This note is for all the MBAs out there. What are you actually looking for? - a better way to give discounts. Forgotten Kotler - first year MBA. What happens to the brand when we start giving discounts?
And in sales - you are the brand!!!.
Lets discuss a technique to offer discounts which sends the right message to the customer.
Before that, how does the conversation usually happen?
Sales person goes to customer, makes a pitch. Offers a price of Rs 100. Customer responds with Rs 50. Sales person walks out in 5 minutes, comes back into the office and then negotiates for two hours with his bosses.
If only he had the courage to negotiate two hours with the customer!!.
He reverts with a price of Rs. 95. Customer starts laughing. More fun happens. After a few hours or a couple of days, salesman offers a price of Rs 80. Customer issues an ultimatum. Rs 50 by the end of today else I am going with your competitor. The sales guy panics. His boss also panics. The panic travels upwards in the heirarchy till the VP sales also panics. The discoiunt is approved. Customer gets the price of Rs 50. Entire sales team makes their jackpots and super jackpots and incentives.
What is the impression on the customer?
He negotiated a bit. Price dropped from Rs 100 to Rs 95 - dropped by Rs 5.
He negotiated a bit more, price dropped to Rs 80 - this time the drop is Rs 15, it is bigger!!.
He negotiated more, got aggressive - and what happened? The price dropped to Rs 50. This time the drop is Rs 30, the biggest ever!!!
The salesperson has actually given increasing discounts. What message has he inadvertently communicated to the customer?
yes - the tiger has tasted blood.
So what is the right way to do this?
a. Decide a walk - away price: Most sales forces we work with have no concept of this, some do. A walk away price is the absolute lowest price that you will accept, below which you would not be interested in doing business. eg Rs 50 in the above case.
b. Plan on giving "reducing discounts" in stages. Rs 100. Rs 75. Rs 60. Rs 53. Then close at Rs 50. What is the size of each discount? The first discount was Rs 25. The next one was Rs 15, then Rs 7 and the last one was Rs 3.
What is the impression communicated when the discounts go down to Rs 7 and Rs 3?
That no further scope exists to negotiate.
Time to close.
Of course, the best strategy to negotiate is to position yourself in such a manner that the other party does not dare negotiate.
............idea drawn from purchase - vendor negotiations at a large SUV manufacturer based in Mumbai
No comments:
Post a Comment