Ever had that sick feeling after buying a car that you might not have gotten the dealer’s lowest price? Ever wonder when you close a sale whether you had room to increase your price without losing the deal?
One common way of asking either of these questions is “did I leave money on the table?” In other words, if you’re the buyer did you overpay and if you’re selling did you charge too little.
A savvy buyer or seller does well to understand some of the tricks of the trade. As the bumper sticker says, “You Think Education is Expensive; You Ought to Try Ignorance.” And in the negotiation game that bumper sticker could not be truer.
As an example, I’ll relay a sales call a few months back. A potential customer called to get a bid for our services. She explained that her current vendor was raising his prices. I knew that she was currently being charged 55 cents per unit for the product. How did I know that? A year earlier, we had lost the account because we were under bid.
After hanging up, the ’ole game began. First, it had to be determined the minimum price we could bid and still make money. Incidentally, it is astonishing how many bids are calculated without any regard for an acceptable profit margin. It seems hard to come up with a good reason why someone would sell a product or perform a service at cost, which means for free, but it happens routinely. Upon determining my minimum price threshold, the game truly begins. At what price do I need to be to get the job?
In this case, I figured probably the most the competition would raise their price would be a dime. In my mind, my plan was to bid the account at 60 cents per unit — over the previous bid, but hopefully at or below the competition’s new bid.
Scratching my pencil, I just wished I had more information on my competitor’s bid. Rather than pout about my lack of probing on Round 1, I called the customer back up and asked the disarming question, “where does my bid have to be to be competitive?” Without skipping a beat, the purchaser replied, “their bid is at 75 cents per unit.”
Boom! I immediately wrote the bid up for 70 cents per unit and took it to the customer. On that particular order, that extra dime equated to $2,000 into my pocket over the course of the year. If not for the leading question, I would have left $2,000 “on the table.”
We’ll switch from the sell side to the buy side.
I remember looking at a used item for sale that really intrigued me. It had a sign saying, “Make Offer” with no price of any kind. In my mind, I thought, “this is probably worth $200,” but I was hoping he would part with it for around $100. We exchanged pleasantries and, rather than making an offer, I asked the question, “What would be the least you would take for this item?” He thought for a moment, and replied, “I would like to get $50 for it.” I couldn’t get my wallet out fast enough.
Another favorite is to simply ask a seller, “Is that your best price?” After the salesperson has taken all the time and effort to come up with a quote, they’re ready to close the deal. By asking this innocent little question, the salesperson may quite willingly drop the price just to get the deal closed. Vendors lower their quotes an amazing amount of the time. Not bad for simply asking a question.
What are common denominators in these examples? There are probably several, but one sticks out. The more questions you ask the better. Ask them in a sly, non-confrontational manner and you’ll be amazed at how and what the person opposite you will reveal.
A little personal theatrics adds to the effectiveness of these and other questions. Even if you are not Hollywood material, well-timed and well-asked questions put more of that money “on the table” in your pocket.
Damon Carson is a Longmont business owner and small business investor who can be contacted at email@example.com.