How and When to Make Concessions in Sales

Getting What You Want From that Big Deal

In any large complex sales deal it is inevitable that the customer will try to get you to make concessions. They will try to get you to bring the price down, or they will try to get you to throw in bonuses. What you need to know as a successful sales representative is when and how it is appropriate to make concessions. If you don’t go through this process correctly, you are either going to come across like a pushover, or like a jerk that no one will want to work with ever again. On the one hand, if you make too many concessions, the customer will find it easy to abuse you and they will cut into your profits over and over again, setting a poor precedent for the future. On the other hand, if you don’t recognize the times when it is necessary to concede, the customer will leave the deal feeling like they’ve gotten mistreated and won’t come back to you in the future.

In order to fix this problem, you need to be ever prepared to handle your customer’s demands, knowing when it is OK to say yes, and when you need to say no. This article will begin to help you understand this delicate balance. However, if you still need more help with this process I suggest checking out our podcast SalesRoundup.com. You can find a truckload of addition helpful information on this subject there.

But for now, let’s get down to the real dos and don’ts of concessions.

Never Make A Concession Unless You Have To

You should never be the one to introduce the topic of discounts into the discussion. Rather, you should act at first as if concessions are not even within the realm of possibility. Wait until the customer expresses an interest in getting a discount and then make them work for it. The customer needs to feel like you are reluctant, or else they will not feel like they are getting a deal.

Always Get Something In Return

When you do decide to make a concession, it should rarely be one sided. If the customer wants you to change your price, ask for something in return. Ask them to promise to close the deal at an earlier date than planned or to buy a great quantity of your product. This way, you are both gaining something from the change in plans.

Know Your Customer’s Needs; Make Sure They Know Yours
Know what your customer is hoping to get out of this deal and communicate to them effectively what they need to do for you in return. If you do your research properly, you should already be well acquainted with their buying procedures before you have even met.

Follow a Healthy Negotiation Pattern

This is perhaps the most essential point of all. Customers go through a very unique psychological process during the negotiation period. The people that you are working with need to not only get a good deal, but they need to actually feel like they have gotten a good deal. This only comes from getting concessions from you slowly and arduously. They want to feel like they have put the proper effort in and will now enjoy the benefits. In order to make this happen, you need to give concessions slowly, a little bit at a time. If the absolute lowest price that you can charge is $8000 and you concede from $10,000 to $8000 on the first day, the customer will be frustrated later when they find that you are unwilling to go any lower. Instead, concede a little bit at each session, until the customer feels like they have worn you down to your absolute, lowest price. This boosts their self-esteem by making them feel like they have driven a hard bargain, making them feel optimistic about working with you again in the future.

This post was inspired by the SalesRoundup Podcast episode titled “Let’s Make a Deal – Behind door number one Principles of Negotiation”  we recorded in March of 2007.

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Part two

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Part three

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Part one

Good Selling
Mike & Joe
SalesRoundup Podcast

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10 comments for “How and When to Make Concessions in Sales

  1. Cindy Shea
    March 19, 2009 at 8:28 am

    Can you please send them the link to all three pod cast sessions of Let’s make a Deal? I would like to share them with my staff.

    Much thanks.

  2. Jonathan Wiener
    March 19, 2009 at 3:43 pm

    Hello Mike and Joe,

    Your point about “letting someone feel like they got a deal” really struck a chord with me. In truth, this was something that I really didn’t understand the importance of until mid career. At the time I took over the role of Regional VP of Sales for company selling wireless tracking and communications solutions to the long haul transportation market. As it turned out, dealing with this industry was a real eye opener that forced me to evaluate a good many of my own long standard philosphies on high level sales execution. You see, in prior years my primary industry focus was within “white collar” sectors where excessive requests by a rep for concessions was typically a sign that you either needed to do some training or recruiting of a new rep. Then as I said I ran into the nations trucking company culture and learned that you could deliver the most compelling business case of all for your solution, gain buyin from every buying influence clearly differentiate your operational and economic value from the competitive landscape and still not have a contract. Why? You guessed it, because the President of that company still felt he needed to get a deal. Was this wrong? No, far from it. You see, as I quickly learned, the trucking industry is a very low margin industry characterized by family owned businesses who survive and sustain themselves primarily because they are intimately aware of the variables that impact cost in their operations AND because they have spent generations negotiating good deals. With this as a landscape, my organization did two very important things to help us be successful. First, we acknowledged and stopped judging the nature of our customers. Secondly, we developed strategies to provide our clients with that very sense that they got a deal each and every time. These strategies incorporated many of the critical elements in sales execution that you mentioned above as well as the development of some other creative spiffs that delivered that perception of extra value in the eyes of customers while still protecting our bottom line.

    companies were by nature very thin on margins and therefore thereforeIt was the nature of the beast and something that we really gave careful thought and attention to as an organization. Ultimately we followed much of your above mentioned advice. We also were ver

  3. March 26, 2009 at 4:36 am

    Hey Cindy

    I added the links to the other two episodes. Enjoy!

    If your staff uses iTunes, consider having them subscribe to the podcast (its free) All they need to do is click on the iTunes store, then Podcasts… In the search box search for SalesRoundup… click subscribe and you are done… We have over 176 episodes on the feed.

    Joe

  4. March 26, 2009 at 8:15 am

    Mike, Joe; great as always. Don’t forget that the when you request a client to give something up, you can get creative. Sure you can go for things like blanket orders, extending contracts, or other direct sales gains; but you can also do other items that will indirectly help your sales efforts.

