Passing the Price Gauntlet with Strategic Accounts

Posted by Reed Holden on Sep 8, 2021 5:44:03 PM
Reed Holden

As a strategic account manager, you take the long view in working with your customers to ensure that each of them gets the right solution. You invest time in evaluating your customer's business and sourcing the best team internally to configure a valuable solution. It takes teamwork, planning, and execution.

When it’s time to close the deal, procurement is introduced into the process and now runs the relationship and the deal – and they only focus on the price. The deal is still expected to close, but how much margin will be compromised? Will procurement even care about the time and energy you and your team have invested over the past two years?

It doesn't have to be this way. Before I get to why, let me share a story. Recently, I was interviewing a senior procurement executive. He spoke about their system to evaluate product groups and the competitive landscapes of suppliers. The purpose was to determine when a particular product group needed to be handled with salesperson involvement and which suppliers needed to be developed as a strategic relationship. He talked about the evaluation steps they went through, and how they worked with the seller to make sure they were as efficient and effective as possible before they inked the deal. I asked him if they asked for additional discounts. He smiled and said, "Of course, we put them through the ‘Price Gauntlet’.”

You see, buyers ask for discounts because they can and know they should. Not asking for one would be foolish because it is typically there for the asking. You, as a strategic account manager, can view that request as a troublesome thing that is going to keep rearing its ugly head. Or, you can view it as a test. If you give the discount in the first test, you are going to face that gauntlet every time a new contract comes up. If you don't discount, however, you reduce the likelihood of being put through the gauntlet in future negotiations. You passed the test.

Passing the test is simple: Defend your price with value or, if you must discount, make sure you take something away – create a tradeoff, or what we call a Give-Get. If the customer Gets a discount they must Give up something of value in the solution. The goal is a fair exchange for that lower price. A few examples of Give-GetsSM can be 16 weeks delivery vs. 2 weeks, full pallets vs. custom or mixed pallets, a tenured top notch project manager or an entry level project manager, or reduced or limited features vs. full solution. Sure, procurement will apply many different tactics to get you to discount the full product or service, but to pass the test, the customer only Gets the discount if they Give up some value. Eventually, procurement learns that discounts come with a price of their own. Defending your price using Give-GetsSM shows the customer that you know your value and you are worth it.

Over time, if you discount too quickly or too often it erodes trust. The customer thinks that every deal starts at a price that is too high and will put you through the Price Gauntlet with every order. The account managers that pass the test send a major signal to buyers that they have confidence in what their company does and will be a reliable and professional supplier going forward. 

Topics: Negotiating with Backbone, Selling with Confidence