Optimize Your Customer Development Funnel in Vendor Negotiations

How to create outlook signature

- The client says give me a discount, I'm going to give you lots of business. I need a discount. What do you do? Join me on this episode of The Dave Lorenzo Daily to find out. (upbeat rhythmic music) Hi, I'm Dave Lorenzo, and today, we're talking about when a client gives you the objection, look, just give me a discount. Just give me a discount because I'm going to give you a lot of business. I can't tell you how many times each month I hear this from my clients because their clients say it to them. Everybody's going to be the best referral source you've ever had. Everybody's going to be the most productive business relationship you've ever seen. They want a discount in advance of giving you all kinds of business. They're promising you all kinds of business so they want a discount. Sometimes this will be called favored nation pricing or most favored nation pricing or volume pricing. Here's how you handle this particular objection, this particular negotiation strategy from your clients or your prospects. The first thing you have to think about is you never give a discount to anyone in advance of doing business with them. Everybody pays the base price based on the value you provide. What you can do is you can structure your relationship with a client in a way that says once you hit a certain threshold, Mr. Client, you will receive a discount off of future purchases. This is a discount for performance model and it's a way for you to please those clients who are telling you I'm going to do so much business with you, you're not going to be able to stand it, you're going to love what we're doing for you, give me a discount, I'm going to be the best client you've ever had, I'll refer you to all my friends. When a client says that, they're really positioning themselves to get a discount in advance and you don't do that. You say Mr. Client, here's what we're going to do. Your price is going to be X as we start our relationship, but the minute you buy 500 units from me, your price goes down to X minus 10%. At 1,000 units, it goes down to X minus 20%, and that's the best price we've ever offered to anyone. In fact, you'll be alone in that huge discount because of the volume you've done. You teach your clients that they get rewarded after performance and not before performance. So when a client says I'm going to give you all kinds of business, give me a discount, your response has to be I would love to do that. As soon as you hit these thresholds, as soon as you hit these benchmarks, I'm happy to give you discounted pricing along these lines. Now one other point on discounting. The only other time I'm okay with you discounting your price is when you can get the client to pay in advance for volume. So let's say the client says to you you're charging me $10 for one widget. I want to buy 100 widgets and I want to pay $9 per widget because I'm doing so much volume. You can say to them I'm fine with that pricing. If you give me $900 upfront, you can take the total volume of widgets, the 10 widgets for $9, that would be $9 per widget, but you pay me the $900 upfront. That then allows them to take advantage of a huge discount in advance, but you also get money in advance, and the value of money in advance is far greater than the discount you're going to give them. So if they're willing to pay in advance for the total volume they're promising you, you may want to consider giving them a discount. Those are the only times it's okay to discount your pricing. I encourage you to combat that objection, that negotiating strategy. I encourage you to combat the discount negotiating strategy with an offer if you pay upfront for your total volume, you get the discount, or we give you the discount when we hit thresholds that are set out in our agreement. Those are the only two times you discount your pricing, and that's how you combat the objection of I'm going to give you so much business, you need to discount. I'm Dave Lorenzo. If you like what you heard here today, please give me a thumbs up. And make sure you subscribe, hit that subscribe button so that you get notified whenever we deliver great videos just like this, and we do that every day. I look forward to seeing you back here again tomorrow on the next edition of The Dave Lorenzo Daily. Until then, here's hoping you do this and sell more. (upbeat rhythmic music)