Here’s a story you’ve probably heard, if not participated in, many times in your career. A lead is passed your way, regarding the use of your services. You dutifully set an appointment with the potential prospect. Things are going well on the call, and the conversation turns to costs. The prospect doesn’t want to tip his or her hand when asked about the budget for this service. Instead, the prospect deflects the request for information, and asks you to put a proposal together for them to see.
Sound familiar? It sure would be valuable to have an understanding of the budget for the services you are hoping to provide, but we can’t blame the prospect here… yet. These numbers are guarded with the hopes that, by not disclosing a budget, the prospect will get a better deal. After all, what if the budget is higher than the rate the vendor quotes them? So we, the vendor, will often be forced to go first. But without knowing the budget, what happens if our number is so high the prospect backs out without ever entering into a negotiation?
Recently, I was on a call with exactly this kind of a prospect. We did our pricing dance, and I was asked to send a proposal. This was for a job that was twenty minutes from my house, and a great fit for my services. As a man who has spent nearly 32 years on the road conducting seminars, I really wanted this job. What’s more, I really liked the company in question and the prospect I was talking to. So, I did something I rarely do; I damaged my negotiation position before I even sent out the proposal. Here’s what I told the prospect:
“I rarely am able to conduct seminars near my home, let alone in my state. I’m going to put together a proposal as you’ve asked, and I’m going to put my published rates into this proposal. However, because the session is as close to my house as it is, and I’m available to do this job, I want you to know this number is merely a starting point. If I’m not the best person for the job, the rest is moot, but if I am, all I ask is that once you get the proposal, if the numbers don’t fit your budget, counter them. Then it will fall upon me to either do the job for the numbers you are suggesting or not.”
I was basically inviting him to counter the price I had sent him. I even made a quick little joke when I said, “How’s that for an approach to negotiation?!” My prospect seemed grateful. I sent the proposal out 30 minutes later, and the next morning I received a short email back: It read:
“Thank you very much for your proposal. Unfortunately, your price is significantly higher than our budget allowance for a 90-minute session. We can’t afford this to kick-off our meeting.”
And like that, despite my follow-up attempts, another vendor had been selected and the deal was dead.
It’s a strange paradox, because on the one hand, we as vendors are often forced to give up our negotiation position to pacify our prospects. But rather than negotiate, our prospects are rejecting the offers made to them. It’s a shame, because we aren’t talking about hiring an overqualified candidate to work for a company. It’s understandable that the company often feels like they will be stuck with a disgruntled employee who will bolt the moment something that fits his or her qualifications comes along. We’re talking about getting goods or services at a reduced rate. Why in the world would that be rejected based on price without a counter?
The first time it happened, I thought it was an anomaly. The second time it happened, I spoke to other vendors and realized it’s a trend. When a company refuses to disclose its budget, and rejects a proposal without countering based on price alone, it just leaves me scratching my head.
As our economy continues to limp along, today’s BLArticle® is aimed at those companies who are missing the boat on this issue. By all means, when it comes to a negotiation, go second, but if you want the goods or services from a vendor and the price given is higher than what you expected, never, ever reject a proposal based on price without a counter. What’s the worst that can happen to you? That’s right: nothing.
EXCELLENT BLarticle today, Rob! You hit the nail on the head. I’ve run into this (and my sales teams have run into it) more times than I can recall. Very common…yet having the shoe on the other foot (where I’m the purchaser), I often find that there’s little or nothing to be gained by going second. Regardless of what my “budget” is for something, if the proposal I receive is a good value I’m likely to take it. If I like it but the price tag is too high, then I negotiate for it. If it’s lower than my budget but I don’t like it, I don’t write the check. So I wonder about the “purchaser’s wisdom” of going second, often…..
Well said, and let’s agree on one thing – If you are going to go second, never, ever dismiss an offer based on price because it’s out of your price range. There is never harm in countering. I’ll bet a few who read this can think of a house purchase, perhaps one of the biggest purchases in your lifetime, where you’re awfully glad you did counter. Ultimately, if a number doesn’t work for us, we can always say, “no.” Thanks for chiming in Nick!
Hi Rob,
I am going to offer a thought on this: Sometimes, companies are interviewing vendors, already knowing who they want the winning proposal to come from. They are just demonstrating a certain level of due diligence before picking the winner.
