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The biggest lesson of all is to understand the power of gross margin. Gross margin is your selling price less cost of goods. The one, single secret to long term success in sales is to understand that it is from this gross margin that commissions, bonuses, profit sharing, 401K plans, incentive trips, recognition programs and all else are ultimately paid!
The one, single person who can control gross margin is you! You can lose the entire ballgame in 45 seconds of poor negotiation. You can erode the entire profit picture by caving into pressure, gamesmanship, threats or intimidation on the part of a prospect or customer.
One of the secrets is to master the following five strategies for maintaining margin and price.
And here they are:
· Remember that the selling price you initially settle for is the one you'll establish as the ongoing standard for subsequent purchases. And this is true whether it is a high or low price!
· Remember that you should never present price until you understand what your prospect or customer perceives as value. And only then should you present price as related to the benefits they'll receive in relationship to that value.
· Always differentiate between initial price and the long-term cost of ownership. This is particularly true as compared to your competitor's price and cost structure.
· Never cave into price cutting attempts. The only real way to do this is to have an ongoing supply of qualified prospects who are willing to pay your price and to be able to justify your price, reinterpret its value and then be willing to refuse to do business if it is not profitable enough.
· You must know your cost structure and margins as well as you know your own name. You must know which components carry the highest perceived value and lowest cost - this is the only area for negotiation – and negotiate only on those items if you must, and then only as an ultimate, last resort.
Several years ago my property was annexed by the City of Greensboro. I had no choice in the matter. I discussed it with several city employees. To this day they have not convinced me of the value that I am receiving for the doubling of my taxes. Perhaps if they had learned about the power of questions, understanding what I perceived as value, were able to justify the increased price and long term cost of the taxes, I would be a happy city resident. Unfortunately, that never happened. Fortunately for them the law was on their side. Unlike your customers, though, I didn't have a choice.
Your customers, unlike unhappy taxpayers, do have a choice. And in the absence of value, they will actively seek another supplier. Don't give them a reason to do that. Sell value - not price!
Bill Brooks, CSP, CPAE, CMC, CPCM former CEO of a $300,000,000 corporation and two-time sales award winner from an international sales force of 8,000, Bill has real-world expertise. Bill has spoken or consulted in over 300 different industries while being engaged by at least 150 clients an astonishing six times each. For information about how to bring Bill to your next meeting or convention, contact the Frog Pond at 800.704.FROG(3764) or email firstname.lastname@example.org.
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Copyright © 2002, Bill Brooks
Copyright © 2002, The Negotiator Magazine