Prior to the proliferation of the internet, potential buyers had to rely on advertisements, catalogs, and sales professionals to help them differentiate between similar products. And when it was obvious that certain products were becoming or had already become commodity items, marketing professionals were challenged to establish emotional connections to their products to either attract buyers or compete on price. Because information was more difficult to access, most buyers made their decisions based on biased collateral or as the result of an emotional response to their interactions with professional sales people. A good sales person held a lot of power with respect to negotiating price.
Information Access Shifting Power
The internet empowered buyers by allowing them to take much of the emotion out of buying situations. They can now access more information more quickly and then take their time assessing and comparing products in order to make the selection that best suits their needs. Buyers no longer have to rely solely on product marketing collateral and product presentations to help them make purchase decisions. The internet has given rise to a broad spectrum of information sources including customer and independent product testing reviews that eliminate a lot of the product bias from the decision process. Some information sites actually present data on feature application that clarify which features may or may not be of value depending on the buyers’ needs.
Many products that used to be sold via external sales professionals are now handled via automated sales sites or by a consolidated sales entity via the internet or phone. And while some larger and more complex products still require an interpersonal sales approach, savvy buyers are using the internet to educate themselves prior to speaking with the professional sales person. Again, buyers are becoming better educated and less reliant on the interpersonal sales communication than ever before. Though these products are not commodity items in the purest sense, the abundance of information and ease of product comparison often work together to create a mindset that, accepting minor tradeoffs, price is the primary differentiator. From the buyers’ perspectives, the purchase looks like a commodity purchase and the stage is thus set for them to negotiate on price.
Balancing the Equation
Sales personnel need to understand how to engage a client who is well educated on their products, their competitors’ products, and who has an established commodity mindset. They also need to know how to negotiate a price that is appropriate to the value provided by their products. Most professional buyers have taken one or more courses in negotiations skills and are adept at closing deals that are advantageous for them. Even the novice buyers will be better prepared today than in times past.
The internet has changed corporate buying behavior and created better informed and savvier buyers. With or without formal negotiations training, buyers are in a stronger bargaining position today than in years past. Have your sales strategies evolved to allow negotiating on even terms? What is your average annual discount percentage? If you could increase the net of each sale by 1 to 2 percentage points in the first year, how much would your profit increase? Increasing net sales by 1 to 2 percentage points is a typical result of empowering sales personnel with negotiations skills. Many companies have reported that they recouped the entire cost of the training in the first two months after the training was completed. Enabling your sales professionals with proven negotiations skills is an easy, low-risk method of significantly improving your bottom line.
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RT @Leadership1: Arming your team with negotiations skills can boost profits http://is.gd/71SGx.
RT @leadership1: Latest blog post: "Is Your Sales Team Maximizing Your Profits?"- http://is.gd/71SGx #sales
In the current information-rich, online environment, in which publishing additional product and service information can be done for next to no cost, there is a new dynamic at play in sales transactions. On the one hand, the balance of power has shifted dramatically in the direction of the buyer. On the other hand, sellers can share more useful and more targeted marketing information, more easily than ever before.
Gordon has hit the nail on the head with this observation about the new demands on sales professionals: “They also need to know how to negotiate a price that is appropriate to the value provided by their products.” The key to success here is understanding and effectively communicating a compelling VALUE proposition.
Because value is always in the eye of the beholder, sales pros find ways to deliver a “value-package” that buyers feel they really want or need. When buyers can actually see value in an offer, negotiations almost become beside the point–as does price, more often than not.
Thank you for the commentary, Bob. You have pointed an important aspect that I completely missed, though the internet has shifted the power, it can be used by companies to their advantage with the appropriate marketing approach. Well done.
RT @leadership1: Is your sales team prepared to negotiate? New post: "Is Your Sales Team Maximizing Your Profits?"- http://is.gd/71SGx #sales #management