The Dangerous Games People Play: Price Negotiations

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Price is one of the most deadly weapons in the marketing mix.

One of  the “4 P’s” of marketing, and one that creates some of  the most pressure packed situations in business.

  • It determines 50% of a company’s profit margin.

  • Depending on your market share and/or industry, it is also the most controllable decision someone can make to influence their outcome of profit/loss.

  • It is the most easily compared element of the marketing mix against a competitor.  Evaluating $499 vs. $549 is easier than comparing product reviews, technical features or “quality” (perceived or real)

  • Could be the most “emotional” element in business.

Why?

Let’s say you are quoting on a business, and it’s somewhat of a “bid” process, meaning you are quoting against different competitors selling products that have SOME differentiation, but generally viewed as a commodity.  So Price is a MAJOR factor, but like all competitive situations, everything influences the outcome:

  • Quality and service track record

  • Terms, flexibility

  • Relationship:  How will your bid affect the relationship?  Does that matter?

  • Risk of loss:  If you lose, how does your business look?  Better or worse?

All situations have a different ranking.  If I were bidding, here’s what I’d be looking at:

*  How many different factors influence a buying decision?
*  Rank them from high to low.
*  Know where you score at all times with your customer.  How?  ASK THEM!

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