One of the top challenges facing a recruitment professional in today’s competitive market is how to negotiate against price and discount pressure to retain the right margin. When recruiters concede in these situations they not only reduce the profitability of the placement, but also devalue the customer perceptions of the Product (ie. the Candidate) and Service provided (ie. you).
Here are 10 guidelines skilled negotiators use to deal with price pressure tactics:
1. Position around value.
Strong value based positioning for the service is vital. The key to maintaining price points in sales negotiations is having a clear, convincing story you can tell about the added value you will provide. When faced with acknowledged value, many buyers will concede on their expectations of discounts.
2. Compare value not price.
When confronted by price comparisons, shift the focus to value comparisons. Unskilled negotiators will respond directly to questions like: What fee are THEY offering? This is a mistake as the focus remains with the fee. Instead move to a value focus discussion. “I know cost is important, but I am committed to ensuring your needs are meet. Lets come back to the cost once I fully understand your needs. To ensure I am able to do this I would like to further explore…” (And so the focus shifts to the relationship between benefits and price.)
3. Build negotiating space into your proposals.
Structure your searches and placement deals in anticipation of negotiation. Consider increasing the scope of your product or services by offering added features or service. You can then offer to work with the customer to cut scope in an effort to meet the customer’s true needs at a lower price.
4. Concede slowly and reluctantly.
If you have a price or room to discount, do not give it all away at once. Instead concede slowly and reluctantly, asking for something back at each juncture.
5. Exchange price concessions for true commitment.
When a customer asks for a price concession, experienced negotiators deal with this by trading price for major commitments. Something like: “If I am able to do candidate X at that fee, we need to know that we have a firm deal. Do we have your commitment?”
6. Avoid negotiating on price alone.
Don’t negotiate all aspects of the placement and then focus on price alone. Your client must be clear from the outset that price changes alongside the scope of the vacancy proposal.
7. Get to the REAL business need.
When confronted with price resistance ask for more information on the underlying problem solved by the price or discount. Skilled negotiators may interject by saying: I would like to understand more about the issues surrounding the investment level of our proposal… Is it a budget problem? (what if we were able to spread the cost…? Is it a perceived value problem (how can we increase the perceived value)? Is it an issue of persuading the decision maker (“how can we work together to achieve this”)?
8. Uncover the underlying personal needs which should be met by price concession, and work to meet them.
Sometimes a customer’s request for a price concession represents a non-financial need, such as a feeling of having won in the negotiation. Often you can meet these underlying needs with other negotiables and still maintain your price points. In such cases search for ‘elegant’ negotiables – those that have a high perceived value to your customer but are of low value cost to your company.
9. Uncover the whole rationale behind the price or discount requests.
If you give a concession simply because your price is too high, it may remain too high even after the concession. However if you get a customer to give you their complete and substantive rationale for the price or discount request, it makes it more difficult to justify further discount requests in the future.
10. Limit your Authority.
Use limited authority to avoid having to commit to immediate price and discount concessions (“I’ll need to check with my Manager/my Director/Commerical” etc). The extra time spent going back to your customer can be time spent developing strategies for minimising the concession made. Sometimes the time delay can prove unacceptable to the customer and therefore force a settlement. In these circumstances limited authority may allow you to discover that price is not such a big barrier to closing the deal as you might have thought.
Price & discount pressure is unavoidable in the competitive market of today. But with good planning and an effective negotiation strategy you can minimise price concessions, and increase both sales volume and profit margin.