There’s no better feeling than closing a deal after a tough price negotiation. Everyone is smiles, satisfied with the deal. But getting to that stage requires more than charm and good luck. Negotiation is a learned skill, requiring time for research, discovery, and due diligence long before both parties ever sit down together.

In this article, we’ll show you how to perfect that skill — complete with 12 price negotiation tactics used by reps across industries.

What you’ll learn:

• What is price negotiation?
• Why are price negotiations important?
• 12 ways to prepare for an effective price negotiation
• Best practices for negotiating effectively

What is price negotiation?

Price negotiation is when a buyer and seller discuss and settle on the financial terms of a sale. It’s the stage of the sales process where buyers should be sharing whether your service has been short-listed, if not outright chosen.

Finalizing commercial terms can be quick and informal, settled with a handshake over a cup of coffee. They can also be complex, involve multiple stakeholders and take months or even years to finalize.

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Why are price negotiations important?

Price negotiations can be nerve-wracking, even for seasoned sales pros. A misstep can negatively impact the financial health of the deal — and your business. On the flip side, however, negotiations can go a long way toward cultivating a lasting customer relationship that could include additional sales opportunities. That means more revenue and higher commissions.

More generally, price negotiations present opportunities to learn about your customer, including their interests, challenges, and willingness to pay. You’ll also likely hear about competitors and the markets you serve. All of this can serve future selling efforts by your team.

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12 ways to prepare for an effective price negotiation

An intense negotiation can feel like the standoff scene in “The Good, the Bad, and the Ugly,” where the buyer and seller are waiting to see who will blink first. But most conversations around the financial terms of a deal don’t have to mimic the Wild West. Here are some steps to prepare for an effective negotiation:

1. Understand your goals

It may sound simple, but before you enter price negotiations, make sure you know exactly what you want to achieve. I find it’s easier to steer negotiations in your favor when you have a clear picture of your goals.

2. Do your due diligence before you meet

A little research goes a long way. Before a negotiation, I like to make sure I have an idea of how much money my customer has to spend, who they may have worked with before, and if they have a reputation for straight shooting. It also helps to be prepared with a price quote template, so you can have your invoice filled out and ready to go.

3. Know your skeptics so you can address them

When negotiating prices, you need to know who your skeptics at the buying company are. Ask this question out loud in a meeting: “Who on your team is going to be the most skeptical about pricing?” This seems like a shockingly direct way of collecting the information you need, but knowing who will push back is good so you can approach them directly. If you do not know the skeptics before you start your negotiating, you have already lost. 

4. Know your walk-away moment

What’s the lowest price you’ll accept before you’re willing to walk away from the deal? Before you begin negotiations, be clear about what that number is and stick to it.

5. “Feel out the number” to make the buyer move first

When you offer a price, whatever the number, wait a beat and ask, “How does that feel?” This forces the buyer to make the first move in the negotiation. Concessions should not be offered too early in the sales process, as it sets up expectations for further concessions.

6. Work with wiggle room in price negotiations

Before a big price negotiation, I like to consider what I’d be willing to give up or change to get what I want. I will also look for aspects of the deal where the other party may have some wiggle room to compromise. Perhaps their delivery schedule or payment terms?

7. Sweeten the deal if you come to a stalemate

When negotiating, remember that you have a wealth of assets and tools that you can use to get a better deal. If you find yourself in a stalemate, try offering a discount. For example, in negotiations, I might offer a 2% discount for marketing services. If that doesn’t work, I’ll add another discount of 2% for a multi-year contract to make the deal more enticing. This small concession typically works to move the deal forward.

8. Ask for “just a nibble”

This negotiation technique is exactly what it sounds like — asking for concessions in tiny bites. Smaller asks can help the buyer feel like they’re not giving up a lot. But they can build up throughout the negotiation and lead to better outcomes for you.

9. Find common ground to keep negotiations moving

Don’t forget that both parties have something to gain by being there and need the other to make it happen. If price negotiations start going south, I recommend letting your common interests guide you back on track.

10. Use configure, price, quote (CPQ) software

Just a third of a salesperson’s time is spent selling each week, according to the State of Sales report. It’s shocking how much time can add up when it comes to working on routine tasks. That’s is why I like using CPQ software to quickly and accurately generate order quotes. This way, I can focus more time on my negotiation strategy.

11. Communicate price negotiations internally

When more than two people are involved in negotiations, it’s important that you’re all on the same page. In SaaS sales, for example, there are often multiple negotiations happening between different departments at the same time. If you’re not careful, you may make a concession with the legal department that will unbundle a deal you made with procurement, negatively affecting the price you already negotiated.

12. Be realistic with your pricing

As you negotiate, make sure that your pricing is in line with what your competitors are charging. Your pricing shouldn’t be based on what you think your products or services are worth. It should be based on what the market thinks they’re worth.

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Best practices for negotiating effectively

“Failing to plan means you are planning to fail” is a popular saying among salespeople. In other words, plan and practice now so you have success in future deals. Keeping this in mind, here are several sales tactics that I recommend to my clients at The Harris Consulting Group, and that I’m sure will help you, too:

Practice active listening

Be uniquely present when talking to a prospect. When you’re able to focus and listen without interruption, you earn their trust, and make them feel heard. You also encourage them to open up about circumstances that can inform your price negotiations.

Find empathy to make connections

Connect with a prospect by making them feel included, appreciated, and heard. Empathy is about being committed to fully understanding someone’s experience. It requires a conscious effort at understanding their circumstances.

Ask open and closed-ended questions

Open-ended questions require salespeople to actively listen to prospects, while closed-ended questions force prospects to answer — succinctly. The former should be used to collect information about need, circumstances, and challenges. The latter should be used for black-and-white questions.

Know when to use “and” vs. “but”

These are two little words with two very different meanings. The word “but” dismisses everything that was said before it, while the word “and” allows you to simply acknowledge what was said. Subconsciously, this tells the other party that you agree with them, even if you do not. Understand the context of the sentence you’re using each one in so you can ensure you don’t derail negotiations.

Don’t handle objections; marinate in them

Customer objections are an opportunity. They are signals that someone is interested in purchasing, and they are telling you some of the primary obstacles you will need to get through to make this a real opportunity and a real deal. Think about them carefully, then offer a meaningful, value-first solution that serves both of you.

Know the competition

With business rivals, honesty is the best policy. Being direct, honest, and upfront will help keep you from being blindsided later, and in many cases, it will allow you to truly understand the viability of the opportunity. When someone asks you about a feature your competitor offers, the best response is simple, “Yes (or no), we can(not) do that. I am curious, how important is that feature for you to make this decision?”

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Price negotiation is a game of strategy

Preparation will give you the confidence necessary to achieve the outcomes you want in your next price negotiation. You must define your goals, research your customers, and know when to compromise and when to stand your ground. When you have a clear picture of your goals, it will be easier to steer negotiations in your favor and get the price you’re looking for.