Will you pass the Flinch Test?
After a long buying process, the time has come to submit prizes. Countless hours are spent formulating a glorious proposal that will show you your comprehensive solution. Proud of your performance, you present the proposal to the buyer. To save the sections about your business and your solution, turn it right to the price sheet. Oh me, I didn’t think it would be so expensive!
What happens next determines whether you will get the business or not. If I say the business gets there, there are two sides to consider. The obvious is whether the prospect will award the business to you. The less obvious is whether your company will match their desired price level. The negotiation can come to a point where the prospect says they want to award you the business, but at a price that is unacceptable to your business. If you’ve ever been there, it’s painful to say the least. As a salesperson, you have the responsibility to facilitate the process in a way that leads to a mutually acceptable conclusion.
There is a trade secret in the buying world. They call it the flinch test. These are the test procurement agencies and other professional buyers giving to sellers when they offer prices. Wow! You are 25% higher than your competition. These benefits are trained to respond with surprise so they can see if the salesperson has confidence in the price they have suggested. It’s nothing more than a simple bargaining tactic. Often they exceed the price difference so you can do some quick maths and see that the differential is false. I can remember a time where I was told that we were 50% higher than the competition. When I reviewed the numbers, it meant that the participant lost 18% due to fixed costs we both had. The participant was highly unlikely to report for this type of account. When I asked the Procurement Agent again about the figure, he flew and we eventually won the business.
The key to passing the flinch test is to respond with confidence in your price. If you do not believe that you are offering a fair, competitive price to the solution, is my question why you offer it anyway? One would hope you have integrity, so why offer something you don’t believe?
Some reactions cause you to fail the flinch test.
What price were you looking for?
I ask my manager if we can do better.
What happens if I decrease 10%?
The reason they are failing responses is that they create confidence with the prospect. Did you try to rip them off with the price you offered? One of two things is true. Or you tried to rip them off or you believe you had a fair price. What other option is there? Some will say they have prepared for a negotiation. It’s a fair point; However, it is a terrible negotiation strategy to give the appearance that you will drop your prize first when someone is being baled. That approach gives the impression that you were trying to hurry them.
Most negotiations end on the middle ground. They wanted 5; you wanted 10 and traveled to 7.5. It looks logical. However, if you lower your price well in advance, the middle ground is lower. In the same scenario, if you fall to 8 right of the bat, the drug becomes 6.5. As I mentioned, you need to manage the negotiation so that the drug is not lower than an acceptable price for your business.
Successful sellers have a planned or dare I say canned response to the flinch test. They do not expect a prospect of reacting with price excitement. They expect shock and have a process to handle it. Here are their secrets
- They set expectations in advance. Early in the buying process, they are expecting them not to be the low price provider. To be clear, our company is rarely the low bid, does it mean that we will not cooperate with this project? If they are no, you are set for the later stages of the process. If they say yes, you invest at least a ton of time in an account you don’t win. If you are going to lose, lose early.
- They don’t flinch! I’m not surprised at your response. I get it a lot. As I have mentioned before, we are rarely the low bidder.
- They try to understand. If you say you’re shocked about the price, what part is surprising? This is the subject of another article from me that addresses the importance of understanding the prospects of the price perspective.
- They strengthen their position. Since we are rarely the low price provider, what do you think are our 1000 clients what they are doing to pay a little more to have us?
Many years ago I had the opportunity to participate in Procurement Training. Think of it as sales training for buyers. After the session I had an interesting conversation with the coach. Here’s what he said to me.
For 25 years, sellers have asked me for price training of their proposal, as I was the head of the acquisition of my company. I told each of them the same. Give us the best price you feel good to give and either, you win. I always got a confused expression from it. Let me explain. If we award the business to you at that price, you’re happy. If we award the business to someone else at a lower price, you are also happy because you could not support the account at that price.
To share a little secret, I use the flinch test all the time when I buy. It’s amazing how fast sellers drop their drawers. I bet I saved my family 20% across the board for all our spending just at the test. It’s no wonder that professional buyers use it. I often wonder how much commission dollars were lost just because they were flying. How can commission dollars lose you because you flinched?