Every salesperson knows it can be hard to say no to a customer who is chipping away and pushing for a lower price. We can get emotionally attached to the deal and are scared to say no, because we don’t want to lose it. Not only can that lead to being painted into a corner, but also – if too many of a company’s salespeople are doing it – to the demise of the company.
You may wonder, “Why does it matter if I give up 1-2 percent on the deal?” or “What’s the big deal if the customer wants to pay in 120 days?”
In the value-added reseller (VAR) business, if the average margin is 5-6 percent on the gear, that salesperson just gave up 20 percent of the VAR’s margin. That is a big deal to the profitability of a company if everyone is behaving like that. If you tell a customer, “okay, you can pay in 120 days,” you are giving up your company’s money for four months. Meanwhile, the company has to pay for the equipment, so it outlays the cash and doesn’t get it back for 100 days. If all the deals are paying at 90 or 120 days, the only way a VAR can keep up is to go to lines of credit.
That’s not good for the company, the salesperson or, ultimately, the customer (who may unknowingly be driving the VAR out of business). Salespeople have to learn to say no to customers. Here’s what I recommend:
- Learn how to articulate and demonstrate the unique or incremental value your product brings to the customer. You must understand how your solutions fit into a customer’s business and be able to help the customer compete and gain market share in order to increase the bottom line. You can’t be swimming around in the commodity pool, but, rather, must create perceived or expressed value that is acknowledged by the customer.
- Deal with the right person at the right level. This is critical. If you are selling into the procurement department, you are dealing on price. If you are working with someone in the line of business – which is where you should be working – you are dealing on perceived or expressed value. When your customer values all that you bring to the business, he or she also will understand how important it is for your business to remain healthy and will be more likely to respect the pricing level you have set.
- Be able to explain your value in business terms. You must be able to articulate how your offer can bring incremental value to their business. If you don’t understand P&L, ROI, balance sheets, margin, etc., learn what they mean and how your products can help a company improve on all of those areas. I have learned that when I talk to customers about how I also am held accountable for P&L, a healthy EBITDA, and must operate at a profit, they understand and respect that. The response is, “Oh, okay. We want you to be a partner, so let’s have a discussion about how to keep you whole.”
As salespeople, we often find ourselves paying for the sins of all the salespeople who have gone before us, so it can be hard to achieve #3. It can be easy to let yourself be beaten down and take on an “I’m not worthy” mindset. You have to shake that off and show the value. It’s not easy the first time, but it gets easier.
That can mean not only saying “no” to a customer, but also, occasionally, firing your customer. If your customer is determined to beat the heck out of you, it is okay to acknowledge that he or she isn’t the customer for you. If your customer wants to keep you swimming in the commodity pool, then it is okay to say, “we aren’t a good match,” and move on.
When have you determined that your customer needs to be fired, say no and stand firm. Never set the precedent that you will blink, because they will just wait for you to capitulate, setting you – and possibly your company –up for even greater failure.