Valuable(s):

Standing Behind Your Price
and Performance

Should you ever lower your price?

No.

OK, does that mean that we can move on to the next chapter then?

Well, did that answer satisfy you? If it did, then I may have done my job, but you probably wouldn’t feel that you were being taken seriously, because the real world doesn’t work that way. You may be saying to yourself, “OK, you’re saying I should never lower my price and risk losing my customer? That’s your advice? That sounds more like dogma than advice.”

So let’s try this again.

Should you ever lower your price?

In principle, no. However! A price negotiation is more than a numbers game. In terms of sheer numbers, I can say that my fee as a speaker and a trainer is non-negotiable. I don’t budge from it. No discounts. Why? Because I’m worth the money. And not only that. I’m worth the client’s money. My fee is what it is and will remain that way. Case closed.

But beyond the numbers there are many factors to take into account. I’m not giving you advice nor making any suggestions, but I am making you an offer to show you how important you are to me: You will get this book with a complimentary package of the best tips for price negotiation, even though this book is strictly speaking not a guidebook and doesn’t strive to be. This chapter is therefore a supplementary one, because I realize that simply responding no to the question of price reduction is simplistic.

What Is the Cost of Paying Less?

Recently I considered buying myself a quad bike. I called a dealership with the intention of getting a general idea of the cost. The man on the phone said, “The list price is $8,799, but if you pay cash I could bring it down a little.”

Essentially, what the gentleman was saying was this: My price is flexible. There’s always room for negotiation. I’m practically putty in your hands. Press me, squeeze me, wear me down enough, and you’ll see how low I’ll go.

Whoever names their price and a discount on that price in the same breath is pulling the rug out from beneath their own feet. They’re signaling that they desperately need the sale. They’re waving the white flag before the first shot has even been fired and succumbing to the power of the customer.

In the case of the quad bike, that’s exactly how it proceeded. A few minutes into the conversation I had already brought him down to under $8,000. It was so easy that it was no longer even fun for me, and I ended up asking him if he would kindly recommend one of his competitors. Because the fact is, a victory that looks too easy can be a turn-off.

People, this is no way to do business—at least not effective business that is satisfying for both parties. The bottom line is, do not offer a discount! The customer needs to ask for one himself; that’s the way it works. The customer is otherwise left with a dubious feeling. Take an advertisement for any brand of chocolate as an example: “Get 20 percent extra fudge for the same price!” Any consumer with a sweet tooth will be thinking, “Hmm, either they’ve been asking too much for their chocolate up until now, or they’ve changed the recipe and the ingredients are only worth 80 percent of what they used to be worth.”

The customer in this situation is left with a sense of uncertainty. Uncertainty then breeds doubt, and doubt is counterproductive in sales. A salesperson who already offers the possibility of a discount in her sales pitch is only harming herself. She is triggering a downward spiral that can only get worse, and this will do harm to everyone involved. The salesperson is undermining her own credibility. She undermines the trust in her own product and weakens the long-term value of her brand.

Instead, look at the issue the opposite way. A client who enters into a price negotiation has in principle already made his purchase, because the moment he mentions the price, he is already indicating that he wants the product. The rest is merely a matter of numbers. And by “merely” I don’t mean that the salesperson necessarily has to accept the lowest price but that the client will normally accept the price that the salesperson stands behind, if she does it well enough. It’s not the highest, or lowest, or the most reasonable price, but the most convincing one—namely, the one that you as a salesperson are most convinced of.

Besides, price is something you can only negotiate if your client is truly convinced by you, your product, your service, or all three put together. Otherwise you’re nothing more than a babbling discount sign.

If a customer wants a discount, this means that he wants something from the salesperson. He wants an additional service; he is saying, Yes, I want to buy from you, provided that we can agree on this additional service, namely that you lower your price. How much will this cost me?

You say, OK, you’d like a little something extra, so let’s talk! Here you must bear in mind that the fundamental principle of economics holds in this situation as well, namely the principle of trade. Quid pro quo. No service without compensation. For example, a discount in exchange for payment in advance, for more orders, for lower investment of time and effort. A good sales professional does business but not for free; she holds firm on the price but is generous with minor concessions. That is how a top salesperson thinks and acts.

Even so, many firms arm their sales team with one of two main strategic negotiation policies. The first is don’t lose a deal over price. In other words, it is better to close a bad deal than no deal. The second policy involves the company giving the salesperson a fixed margin of discount beforehand.

