Group.