Early in my career, my sales manager called me into his office. On his desk was a spreadsheet that told the story of a curious pattern in my deal-making. He pointed out that I became a much better negotiator once I’d wrapped up quota
Sales professionals have been taught to sell value, not price, ad nauseam. I have no doubt that the phrases “sell value” and “demonstrate value” have been drilled into you by leaders and trainers.
Demonstrating value by building a business case for how you and your company will deliver measurable business outcomes is crucial for both competitive differentiation and improving your power position at the sales negotiation table.
Along with demonstrating value, helping stakeholders look beyond price to the total cost of ownership (TCO) makes it easier to build apples to apples comparisons in competitive situations.
Still, if we are keeping it real, price matters. It is the ticket into the game. As much as sales trainers are wont to downplay the role that price plays, the sales professionals who are working in the trenches know it matters.
Price is what buyers will fixate on.
Price, and the terms and conditions attached to the price, will likely determine how your commission or bonus is calculated for the sale.
Price, and the terms and conditions attached to the price, directly impacts your company’s profit margin.
Price is what you will negotiate and agree on before doing business.
Price is what you are most likely to discount in order to close the deal.
And you will discount. In the real world, you will need to make concessions to get deals done. The problem is that most salespeople are giving away far more in discounts than is required to win deals because, as we’ve established, they suck at negotiating.
The Path of Least Resistance to a Commission Check
Salespeople have a bad tendency of taking the path of least resistance to a commission check. In doing so, they leave a massive amount of money on the table for themselves and their employers.
I get it because I’ve been there, done that, and have the tattoo and t-shirt to prove it. You really want the deal, are desperate to put a number on the board, or maybe just dig the rush of getting ink. It feels easier and safer in the moment to give it all away and get the deal instead of taking the risk that you’ll negotiate and get nothing.
Early in my career, my sales manager called me into his office. On his desk was a spreadsheet that told the story of a curious pattern in my deal-making. He pointed out that I became a much better negotiator once I’d wrapped up quota.
It was January, at the beginning of a new sales year. He walked me through my average discounts from our book rates before and after I made quota the previous year. Before the third week in September, my average discount from book was 22.7%, which was all of the 20% leeway my company allowed me to reduce prices without management approval, plus the additional discounts I’d convinced my leadership team to approve in order to close many of my bigger deals.
The shocker was what happened to my discounts after I had made my number for the year. He showed me that after I’d made quota, my discounts had dropped to just 9%, and the average number of deals I’d inked per month had actually gone up.
As soon as I saw the evidence in black and white, I knew the truth. Once I didn’t need to win, I approached stakeholders differently. I started closing assumptively and asking for exactly what I wanted. Stakeholders bent to my will. I sold new accounts at higher prices. I confidently asked for full fees and payment for ancillary items that we would usually write off to get the deal. I secured longer contractual commitments along with more favorable terms and conditions.
Before making my number, I was afraid that if I didn’t give big discounts, I’d lose sales to my competitors. The data proved that my closing ratio did just the opposite. Even though I stopped handing out big discounts like candy, it went up. I closed account after account at higher prices, and my commissions grew bigger because the commission plan richly rewarded high-profit deals.
It was these observations of my own behavior that began my fascination with sales negotiation. I began to study, hone, and master sales negotiation tactics that reduced the need for discounting. As my income grew, I had more money to save and invest. I was able to max out my 401(k) plan and buy a home rather than rent. I bought a few fun “toys” for the driveway as well. When I looked around, I was making far more than my peers and my friends. This epiphany happened in my twenties.
Today, through the magic of compound interest, the extra money I put away from my larger commission checks has grown exponentially. Those investments gave me financial freedom, allowed me to start my company, Sales Gravy, and will take care of my family in retirement.
When you discount, you aren’t just reducing your income today; you are also impacting your savings and future income.
About the author
Jeb Blount is one of the most sought-after and transformative speakers in the world…