Sales negotiation training experts have always considered it risky to make the first offer in a sales negotiation.
The worry was that if you showed your cards too early, you might be underselling your solution and would not be able to effectively renegotiate your position. Or you had to think about the risk of proposing a deal that was so far from what your buyer expected that they might just up and leave. Traditionalists in sales negotiation training recommended you keep your cards close to your chest and let the other person make the first move. But experts are re-thinking that advice.
Recent research has shown that there are many times when going first in a sales negotiation can be advantageous. It sets the stage for subsequent negotiations and, when set high, can keep the offers high as well. You give yourself some negotiating room and the buyer begins from the top. Just think about buying a house. The seller fixes the price to start. They want more than most buyers are willing to pay. But their starting point keeps bids higher than if a seller were to establish the price and put in a “low-ball” starting bid.
When is it unwise to go first in the sales negotiation process? When you don’t know enough about how the buyer values your offer. You may seriously underprice your offering and leave value on the table.
To be smart as you negotiate an important sales deal, learn as much as you can about what your solution can do for the customer and their business. Why do they need it and what are the consequences to them if they don’t buy? The more information you have, the better. If, for instance, you are recommending a sales negotiation training program and follow-up coaching process that is guaranteed to boost margins by 20%, figure out how much that can mean to your customer and set your price accordingly. When you sell value rather than price, you avoid tangling over the cost and, instead, spend more time on the specifics of the overall solution.
When you don’t know enough about the customer and their priorities, invite them to make the first offer. However, when you know what would be a reasonable price to pay for the value you provide, it is smart for you to quote numbers first.
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