The research is out!
It’s not just clown-car-Todd beating the drum on pricing and negotiation transparency!
Since the beginning of time, we were all taught to not share the price too early in an enterprise sale, right? That, until we've established value in the prospect's mind, price will become the decision criteria instead.
According to a study out this month in The Journal of Marketing Research, it turns out the opposite is true.
Playing your pricing and negotiation cards face-up early in a sales cycle has magical impacts on deal values, win rates, and trust throughout the seller-vendor-prospect-client relationship.
Where it started...
Twelve years ago, as the VP of WW Sales for a software company.
I had a rep who was working on a large prospect down in Houston, Texas. I joined him in a meeting with the client to talk pricing.
I thought it would just be the three of us - my rep, the client and myself.
Instead, when the conference room doors opened, their entire procurement team sat.
Now, I had never been tightly trained in the art of negotiation. I had taken a class, that seemed to focus on "tells" and reading eye movements, and essentially how to be the better liar.
I was admitedly nervous at this point. And being a bad liar anyway, I decided to throw our cards face up on the table.
I basically spouted, "Here's how our pricing is structured," and "Here's how we as a company make money/stay viable."
What happened next was magic.
Instead of the typical house-of-lies negotiation, trust was built. It was a collaboration instead of a battle.
For every dollar we gave away in the form of a discount, we got value back.
It was...easy. The second biggest deal in our company's history.
What happened next?
I sat in a conference room with my CEO, where I shared what I thought were our "levers" - the things we care about as an organization. Instead of burying our pricing model, we started to lead with it. We used it as a qualification element. We found that pricing transparency helped - in a big way!
After leaving that company, I joined the sales leadership team of a unicorn (ExactTarget). In one of my first team meetings, I taught my team the concept and structure. The results were so profound, I ended up teaching the 300+ sellers across the organization - who found success with it overnight. It became known as "Todd Caponi's Famous 20-Minute Negotiation Skills" class.
I brought it with me to my next company, where it had equally huge success.
But it's always just been me banging the drum. One guy preaching from the mountaintops that the old approach to revealing price is dated, and runs counter to the behavioral science of trust and decision making!
In this month's issue of The Journal of Marketing Research, a group of professors researched the idea of "Open Negotiation".
Professors from The University of Texas at Austin, TCU, Northwestern and the University of Denver studied the impact of revealing your pricing model at the front-end of the sales cycle.
The results? It builds trust, results in the client becoming much more likely to actually make a purchase, and when a salesperson revealed the cost at the beginning, the customer long-term value became significantly higher.
Transparency sells better than perfection. When we're making a purchase, our brains are driven to "predict". We access all of the elements of a purchase, much of which is done subconsciously, under the guise of "will the juice be worth the squeeze?"
Will this purchase make me look good? Can I predict its impact on me, my team, our business, etc.? Will this help me maintain or grow control? Are others like me doing this already, and if so, with what results? Will this aid in accomplishing our mission? Is the investment (price, resources, time, risk) going to be worth the outcome?
As the seller, as every word is coming out of your mouth, the buying brain is matching it up, constantly assessing that question - is the juice worth the squeeze? If our brain doesn't know what "the squeeze" is going to require, the brain cannot properly consume your positioning of the value of "the juice".
Lead with transparency!
The cons of a potential purchase:
An area where a competitor may have the upper hand. A part of the solution that's not fully developed yet. Where customers often struggle.
"If these are areas that are a high priority for you, let's vet that out first. And if they're the ultimate priority, we might just be saving each other a great deal of time."
"Based on what we know about your organization and initial discovery, the investment is typically in the $X - $Y range. We'll dig in deeper throughout the process. If that price range is way off, let's talk about that right away, too. If it turns out it's a non-starter, again, we also can save each other a ton of time."
In the end, you've just (a) built trust by playing your cards face up, (b) helped the buyer's brain's filing system get set up to consume the "why you're great" messaging. The two together removes the brain's "salesperson alert" BS radar, making every word that comes through believable.
Remember, you are the buyer's Sherpa through their buying journey. Help them make the best decision for them. And if it's not going to be a great decision for them, the faster you can find out, the better!
In the end, you'll win more often, win faster, spend a greater percentage of your time on the deals you should win (or prospecting into others that also have a higher likelihood of being a great fit). Your deal values will be higher. You'll build trust to the goal-line. And those customers are more likely to stay, buy more (at a higher margin) and advocate.
Seriously - it's as close to magic as you're going to find in sales.
Transparency sells better than perfection!
(and here's a little video that explains it further...)