Before Considering Incentives, Know Where You Rank

Particularly in uncertain economic environments, one can hardly blame salespeople for entertaining requests for incentives from buyers and even giving in to the temptation of prematurely offering incentives before they’ve been explicitly requested. That doesn’t, however, mean that sellers should do so. Before considering an incentive, sellers need to understand where they rank among the buyer’s potential options – both internal and external.

When making a recommendation, context matters but the rules are the same

If you as a salesperson wish to be truly viewed as a trusted advisor, it’s important to view your role as one involving helping buyers identify their available options and guiding them to the best solution for them – not what you want them to do or what some seemingly similar company you sold last quarter chose to do. While this is particularly critical in cases where you proactively contacted a company, the same approach should be applied to those in which the prospect came to you via an inbound lead or referral.

If a prospect approached you, rest assured that they are also talking to your competitors. If you found them, you’ve probably introduced competitors. And unless the prospect is entirely incapable, there is also likely to be an internal solution that they are or will be considering. Being curious and transparent about their options will greatly increase the likelihood that they will be equally open about their decision criteria and process.

Keep the following in mind when assessing whether or not to offer an incentive, when to do so, and what it should involve

• How critical is the prospect’s need to do something?

If the status quo is acceptable (at least in the near term), a prospect is likely asking for a discount primarily to save money and increase their potential ROI, which is completely understandable. If their problem is severe enough and only an external solution can solve it, their bargaining leverage is lower, but that is not the same thing as needing to buy from you. At the same time, if they don’t have or can’t generate the requisite budget, they may truly need a price incentive to be able to address their problem. Your role is to uncover what scenario applies and react accordingly.

• How confident are you in your solution to their problem?

If you are certain that your offering can meet or exceed customer needs and expectations based on your discovery and proof of concept process (and the prospect agrees), negotiation can be conducted from a position of relative strength. It then becomes a question of where you rank relative to other solutions, both internal and external. If it’s been established that you can solve a portion (but not all) of their problem, it’s more a matter of quantifying how to account for that fact in terms of pricing and if/what others can do better and not as well.

• If the buyer acknowledges that you are the optimal solution or at least as good as any other, revisit other criteria

If a prospect’s company has uneven cash flow or their current year budget has been exhausted, flexible payment terms may move the needle. If they are a particularly lean organization, the level of customer support resources a supplier can provide could be a determining factor. Therefore, before instinctively moving to pricing discussions, ask the prospect to rank what is most important to them. And don’t forget that if you are truly the optimal solution as acknowledged by the prospect, there may be no need to offer an incentive at all.

• Does the person asking for the incentive even have power to accept it?

If the person asking for an incentive doesn’t have the authority to accept what they are requesting and sign off on the deal if you formally offer it, hit the pause button and request access to the decision-maker. At a minimum, confirm that you will be the chosen provider if their request is honored. If a buyer can’t commit to that, you need to reassess where you are in their internal ranking of options.

If you are viewed as “good enough” compared their preferred option, a pricing or other incentive may in fact be the factor that moves you to the top of their list. If you are already number one in their mind, consider what competitors may do to change that via their willingness to offer incentives – and ask the buyer to validate what others are offering.

• Make sure that requests for incentives are specific and final

If a prospect is asking for an incentive, make sure that it’s specific. Otherwise, you are essentially negotiating against yourself. Reconfirm their timing and procurement process and gain commitment on the “if/when” dynamic, i.e. “If I am able to gain approval on my end for your request, what does your procurement process involve and when is the latest possible date at which an order would be completed on your end”? The last thing any seller wants to hear is that they need to go through “round two” of negotiations with a separate procurement team.

Specific negotiation techniques are a topic for another day. In the interim, be sure to understand where you stack up in terms of a buyer’s options – in their eyes, not just yours – before you consider offering an incentive and, if so, what it should be.