Strengthen Negotiations with New Products and Services

Posted by Pete Morelli on Oct 19, 2021 9:43:44 AM
Pete Morelli
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Too often, sales teams rely too heavily on discounts or service giveaways to close deals. This leads to a host of issues including leaving money on the table, teaching customers to negotiate hard for discounts and freebies, and eroding the customer's perception of your value.  

How can sales teams get the negotiating flexibility they need to defend value and price? One solution is by adding new products and services.

Why add products and services? Using price as a primary sales lever trains customers to be price sensitive. The solution is to innovate and differentiate your offering. Why? Not all customers or market segments need or want the same thing. Some customers need just core features, while others require cutting edge services. If some of your offering is not differentiated, it becomes a commodity that reduces your pricing leverage. If you add differentiated products and services, it meets the market spectrum of needs and gives your sales teams the flexibility to offer different products to different customers to match their wants and needs.

It's often easier to add services to your offering because there are inherent capabilities that exist within your organization today, and don't require time consuming and resource intensive product development or engineering. This could include consulting services, expedited delivery and logistics support, or tech support.

What can you do to protect the value of those products and services when you add them? Whether they need it or not, all customers would love to have access to the most advanced features and services while paying the basic or rock bottom price.

Organizations are often fearful to expand their product offering for two reasons. At the high end, they don't want to cannibalize that offering by adding low value products and services of flanking products. And on the flip side, if you add additional services or support, companies worry they won't be able to control access to those high value offerings from the base of the customers.

To address this, use the power of fences. Fences protect the price integrity by forcing a tradeoff between price and value for your customers when they buy. These could come in the form of product features, services and support differences, logistics support differences, or even different brand names that your customers buy from you.

Fences work best when they are simple. They should be clear and observable, and they must be intuitive to both your customers and sales teams. If you leverage fences, you will boost your credibility in the marketplace because sellers will be able to confidently explain to anyone why one customer is paying a different price than another.


How do I package those products and services in an offering that drives more sales? Most businesses sell the same product or service in multiple segments who value that offering quite differently. Simply lowering the price of this packaged offering to meet low value customer willingness to pay risks giving up revenue and profit opportunities. The solution around this is to combine multiple products or services into a bundle at a price point that is lower than the sum total of the individual components.

This can be an attractive incentive for more users to purchase additional services, without you as an organization needing to know the specific value they assign to each individual component of that bundle.

A few things to keep in mind when bundling:

  • The bundled price must be lower than the individual sum of the component prices
  • Make sure that the bundle components add real value to customers and are not just frivolous add-ons that they will see through quickly
  • Don't let customers break the bundle by pulling out pieces and asking for an equivalent list price discount; maintain the integrity of that bundle for you as an organization

The lifeblood that drives every business is growth and innovation. Avoid the temptation to pull the price lever too often to close deals, and instead look for opportunities to bolster, fence, and bundle your products and services to start growing profitably.


Topics: Negotiating with Backbone