Dec 5, 2022 • Podcast

What if my customer flexes their negotiating muscles?

Paul provides the necessary strategies to succeed when your customers try to “Walmart” you.

Show Notes

Never let any single customer become more than 20% of your business. That puts you in a terrible negotiating position.

Shift the conversation from “price” to “money.” Listen to find out more!

Create an army of internal champions. Internal champions may not have buying authority, but their opinion is their power.

Stop selling value to procurement-type buyers. They are the least likely to buy on value!

You, alone, make the choice whether to cut the price or not – not the customer. Hold the line!

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What if my customer flexes their negotiating muscles?

(Transcribed from podcast)

In the Wall Street Journal there was an article that appeared, oh, this is probably about three weeks ago now. The article was titled “Walmart’s New Muscle.” So this was in the weekend edition of the Wall Street Journal. And in this article, Walmart’s CEO made it clear that they are no longer going to pay high prices anymore. And this was a message, clearly, he was sending to suppliers that they were sick and tired. They’re taking an aggressive stance on basically paying higher prices. And yeah, sure, Walmart’s dealing with inflation and they’re doing their best to try to keep prices low for consumers. But the challenge we face as salespeople, is that our customers tend to use their negotiating leverage to get cheaper prices. And Walmart has been known for this. Some of the stories I hear from salespeople that sell to Walmart, it makes me wonder why on earth you would even want to do business with them. That’s what Walmart is doing right now, and that’s what prompted today’s episode.

So here’s what you can do as a salesperson. When your customers attempt to “Walmart” you (that’s what we’re going to call it when they try to strong-arm you into giving a discount), there are better ways to respond. And in today’s episode, I’m going to give you six ideas to help you flex your negotiating muscles when your customers try to “Walmart” you.

Before we get into that though, just a reminder, I know that, right now, you are facing increasing prices. You’re facing pressure from your customers to lower the price. Guys, there’s a better way to respond. In fact, that pricing challenge, that’s what sparked the Value-Added Selling revolution. So, make sure you go to Amazon or wherever you get your books. Pick up your copy of Value-Added Selling. This is your go-to guide to compete profitably. Even when customers beat you up on price, you can learn a process to proactively steer the conversation towards value. So you can pick up your book (I doubt they sell it at Walmart. And if they don’t buy it from them. Go to Amazon instead or wherever you buy your books.) You can get a copy of Value-Added Selling.

So don’t let your customers “Walmart” you. Here’s how you can flex your negotiating muscle. Tip number one—and this is so crucial—never let any one single customer become more than 20% of your overall business. This is just good business on your part. If you have a customer who accounts for more than 20% of your overall revenue, you are in a terrible position to negotiate, because that customer knows that you have to keep their business. And so, one of the things I encourage salespeople to do is to take a look at their individual territories. Look at their revenue numbers that they’re bringing in, and if there is one customer who’s bringing in more than 20%, you need to go out there and find new opportunities to lower that percentage.

If you sit down to a negotiating table and the other side knows that you have to do business with them, you’re more likely to discount. So, salespeople listening right now, if one customer accounts for more than 20%, you need to amp up your prospecting activity immediately and lower that percentage. So that’s tip number one.

Number two, shift the buyer’s focus to money and away from price. Okay, think about this. When the buyer is telling you your price is too high, “Your price is too high. We can no longer take on these increases,” shift the conversation to money. And by shifting the conversation to money, you open up new avenues on how you can help them make more money.

And here’s how you may frame this. You may say to the buyer, “Hey, you know, I understand pricing is a concern, but you’re focused on price because you want to make sure you make or save the most money. Is that it?” And the buyer will agree to that. Then once they agree to it, you start talking about other ways you help them save or make more money. Money is a much better conversation to have. So that’s tip number two.

Number three, create an army of internal champions. Internal champions are those individuals who may not have buying authority, but what they do have is their opinion, and their opinion is their power. Think about your best customer, and ask yourself, “Okay, who is selling my solution to my customer while I’m listening to this podcast?” That’s likely your internal champions. You think about internal champions—internal champions are your raving fans. These are the individuals who, oftentimes, do a better job of selling your solution than you do. And we’ve got to remember that even the toughest procurement buyer has a greater fear than paying a little more than they expected, and that is the fear of disappointing their team. The fear of getting that call at 3:00 AM in the morning saying, “Hey, why did you decide to switch to that supplier? They’re doing a terrible job.” That fear is more potent than their fear of overpaying for something. We can leverage that. And how you do that is you rely on your internal champions to help you sell that solution.

Here’s how it may look. Let’s say you’ve got, I don’t know, three or four main contacts at your customer—one of which is procurement. You know you’re having to interact with procurement. Procurement’s giving you some pricing pressure. You need to reach out to the other three or four people that are involved and ask for their help, ask for their support. Have them share their endorsement with that procurement buyer. And think about it, from a buyer’s perspective, once they’re getting all this pressure from their internal team, they’re not going to go against that. Make sure you’re utilizing your internal champions.

