Typically my company's price negotiations with customers...

April 30, 2008
THE TALK...

The Talk, Page 2...

Survey Results for 04/30/2008:

Typically my company's price negotiations with customers:

Avoid bending on price. We take the value-add approach.

  

 

48%

 

Is often a blend of price adjustment and offer adjustment.

  

 

40%

 

Center on price. We have our target, the customer has his - we find a way to meet in the middle.

  

 

12%

 

Christina Lewellen,
senior editor of
Window & Door

Even giving your customers a ballpark quote for a transaction could set your negotiations off on the wrong foot, says business consultant Elliott Yama. He argues that negotiating on price means you’re negotiating away your profit margin to your customers. He says you should focus on the offer instead and if customers demand a lower price, you should adjust down the offer to match it.

I’m sure everyone wants to maintain their profit margins but I suspected that was getting trickier to do in today’s macro environment. So we asked our readers whether they negotiate on price, value or both. Here’s what the survey said:

About 48 percent of respondents take the value-add approach and resist bending on price; another 40 percent negotiate with both tools—value and price; and the final 12 percent negotiate primarily on price and try to find a way to meet customers in the middle.

Most of the folks who took a moment to drop me an email fell into the “negotiate value” camp.

Window and door dealer Joe Sandino of Weatherite, a company based in California, says he tries to keep conversations with customers and vendors focused on value instead of price. “By far, the majority of consumers want value—real value—such as products that last and really perform, installations that are well done, a rewarding experience, a warranty that assures value, etc.,” he says. “If your pricing is correct—high enough to pay all costs and a reasonable reward for the risk involved and low enough to be a valuable proposition to the consumer—it should stand. Offer alternatives in products and/or services. Ultimately, the real loser in an underpriced proposition is the business owners.”

Another reader points out that “…as a buyer, you always need to understand that your vendor needs to cover his costs and be allowed a profit and then you judge the price versus the value and make your decision.”

Another equipment seller recalls a pricing story: “I had one instance where a customer stated, ‘I will give you the order if you will reduce price by X number of dollars.’ He was a window manufacturer and I pointed to one of his windows and asked, ‘Is that a quality window?’ He said, ‘The best.’ I then asked, ‘Will you take 20 percent off the price?’ End of conversation.”

Want to talk more about price negotiations? Feel free to email me.