Both options are equally bad. Because what happens then? The salesperson automatically goes the way of least resistance. The initial price quote collapses because she panics as soon as the client begins to utter the words “price” or “discount.” The moment he says, “Listen, ma’am, as far as the price is concerned we need to . . .,” she instantly caves, saying, “Absolutely! Don’t say another word! Of course I’ll give you the minimum price, the maximum discount! Why shouldn’t I hit rock bottom to close a deal?”

The reason this happens is that many salespeople believe in themselves and in their company but not in their product. Or they believe in their product and themselves but not in their company. Or they believe in their company and their product but not in themselves. Some don’t believe in any of them and still attempt to sell.

This is not good. If you constantly think in one of these three ways, then sooner or later there is only one thing left for you to do: Make a decision. Seek out a different circus for your act, and your company will find another clown. Anything else will leave you unsuccessful, unhappy, and bitter.

The most important feeling to bring to a price negotiation is self-respect. The salesperson has to be worth the price in her own right. Determine the price below which you would never sell your product. In other words, which price is beneath you? Then keep that figure firmly in your mind. Your self-respect is your beacon.

The most important feeling to bring
to a price negotiation is self-respect.

How Much Will Michael Pay?

It’s Michael’s birthday. He’s turning forty and wants to celebrate with his friends. Naturally, he needs something special to mark the occasion, and Michael will settle for nothing but the best: Champagne is the order of the day. So he drives to his local liquor store and buys twenty bottles of champagne at $22 a bottle or $440 total. It’s a successful party, Michael’s friends enjoy the fact that there’s some quality wine, and Michael is happy when his guests are happy.

A week later Michael goes skiing in St. Anton am Arlberg, the illustrious ski resort in Austria, with two of his friends. Mornings and afternoons they ride the slopes, and at the end of the day they’re off to the Mooserwirt ski lodge for some après-ski. The venue advertises on the Internet as “Possibly the worst ski lodge in St. Anton.” The menu reads: “Damned fine, and damned expensive.” As it turns out, the Mooserwirt can afford to be blithe and self-assured; its success speaks for itself. The place has been described by Playboy as “the mother of all ski lodges.” This venue boasts the highest beer sales per square foot in all of Europe, including the Oktoberfest. Twenty-five miles of plumbing have been installed to streamline the flow of beer to customers. The peak hours of the Mooserwirt are from 3:30 to 8 p.m., no earlier and no later, after which they will promptly throw you out. The lodge is always packed. As much as you’re able to drink, falling over isn’t even an option.

Michael and his friends are standing at the bar and chatting with three Dutch girls. Michael wants to make a good impression, so he orders some champagne. As it gets dark, Michael and his friends call it a night and make their way home. Michael’s bill for the evening: $600 for three bottles of champagne. More than the twenty bottles he bought from his local liquor store for his birthday party. Pretty steep.

Is Michael angry about it? On the contrary, he’s happy, because he had a great time and got a phone number from Anna, the pretty Dutch tourist, to boot.

Is Michael angry? On the contrary!

Two years later, Michael is married. To whom? Anna, of course. They’re skiing at St. Anton and celebrating the time they first met at the Mooserwirt.

At the resort there is an elegant boutique, carrying the finest brands: Gucci, Prada, Dior, Versace. As the couple enters the shop, the owner leads Michael to a sofa in the middle of the room and hands him first an espresso and later a sparkling wine. Meanwhile, a saleswoman whisks Anna off to a changing room. Anna comes back after a while and is standing before Michael in a designer outfit that looks like it costs $50 per square inch. The boutique owner now asks, “So, what does the gentleman think of his wife in this beautiful dress?”

What would you do if you were in Michael’s shoes? You probably wouldn’t say, “That would look great for Halloween.” Even a frugal man like Michael does what most people would do, namely be happy for their spouse and
pay up.

Come summer, Anna and Michael are in Turkey. In the Aldiana Club hotel there is a jewelry store that is always teeming with tourists. The three Turkish gentlemen running the establishment are affable, charming, and attentive. And what’s more, they’re good salespeople. Customers are instantly offered tea, and their children are given soft drinks. The three young owners play perfectly off each other, and when a female customer seems to have her heart set on a particular piece, they are poised with the clinching remark: “My dear lady, you know there are only three vital questions when it comes to jewelry: One, do I like it? Two, do I want it? And three, should I treat myself to it?”

Trust me, every female tourist staying at this hotel sooner or later purchases something from that shop. No exceptions. And it is never a matter of price.

Therefore, what can we learn from Michael? The situation determines
the price.

