While there are surely more important things than crowd size for our politicians and news media to worry about, both groups have participated in a flurry of recent discussions of the expression “alternative facts”. While that is not a term often heard in negotiations, other erroneous statements are. You can improve your profitability by using the right tactics in responding to these alternative facts.
Remember that everyone, including your customer, operates in their own self interest. Often that means stretching the truth a bit. As evidence, consider how you behave as a buyer. Have you ever told a car salesman that another dealer offered the same car for a lower price, when it was not the exact same car? It happens all the time. That is why car sellers ask for documentation. Not all buyers are liars, but they are all looking out for themselves or their companies. Be ready to counter some of their claims during negotiations.
“Your products are exactly like your competitor’s “
First, don’t accept commoditization of your product. Your customer bought your product initially based on its value. Remind them of that. What are the differences in performance and durability? If your product lasts longer or performs better for the customer, they will realize cost reductions or revenue improvements from them. Even if you are selling the identical brand as your competitor, there are probably differences in service, delivery, reliability and availability. Make sure you identify these and sell the value of them. Make sure all your sales people understand these differences and are not trapped by the commodity mindset.
“It should only cost $Y to provide this product “
Procurement professionals like to estimate what something might cost to produce, and then negotiate your profit margin. Unfortunately, their estimate is not relevant. What is relevant is the total cost of the customer’s next best alternative compared to your price, including all the components of value. If the next best alternative is your customer making the product or providing the service themselves, there is a reason they are looking to you to provide it. And that reason is you are the expert, and there is much higher quality and lower risk if you, the professionals, provide it. Don’t get sucked into this debate about what it should cost to make your product or service. Stick to the topic that matters – your value versus alternatives.
It is easy to make the decision to switch providers of a product or service, but that usually comes with costs. There are uncertainties of how the new product or service will impact the customer’s business, plus new ordering systems, delivery schedules, billing and collections issues. The unknown quality of post-sale service is also a risk. If your customer tells you it does not cost anything to switch to a competitor, remember they are exaggerating.
Remember we all act in our own best interests. Your customers are trying to get the best deal for themselves or for their companies. They may tell little white lies or even big whoppers. Protect your profitability by responding appropriately to these “alternative facts”.
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