Another harder on the ego possibility: Maybe they did not feel as good about the meeting as you did and no matter what the price, you may, for whatever reason, have been discarded as a possibility by the time you left the meeting. (I don’t really mean you, but the presenter in a situation such as the one you described.) Hope to see you this weekend during the studio tour.
Regards,
Kurt
Good point. Speaker’s bureaus frequently make three recommendations to clients, but two of the three are window dressing.
I never thought I’d say this, but I can only hope the story I told ended the way it did because of an internal issue that had nothing to do with price! It would be a heck of a lot easier to swallow.
Great hearing from you Kurt!
Thank you, Rob. I’ve had this experience many times, and I hope all our clients take heed!
Rachel will not tell you this, but this is a comment coming from an extremely skilled copy editor I’ve had the privilege to work with. Imagine putting your life’s work into a manuscript, and then wanting to find a bargain editor! It happens to us all, and in the end it all comes back to the same thing. Please don’t ask me to read palms regarding a budget, take my offer as a good faith appraisal of the job you are considering me for, and for goodness sakes, if you don’t like it – counter it! (Sorry about the run-on sentence Rachel 🙂
Great to hear your comments!
This situation you described has happened to us as well. Considering that it is impossible to change the vendor or client, I wonder if people have ideas about what how we can pitch our services and talk about money in a way that encourages counter offers and negotiation. We’ve often asked people what their budget is, and typically people are cagey. We’ve also negotiated our fees, but as you point out, if the first price doesn’t get a counter, it’s frustrating to get silence. You’re right, sometimes it feels like dancing in the dark. (Cue Bruce Springsteen.)
I like any reference to The Boss. There’s no perfect answer, and at the end of the day, I’d like to think if we do a better job providing a rationale to the client as to why it is necessary to provide information regarding costs, we’ll have a better chance to avoid negotiating through emails. Like my fees, or don’t like my fees, but always give me a chance to speak with you about them.
So great to hear from you. Welcome to the BLArticle!
Great words and timing Rob. I had have been in the middle of a long negotiation process that I am hoping to complete soon….if we are off on price, I sure hope we get a counter! Not sure why this isn’t just second nature to people (pun intended)
It’s the second nature part that continues to bother me. Because it isn’t second nature for some, at a bare minimum, I want to provide my costs BEFORE I write them up in a proposal. If it creates some tension – so beit. It beats silence.
Hey Rob – here comes your favorite ‘responder’!
We’re talkin’ ’bout the Sales Profession here! And we all know that in sales – you don’t win ’em all! We all live ‘n’ die – by our ‘Batting Average’! Some of us are .400 ‘hitters’. Some are .300! Some are only at .200. And some are below that – and you know what that means! Back to the ‘Minor Leagues! And we’re not very successful.
It’s nice – when your name is Bill or Hillary Clinton – or Jay Leno – and folks want to pay you $50 grand a ‘pop’ – to say ‘Hi’! But for the rest of us – we just gotta ‘hang in there’ – and as my ‘old man’ used to say – “Johnny – just do the best you can!”
Amen!
JM
“C.T.”
Great comments as always! When John Monsul talks – I listen. Thanks for the redirect here. You can’t win them all… but you can continue to learn from your mistakes.
This is the selling profession and they arent the only prospect in the world! Lets get out and look for other clients, they are not very far from us.
Good point. As they always say, “Each ‘no’ brings us closer to a ‘yes.” Nice to hear from you Melvin. Looking forward to more of your thoughts!
Great advice, Rob! Excellent timing for me as I will most likely enter into a similar negotiation this week.
In government contracting it’s especially tricky, as when negotiating with the government, there are likely preferences going in to the bid process, and every contracting officer interprets the Federal Acquisition Regulation (FAR) a little differently, and some are not even comfortable speaking directly with the bidders until after the award.
I’ve always been told it’s legal and legitimate to inquire about the budget before the Request For Proposal (RFP) is released, but most government personnel aren’t comfortable discussing this because of “front page Washington Post” horror stories they’ve heard.
Trust seems to be the key (the customer trusting that you would not lead them down a bad path), but that takes time to establish.