Tip number four, set the bar so high that your competition is going to falter. You know, when we think about it, expectations are the true benchmarks of satisfaction. So if we raise a high bar and then they decide to go to our competition, they’re going to be dissatisfied. In fact, this happened. I was with a client of mine up in, Fort Wayne, Indiana just a few weeks ago, and one of their sellers was telling a story about how a customer kept beating him up on price. And, finally, the seller had enough. He said, “Alright. Here’s our price. We’re not lowering it.”

The customer decided to go to the competition. When the customer went to the competition, after a few months, the service was terrible. In fact, it got so bad, he was getting so many complaints from all of his employees, he finally called up the salesperson and said, “Look, could you come in? Could you meet with me? We’ve got to figure this out. We’ve got to fix it. We want you back.” Now, not only did the salesperson win the business back, he was able to push through a price increase at the same time. And, basically, the customer said, “Look, if I ever try and tell you I’m leaving again because of price, remind me. Remind me of this situation right now,” although the customer used some colorful language to help describe it. The key was, he set the bar so high that the competition was going to fail when they came in here. So if you set the bar high enough, you are going to win.

Hey, what’s ironic here is Sam Walton actually said, “High expectations are the key to everything.” Good advice, Sam.

Number five—this one drives me nuts—drives me absolutely nuts. Stop selling value to procurement. Just stop. The research shows that salespeople continue to spend a majority of their time selling to procurement-type buyers. Think about this. Fundamentally, you’re selling to the one decision maker who is the least likely to buy on value. Go around them, go above them. Find other people that can influence the decision and work that angle, but quit sitting down with procurement, because once you do, they’re going to block you from the rest of the organization and they’re going to focus the conversation on price.

In Value-Added Selling, I share three strategies to help you go around procurement. Procurement is going to be part of the process, right? I get it. And I don’t want you to think of them as the enemy. They’re not the enemy, they’re the customer, but they’re the ones least likely to buy in your value-added solution. You’re trying to help your customer make better, long range decisions, and you’re selling that concept to a transactional-minded buyer. We’ve got to go around them; we’ve got to go above them. And I know this is a constant challenge facing salespeople. That’s why we focus on helping you get past procurement. So just stop selling to procurement.

Now, point number six. This is the last piece we’ll cover. You have to adjust your attitude before you even consider adjusting your price. Now, there are a few attitudes I want to highlight here. For some reason, it’s common to criticize successful, profitable companies in today’s world. That’s just become so common. Like, it’s almost as if, if you’re making money as a profitable organization, you are the enemy, and that’s not the case. It’s good to earn profit. Earning profit showcases that you are a good business.

And not only that, most of the profitable companies that I know, that I interact with, are also some of the most generous companies that are giving back to their communities and to charities and all that. So, profit is a good thing. It helps you become a better business. So, first and foremost, get the mindset that it’s okay, and that it’s a good thing to earn profit. It’s likely that your website ends in .com, not .org, so you’ve earned the right to be a for-profit organization. Get that in your head.

The second attitude adjustment is to realize you, alone, control the price. No one has more control over the price than you. The customer may request a discount, but you don’t have to give it. The competition may do something stupid, you don’t have to follow suit. Don’t relinquish control. That’s a bad mindset. first of all. It’s minimizing the control you have over the situation. You alone cut the price. Nobody else does. Remember that as you consider how to move forward.

And finally, adjustment number three. Price is not the most important factor. Before you enter an intense negotiation with your customer, review some of your previous successes. By doing that, it’s going to show you proof that price is not the most important thing. I want you to think about scenarios where you were asked to discount, but you held the line, and you still won the business. Review those successes. Remind yourself that it’s not all about price because it is not. Customers will make you think that. They’re doing it to gain a negotiating edge. You’ve got to get your head right when you go in there and negotiate. So use those three attitude adjustments.

So we gave you six ideas—six things to think about as you go out there. And if your customers try to flex on you, you can flex back. Use these six ideas. Remember to have the right attitude. And remember to go against conventional wisdom. If everyone else is discounting, take the road less traveled. In fact, our research shows that 75% of salespeople will discount when the buyer requests it. So, conventionally speaking, most salespeople are going to discount. That’s why companies like Walmart know that by flexing and doing what they’re doing right now, that is going to work to their advantage. But take Sam Walton’s advice here as well. Sam Walton said, “Swim upstream. Go the other way. Ignore conventional wisdom.”

So as you muster the courage to stand firm, consider those sage words from Sam Walton. Again, he said, “Swim upstream. Go the other way. Ignore conventional wisdom.” So that means you’ve got to stand firm. Use these six ideas to help.

Make it a big day.

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