Even though we don’t wish to believe it, this also applies to investment goods and services. Good salespeople have always known that expensive and valuable things are easier to sell than cheap ones.

If, then, we assume that the situation determines the price, what is the next logical step for the sales professional? Don’t change the price; change
the situation.

By this I mean that I have to create a pleasant, easy-going, convivial atmosphere for the client. Fresh espresso is what is needed, not the lukewarm brown dishwater from the drip brewer, freshly squeezed orange juice instead of the flavorless store-bought variety, cookies from a pastry shop and not from an economy-sized cardboard box. The fresh flowers on the negotiating table are worth their $40, all the more when the client ends up buying
your product.

Freshly ground espresso is what’s required,
not brown dishwater from the drip brewer.

The situation determines the price.

The price and the service have to be felt as inseparable from the situation. They have to be visible; they have to be tasted. The salesperson who is looking to sell a construction loan of more than $250,000 cannot show up in scuffed shoes or hand the client a cheap plastic pen to sign the contract—not even if the pen bears the company’s logo. You wouldn’t want the surgeon removing your appendix to be using a pair of Fisher-Price scissors,
would you?

The fact that a salesperson’s appearance needs to be beyond reproach is self-evident. A suit needs not only to be worn but more importantly, it needs to be filled out. Leave the loud and tacky jewelry at home. Men should remove their earrings and piercings, because nobody wants to be advised by a pirate. That is, unless your client owns a tattoo studio or a
jewelry shop.

Pay close attention to detail. When wearing a suit, always wear dress socks. Why? Because when you sit down and cross your legs, your pants will begin to ride up. And what will your client see if you’re wearing short socks? A spotless pair of leather shoes, followed by a section of dark socks, followed by a portion of a man’s hairy leg.

The suit and the shoes are saying to the customer “I know what it takes.” The man’s hairy leg is saying “But I don’t really have what it takes.”

The man’s hairy leg is saying
“I don’t have what it takes.”

To summarize, if you wear a suit, wear dress socks. You’re a professional salesperson, not an altar boy. And when you have the situation covered to every last detail, then you’ll be armed with a lot more than just your price.

Thinking on Your Feet

“That’s too expensive!”

OK, now you’ve reached that point. In spite of your self-respect and the right attitude toward your product, your company, and your price, and in spite of the attention to detail and your control over the situation, the client throws a monkey wrench into the works: Too expensive! Is the price negotiable? Can you go any lower? And so forth. So what now?

To this day, the word preached in many seminars is the rebuttal of the salesperson: “Too expensive? Compared to what?”

“Compared to other offers.”

“To which offers?”

“To companies A, B, C, and D.”

“Yes, but you see, we’re giving you better service and better extras.”

Whereupon the client counters with her killer argument, “C’mon, you know the offers are practically all the same.”

What do you do now? Anything you say from this point onward will be nothing more than a justification. And that’s how the downward spiral begins. The moment you’re on the defensive, you can only play catch-up, because you’ve relinquished control of the game. The salesperson, however, must always control the game; that is his role. Otherwise he is not a salesperson but a mere distributor! So forget this kind of price negotiation. With this “expensive-compared-to-what” tactic, you’re wasting your breath.

Your only other option is to make clear to your client that you still stand behind your price. Don’t even try contradicting the “too expensive” argument. You are expensive and that’s a good thing. Instead, when the client says, “Limbeck, that’s too pricey for me,” that’s when Limbeck agrees with the client and says, “You’re right, it is pricey. It’s pricey and high-value. High-value because . . .” and elaborates on the benefits of his product or service for the client.

There are two important things here that make it work. First, the repetition of “high-value.” Second, the discussion of the benefits for the client will only be effective if you’ve done the prior work on the needs assessment of the client, her motives, wishes, hopes, and demands. Otherwise it will
fall flat.

Bear in mind that this principle is known to work well in many service sectors. From the shoemaker to the lawyer, if you want an expert, you’re going to have to pay for it. Would you haggle with the lawyer whom you hired to get your driver’s license back? Would you let yourself be operated on by a heart surgeon just because she charges less? Would you buy your pacemaker on the Internet? Have you ever bargained over the price at your dentist’s office? Or at your hairdresser’s? Or for an airplane ticket? Or a ticket to any event, for that matter?

From the shoemaker to the lawyer, if you want
an expert, you’re going to have to pay for it.

