I've personally negotiated well over a hundred contracts for my own services and helped many of my erstwhile clients negotiate some truly big-money deals.
There are, of course, hundreds of books about negotiation in general and dozens about price negotiations, but I have three techniques to which I keep returning, probably because they actually work in B2B situations:
1. Getting the buyer to agree to the financial impact of not buying
Every B2B offering promises to increase the customer's revenue, reduce the customer's expenses, or a combination of both.
The financial impact of not buying is the sum of the revenue increase and the expense decrease. The bigger that total, the more likely it is that the customer will buy and the more you can charge for your offering.
Therefore, before you start talking about price, identify all the ways your product will increase revenue and customer loyalty and reduce expenses. For example:
Ways your offering might increase your customer's revenue:
- More customers for your customer (worth $x more per year)
- Bigger purchases from your customer's customer (worth $x per year)
- Greater customer loyalty (worth $x in referrals per year)
Ways your offering might reduce your customer's expenses:
- Less inventory (worth $x in carried interest)
- Lower shipping costs (worth $x per year)
- Less customer attrition (worth $x in lost revenue)
- Lower customer acquisition cost (worth $x per customer)
- Less paperwork (worth $x in lower clerical costs)
Those are just some suggestions; the specific revenue boosts and cost reductions will of course be specific to your offering.
Important: Get the customer to agree that your estimates for all these metrics are reasonable. Once that's happened, your offering will probably seem like a bargain, regardless of what you're charging.
Very important: Frame the impact as an amount that's lost by not buying rather than something that's gained by buying. Customers (like everyone else) are far more motivated by avoiding pain (loss) than obtaining pleasure (gain).
2. Providing a range of pricing but leaving your final price open
OK. If you've ever sold B2B, you're probably asking yourself: What if the customer wants a price quote before even talking with me?
Blurting out a number is not in your best interest, because, unless you've gotten agreement on the financial impact, that number will probably both seem too high to the customer and be less than what your offering might otherwise command.
On the other hand, if you stonewall and delay quoting a price (because you know it will seem too high and be too low), the customer will probably get irritated and think that you're wasting their time.
Your challenge when you're asked for an upfront price quote is to respond without locking yourself into a low price. Here's how.
Phrase the response like so: "Well, there's a range involved, depending upon the specifics. Normally, something like this falls somewhere between $x,xxx and $xx,xxx, but I'm certain we can work together to find the best price for your individual situation."
The $x,xxx should be the lowest price you could comfortably tolerate and $xx,xxx should be in the upper range of what you believe your offering might command. If the customer chokes on the $x,xxx number, they're not a real customer, BTW.
3. Discounting only when you get concessions from the buyer
The previous two techniques are executed before you've quoted a price. If you execute them correctly (especially agreed-upon financial impact), the price you quote will probably go unquestioned and you'll probably make the sale.
However, it's not unknown (actually it's quite common) for customers to ask for a discount after you've provided the price. Although the request might be framed as "we can only pay $xxx" or "if you can't go down by 10 percent, the deal is off," what they're actually doing is testing you to see if you gave them the best price.
When this happens, you must NEVER say, "OK, I'll give you the discount" to close the deal. If you do that, I guarantee that the testing process will continue and you'll get more demands for further discounts. Because by giving them the discount, you admitted that you weren't giving them the best price, so why should they believe you now?
You're usually better off just standing pat with "I gave you my best price; I'm sorry but I can't discount any further." However, if the customer absolutely insists--perhaps pleading that they simply don't have the money--then you can offer a lower price but ONLY if you take something off the table.
Example: "I can give you that price if I lower your service level from platinum to bronze."
Note, though, that you're usually better off just holding the line, especially if your offering has already been customized to what you know the customer really needs.