Price Negotiation: The Buyer’s Broken Calculator
Surprisingly one of the main challenges facing sellers is a mathematical one. To cut back on the level of price discounting sellers need to change how buyers do their maths.
Buyers are increasingly numbers obsessed. They quickly do the numbers on our quotes and proposals. There is a problem however – their calculator looks like this:
The calculator being used by many buyers to choose products and suppliers is broken. As the diagram above suggest it is missing several keys.
As far as most sellers are concerned, the only key actively used by today’s buyers is the minus or subtract key. That is because for most buyers their only engagement with sellers around numbers is to cut price and slash margins. That is the maths challenge at the core of selling.
…the only key used by today’s buyers is the minus or subtract key.
The challenge is to focus buyers on value, rather than just price. That requires getting the buyer do more multiplication or long division and less subtraction!
Business Results Require More Than Subtraction
No manager’s business equation is so simple that it can be calculated with just the minus, or subtract key on a calculator. Results are not that easily got!
If subtracting is all that is going on then basic business math is being neglected, including the calculation of return on investment, or total cost of ownership.
If subtracting is all that is going on then basic business math is being neglected…
Most important business metrics – the metrics increasingly used by buyers to justify purchase decisions – require some element of addition, multiplication and long division.
The challenge is to fix the buyers broken calculator – to give the buyer a better way of arriving at the numbers that he, or she needs.
You Need A Calculator To Improve Your Negotiating Position
Although while the buyer’s calculator may be broken, at least they have one. Many sellers don’t. That is a real problem. To sell to and negotiate with today’s numbers obsessed buyers you absolutely need a calculator. You cannot move the conversation from price to value without it!
The principle maths challenges faced by sellers are:
- To justify your price
- To demonstrate a lower total cost ownership
- To calculate your value.
These so called maths challenges are no simple matter, it is advanced algebra so to speak precisely because even at the best of times the buyer will struggle to accept the answer, or the method by which it is calculated.
Sellers must encourage their buyers to do the maths, but to do better maths too! They must provide their customers with a better; calculator, spreadsheet and business case. Otherwise a compelling argument for the purchase of their solution cannot be demonstrated.