Yes, the ceramic fillings are expensive, but they’re a lot more durable than synthetic fillings and certainly healthier. A good haircut is pricey, but at least you won’t look like David Hasselhoff on “Knight Rider.” Granted, the trip to Fiji costs a great deal, but you’ll be in a different world compared to Las Vegas, for instance. True, the ticket for the fiftieth anniversary tour of the Rolling Stones cost more than $600 on average, but I’m sure it was a unique experience to see legends the likes of Mick Jagger, Keith Richards, and crew live on stage. You get my point.

A hardy ego and the unwavering conviction that you are offering the right product is half the battle. The other half is thinking on your feet. The rebuttal to the price objection should come instantly. Thinking on your feet means intelligence at high speed.

Whoever is quick to point out that they are simply not quick thinkers by nature has misunderstood the point. There is no “speed gene” and no “speed hormone.” It doesn’t have to run in your family; you don’t have to hail from specific regions of the globe, be born under a certain phase of the moon, have a special upbringing, or eat special foods to think quickly. Being quick-witted simply means being well-prepared.

You know how quick thinking works? You just learn twenty stock phrases by heart, verbatim, as you would learn your multiplication tables. When the client says, “Too expensive,” you draw on one of those twenty stock phrases, the first one that comes to mind. You say it instantly, without hesitation. And you say it swiftly but clearly, firmly, and resoundingly. And that should suffice.

You can compile your own list of twenty stock phrases, or you can draw on some of the following:

Take your pick, but be careful: Not every phrase is appropriate for every customer or every sale. And they all have to be delivered with a smile and a slight twinkle in the eye. Try them out for yourself.

In one of my seminars a participant proved to be very successful in the following situation. The salesperson is negotiating with a buyer, and suddenly the general manager walks through the door, introduces himself, and sits down to work at a computer at the back of the room. Throughout the negotiation, the general manager keeps getting involved in the discussion. The salesperson says, “You seem to be in the mood to negotiate today; would you care to join us?” In the end, the salesperson ended up clinching the best deal ever made with this particular customer, a tenfold volume increase.

Or try telling a story, using one that might suit the customer. If, for example, the person you’re dealing with is as well-dressed as you are, try the following scenario.

“You know, comparisons are never really appropriate, but see what you think of this: Imagine you’re going to the best men’s clothing store in town on a Saturday morning, to buy a dark blue suit. The sales clerk greets you warmly. You state your request, and the clerk shows you two different suits; one of them is costly, the other cheap. At first glance, both of them look the same. You try the cheaper one on first, and as you’re doing so, you feel a static shock from the carpeted floor. The fabric of the suit is evidently not as high in quality as it initially appeared. So you try the second one on. It fits like a glove. The sales clerk then tells you that the hemming of the pants is included in the price of the more expensive suit. You see, this is how it works almost everywhere. You can never tell what a product really has in store for you at first blush. You wouldn’t want the seller to surreptitiously cash in on the lost profits from the first order when it comes to the subsequent order, would you? We both know that the principles of economics don’t allow great service for little investment.”

Become verbally convincing. Just give it a try. Learn different techniques and apply them, because the client will be more willing to take action if you’re worth the investment. Esteem goes both ways.

Become verbally convincing. Just give it a try.

Another approach is “pencil selling.” With this method you can convince the client by spelling out on a blank sheet of paper exactly how she will benefit from an investment with you. For this there are only a few ground rules. You start by asking the client for their figures. Normally, the figures you present a client can easily be dismissed. However, the figures that she gives you are ironclad. Whenever possible, let the client tally up the figures for herself.

Back when I was selling photocopiers, I was also interested in closing a service agreement. The advantage for me was clear: First, it meant a larger deal. Second, nobody buys from the competition as long as a service agreement is in force. However, some clients saw declining the service contract as an opportunity to save some money.

It wasn’t difficult to show the customer that this wasn’t the smartest thing to do. The customer makes five thousand copies per month. That’s sixty thousand copies per year. Based on experience, the company could assume that every year brought an increase of 10 percent in copies made. That means sixty-six thousand copies in the second year, 72,600 in the third, and so on, until the end of the depreciation period of five years. It was in the interest of the customer, therefore, that the copier ran smoothly from the first day to the last. If one toner cartridge lasted for five thousand copies, then each copy costs three cents, which makes $1,800 per year for sixty
thousand copies.

I proceeded to make the actual calculation. If something were to go wrong, say the toner cartridge made only four thousand copies, or some Wite-Out fluid got on the glass and nobody noticed, and a black mark found its way onto hundreds of sheets of paper, the service technician would have to be called. Without a service contract, this would cost additional money every time something went wrong, for travel expenses, labor, materials used, replacement parts, and so on.

