Idea 019: Value Mismatch

While I was struggling on finding the right company for one of the main projects of my company, I received a message from one of the shortlisted companies which offered a relatively high price. A, the sales of that company, agreed that his previous offer might not be so competitive, and he was willing to revisit the offer.

To be honest, I was surprised by his messages. I thought he would give up after I gave no further response to him because of his expensive offer.

I totally understand why he made such an expensive offer – because he believed that he could provide valuable service with his professional knowledge. Undoubtedly, we need his qualification to complete the project, but we also have other concerns.

For example, the recent economic downturn has brought adverse impact on our 2020 budget. In order to achieve better result in 2020, we need to reduce the cost throughout the year.

As a result, the expectations are mismatched. On one side, we were looking for a relatively less expensive package for our project. On the other side, A believed in their professional services which is worth a higher fee.

Wait a second. shouldn’t all companies focus on value? As long as we can deliver, why shouldn’t we charge for higher price?

Value is different for different people

This video shows how to close a deal with high fee. Although there are 611k+ view count, I don’t think this is a realistic video. It seems to be oversimplify the real life situation, so that Dan can just use a few words and his confidence to close the deal.

Maybe when we got lucky we can close a deal like that, but it is highly impossible to do so because there are a lot of concerns by each party when they are doing business.

One of the main concerns is that the value required by the buyer might not be exactly the value offered by the seller. My case is a good example in this scenario.

Some people might think that they can charge for whatever fee as long as they can deliver. Yes, they are partial right. If that’s the case, how come some company need to adjust their price of their products or services according to the market situation or the economy? Maybe because of the supply and demand? or maybe because of the change in value from their products or services?

In the business world, no one will make decision sole based on single factors / a few factors. Because if they do so, they need to take risk of making wrong decision and money loss. Therefore, they tend to consider a lot of factors before they get into a deal.

Unless the seller can read buyers’ mind, they will not know whether the value they are offering match with the value in buyer’s mind.

Negotiation is necessary

That is why when A reached out to me one more time, I knew he has chosen the right move. He knew that the fee he offered was less competitive that might cost them our deal. He was sure about this when he received no responses from us at all.

There were only two choices to them, either just lose us or revisit their fee to re-ignite our interest in them.

Of course if A has higher bargaining power, the story will be totally different. However, unless what he is offering is about the necessities or products with very high-end technology, he cannot have much bargaining power over us.

Few days later, A counter-offered a 50% off discount to us. It looks like they were really overpriced before, and they are really desperate to close this deal. My boss is still reviewing different quotations from different companies before making his final decision. He still thinks that the fee is too high and want to reduce it as much as possible.

I think I should learn this price-negotiating attitude from my boss.

Leave a Reply

RSS
Follow by Email
LinkedIn
Share
Telegram
WeChat