    If I give a concession, I will sometimes ask for a testimonial. Key clients will give a few kind words, or even write a nice email. Getting a formal statement, or even better, a video testimonial takes time; but they can be of great value when finalizing a large deal with a new prospective client. You can also use LinkedIN or some industry specific networking system to see who that client is linked to, and then ask for a direct, or even in-person introduction to a new key prospect you’re trying to break into.

    The value of these additions could be worth literally thousands, or even millions of future sales, and it won’t extend the budget of the client who may need to cut costs and is thusly asking for the price negotiation.

    James D Mitchell
    (or as Mike said “James in Mizzou-rah”)

  5. Keegan in VA
    March 26, 2009 at 7:51 pm

    Joe and Mike, you do great job appealing to all sales professionals in all kinds of industries. Your main focus has always been in the more complex sales cycles and I want to adapt this blog entry to those who are more on the retail side of sales or those with a 1 – 7 day sales cycle.

    Depending on how long your sales cycle is you need to adjust the rate your willing to concede discounts. When you have a short sale cycle the process of everything is greatly sped up. You have to be investigating your customer’s needs; learning about them or their company in a short amount of time; and handling objections quickly but effectively. Also most likely with a short sales cycle, the customer is coming to your office or store which enables them to leave at any point.

    In this situation it’s hard not to cave in to the impulse of discounting when the customer asks. What is most important is that you set the presentation up right. Start by showing your highest priced product or service so as you learn their true needs you can move them into products that cost less if price is an issue. Perception is key, sometimes customers don’t realize the true price of things. Be specific to the customer what you are doing for them, they may think you’re doing something for them for free that you would normally charge others for. Make it sound like they are getting exclusive treatment from you.

    Great show guys!
    Keegan Sturdivant

  6. March 27, 2009 at 2:02 pm

    Keegan, et al.

    I agree, selling for smaller dollar amounts and quicker sales cycles are a different story. I myself sell Cables & connectivity products. Our average sale is under $1k, but I also specialize in complex sales that go from $10K to over a quarter of a million.

    Our product is like shoelaces… until you need it, you can’t sell it. So our strategy is to contact regularly, and to be a resource (informing of new technology, helping advise solutions), but the key thing for our industry is this:

    The longer you wait, the more the margin shrinks.

    Clients, especially new ones that we are not at the Trusted Advisor level yet, will call us, get a price, and then go on to the next one. Until we find out their exact needs, their target or budget, and land the deal, the margin will lower.

    An example, a customer is looking for a widget. We sell said widget for $10, they ask if we can do $7. I say, “let me check with management and call you back in an hour.” In that time they contact 4 other vendors and get quoted a different option for $6, now the deal has been bastardized and the margin is falling out.

    The key to quick sales cycles, like retail or commodity type items, is to be able to quickly assess the needs and get them the right solution. If you have to discount, you have to do it quickly. Ask the question “how too high are we?” to see where they are ultimately going to go. If it’s doable, do it; if they’re a lowest cost wins option, stay away, they’ll be a pain in the rear and the deal won’t be worth the squeeze.

    Also, even on retail, try to become a resource. Don’t put them into your most expensive option only to “work backward” due to their needs. Ask them their needs first, and then tell them “Well, this is our highest quality option, but based on the fact you said you need X, I think this middle option is right for you. It’s the best mix of value for the quality”

    By constantly putting people into the highest option, you’re doing Old School sales selling, and buyers are way too sophisticated for that nowadays.

    Good luck in your selling!

    James D Mitchell

  7. marccmandel
    March 28, 2009 at 3:52 pm

    In my years of professional sales and the last two of which as an avid listener to the SalesRoundup, I think your advice and insight are creative and on-target. With that said, I wanted to share an opinion about customer behavior.

    Specifically, I’ve always believed that if I did my job in advance of asking for an order, including building relationship and intellectual capital “bank balances” with my customer, negotiation and close are non-events, but rather just part of the process.

    Too often sales guys are under extra-curricular pressure to prematurely close, such as quarter end or quota performance, and if their “bank balance” with the prospect is too low, or in some cases, overdrawn, the likelihood is the close can be seen as dramatic and sometimes contentious.

    Often, in those cases, buyer and seller represent diametrically opposed views and goals, whereas in better circumstances, given enough value delivery throughout the qualifying and selling process, the close of the sale is a shared goal with agreed upon parameters long before we get to the table.

    We need to be especially aware of the external pressures and do our best to manage them while we work our pipeline and make “deposits” into our prospect accounts relationally and intellectually and with enough patience and value delivered throughout the process, we have a greater chance of closing business predictably and without 11th our surprise.

    Cheers –
    Marc Mandel

  8. March 30, 2009 at 5:39 am

    Thanks for your expert comments. You both are doing a great job in helping scores of sales people out there.

    Chris Wilson

  9. Keegan in VA
    April 1, 2009 at 12:43 pm

    James I definitely agree that blindly putting a customer in the highest priced product “old school” and not beneficial to the customer or the sales rep in the long run. Even in a quickened sales cycle you should still be finding the customer’s real needs. You always want to be asking questions an learning information about the customer. At the same time you want to be setting yourself up for the rest of your presentation.

    Before Tiger Woods takes a swing at the ball he has to set himself up correctly or else his swing will not be executed properly. He first analyzes the situation, then he positions himself in the correct position. It isn’t that his swing is any less important but it is still imperative that he has the correct setup.

  10. April 16, 2009 at 8:59 am

    Joe,

    Thank you for adding the other two episodes. I will enjoy sharing them.

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