How do you handle price negotiations and contract renewals with existing accounts?

The current economic climate continues to throw curve balls at businesses, necessitating price negotiations with existing accounts in many cases. I find that the best approach is a transparent one, by laying out the economic effect of changes and how they affect the underlying assumptions originally used for pricing, similar to how an economic rebalancing clause would work. The current climate has made parties, especially those who want to maintain long term relationships, more accommodating to such changes. More value can be offered by vendors/service providers as a trade off when they are assured of sustainability.

Due to the recent inflationary pressures, price negotiations have become even more of a necessity for both buyers and sellers to maintain cost and margin parity. Especially for longer term programs, with a predicable demand forecast, buyers are more willing to offer multiyear contracts. This protects the buyers' cost of ownership and provides the sellers the opportunity to optimize their supply chain and manufacturing efficiencies.

Vikas has made a very insightful comment about customer readiness to act, which I would add a slight nuance to. In my experience, we need to be very careful about how we define business pain and the degree to which it is a catalyst for action. In many cases, it not the specific business pain, but rather the political embarrassment of that pain that motivates action. Imperfections like added costs, waste, and delays may be considered the cost-of-doing-business. It is when these imperfections become broadly illuminated that they cause embarrassment and lead to action, in my experience.

In my experience, customer readiness to buy is an important consideration. Generally, the urgency that a customer has is dictated by the extent of their pain. If your product or solution is a nice-to-have, the chances of closing that deal are quite small.

I’m always pleasantly surprised in customer or partnership negotiations in how much space there is to agree on terms that are mutually beneficial. It is rarely a zero sum outcome, given the various priorities and motivation driving both parties. If the deal appears to be a “split the difference” situation, you haven’t looked at the deal from every angle. The best performing partnerships are ones where both sides feel like they have net gained from the deal.

In my experience, some negotiations may end with an outcome not planned but may open an opportunity not expected so always remain open and willing to adapt. With more virtual meetings, it’s difficult to gauge the body language so the best approach is to remain optimistic until confirmed otherwise.

These are all excellent points. When recapping the benefits, ask "is there anything I might have missed?" It shows humility and at this stage, something else may be revealed. Also when closing, don't speak faster. If someone says no, don't start talking nonstop about why they should choose you. Slow down and find out why.