Travel expenses, labor, materials used,
and replacement parts.

When I compared the cost of calling the technician with the cost of the service contract, there was never more than a 10 percent difference. The result was either 10 percent above or 10 percent below.

At the end of my pencil selling, the argument was the following: “In one year we might have to cover the 10 percent; in the next year you might have to cover them. However, with this service contract you have the option of calling the technician every week if you wish, even for a bit of Wite-Out. In other words, you are purchasing security, and compared with the option without a service contract you are, on average, not investing a penny more.” Then you nod, while asking your client, “Would you agree that this is an offer in which all parties stand to gain?” Keep in mind that nodding is subliminally contagious, like a bobble-head doll.

Another tip: When articulating the price, always use diminutives: “The quad bike is going for eight,” or “The service contract is twelve.” If, on the other hand, you are pointing out what the customer stands to gain, use full numbers: “At the end of the day you’ve saved yourself $434.”

We are not dealing with witchcraft but craftsmanship. Just as the craftsman is required to master his tools, so the “rhetorical” craftsman needs to practice until every phrase is in the right place. Until every argument comes off smoothly and without a hitch, until every objection is countered and every critique is neutralized. Just like the craftsman, the salesperson begins as an apprentice and proceeds to learn, practice, and experiment. Then she becomes an assistant and continues to learn, practice, and experiment until finally she is made a master and carries on learning, practicing, and experimenting. That is the inner drive that sets a top salesperson apart from the rest.

Memos Are Masterpieces

“Dear Sir or Madam,

We are offering you the following item:

1 Writing Desk, Catalog No. 43578743/ByK 3-Senator/Beech

Price: $2,999.99

We thank you for your interest and look forward to receiving your order.”

It takes time to master a craft. At least that’s what I think when I read a proposal like the one above. By the time you’ve mastered your discipline, you will have sent stacks of written price quotes to the customers. Here, too, there are things to consider.

Imagine for a moment that you are a customer and receive a proposal from a salesperson by email that reads:

“Dear Mr. Client, I fondly recall our conversation on September 13 . . . yada yada . . . we hereby offer you . . . yada yada . . . This offer is nonbinding and based on our general terms and conditions . . . yada yada . . . We hope to have made an offer suitable to your needs . . . yada yada . . . and we look forward to . . . yada yada . . .”

There is nothing wrong with using boilerplates. They are an important component in how you frame your proposal. But this insipid, soulless drivel is as personal as the copious amounts of junk mail that are looking to sell you potency pills and diet plans. Your customer deserves something unique. He should feel that the proposal is specifically intended for him and not a thousand others. The proposal should reflect not you but him. It’s not your proposal but his.

I’ll go a step further. Even if my clients say they want an emailed proposal, I will still send them something by regular mail. I want to treat them to the real pleasure of receiving a bona fide package. In the package they will find my book, my DVD, and if possible a small token of appreciation suited to that specific client.

My proposal offers the client a palpable pleasure.

Of course they will also receive an email but certainly not a mass notice with a generic memo. This lax and shoddy form of communication will be no more effective than if you had cut out letters from a newspaper, glued them together on a sheet of paper, made a photocopy, and sent it off by regular mail. The customer might just be startled enough to think that you’ve kidnapped her dog and were planning on blackmailing her. An email also has a form that you would do well to adhere to: The email itself should contain the cover letter; and the attachment should be a PDF document bearing your company logo, just as if it were elegantly printed stationery with
a letterhead.

I’m partial to displaying prices with two decimal places. Numbers without decimals give the impression of having been rounded up or down. And let’s be honest: Every customer assumes the salesperson rounds up, right?

That’s why prices with decimals give a more conscientious impression. They imply that the sales professional has made an effort to calculate the most favorable price for the customer. And I’m not talking about the typical discount-store prices, such as: “Your lease rate is $799.99.” A much better option would be, “Your lease rate will be in the amount of $701.23 per month.”

Just as in a letter, a PDF file should include a cover sheet stating the name of the proposal’s recipient and perhaps also their firm’s logo. The text of the proposal should be clearly laid out, coherent, and well-structured. Bear in mind that your proposal is a recommendation, not a suggestion.

The price should be folded into the description of the benefits like the meat in a sandwich:

“You will receive a new writing desk, with two drawers, as requested, a hanging file folder, and two cable connectors, for $2,942.11. Of course, this will include the adjustable legs, designed for ergonomic sitting positions, and the power strip attachment.”

So, in the end there were an additional ten tips for you. Are you sold?