Concessions and incentives are powerful tools for account managers to persuade their clients and close deals. But how do you use them effectively without compromising your value or relationship? In this article, you will learn how to plan, present, and negotiate concessions and incentives that benefit both parties and lead to successful outcomes.
Before you offer any concessions or incentives to your client, you need to have a clear idea of what you want to achieve and what you are willing to give up. This means defining your best alternative to a negotiated agreement (BATNA), your reservation point (the lowest acceptable offer), and your aspiration point (the most favorable offer). You also need to understand your client's goals, limits, and interests, and how they align or differ from yours. Doing your research and preparation will help you avoid making unnecessary or costly concessions or incentives that could harm your profitability or reputation.
I agree, in most cases one should resort to a concession/incentive only if the positioning,pricing of the service/product is disconnected from the market. It could also be used as a tool to break a tough client or as a short term strategy to capture market share until you get to understand the acceptable price in the market and balance it with your profitability goals. In some cases it buys your firm valuable time to iron out inefficiencies, re-engineer and find the balance between your target profitability and market expectations.
In my experience incentives or concessions should be a last resort, If you priced your product accordingly. If a concession is made , it can not be undone, and if further concessions are made you risk the possibility of losing credibility with your client.
to be able to earn your client, do not consider yourself as seller, be the consultant of your client & listen carefully to his requirements then provide him the right solution that meets his needs & his budget as well.
I rarely use concessions to win business, unless there is an enormous disconnect between price and market value that would otherwise mean losing the business relationship. Even in this case I seldom recommend taking this approach. Concessions should be used as a tool to do what is right post sale, e.g. repairing a situation which has displaced the customer, but not as a means to win business, which IMO is a weak strategy.
First you can make it clear for your clients, who buy the products from you. 1) Long term and double win business is important for both of us 2) According to the raw material market, there is some shortage and price will rise soon. i suggest you to make the decision soon. 3) We have get more orders than before, now only 10% production capacity left, if there is no confirmation from you soon. sorry to say that we can not supply you in next year. 4) Here i learnt some factory closed and can not fulfilled the signed contract. The reason is that the cost is more higher to cover the cost. Ned from Yusweet Co., Ltd. WhatsApp: + 0086 139 3999 8369
Concessions and incentives can take many forms, such as discounts, free trials, extended warranties, bonus features, flexible payment terms, or referrals. The key is to choose the ones that match your client's needs and values, and that create a perception of reciprocity and fairness. You also want to avoid making concessions or incentives that are too large, too frequent, or too early, as they could signal desperation or weakness. Instead, you should make them conditional, incremental, and strategic, and always ask for something in return, such as a commitment, a referral, or a testimonial.
You have to clearly identify what's in it for the client and for you, the vendor. Referrals/testimonials and other non-cash items have real value to both you and your client. I agree with the cautions above, however - giving concessions or incentives is a slippery slope. Once given, it is hard to get the relationship back to equilibrium. The only real exception: when you as a vendor haven't been able to meet your obligations, for whatever reason. Then, be creative, be strategic and offer a concession/incentive/solution that helps to solve the underlying issue.
If I'm making a price concession, I like to tie it to increased volume. If I've given a price of "X" and the customer is pushing for better pricing, I could give them options of one, box quantity or pallet quantity. My ability to offer a more competitive price is because the labor involved in pulling one vs a box and/or vs a pallet can be significantly different.
Completely agree about showing signs of desperation or weakness . Over 30 years in my industry and with 2 days left in the fiscal year we have lots of end of the year promotions and some of these conversations are leaving me uncomfortable with constantly following up with my clients and prospects.
Based on my experience I have met clients asking for a) Highest quality and cheapest price - My standard answer is "you cannot buy a Merc S class at a price of Corolla". b) Quality for a given price with respect to product and service. It is upto the provider to explain merits and demerits. My honesty has always worked for such clients. Service Providers- a)Big promises, knock down prices after a year this person is not visible. b)Break Even Cost - Service providers who are trying to establish, these guys fall into a trap and are generally not able to increase the cost of their service leading to slow death. c)Safe players - They always keep the cost intact and act on price changes. They are good with service and product.
Absolutely, leveraging incentives for referrals is a must for boosting business growth. By offering incentives for referrals, you create a win-win situation where satisfied clients become advocates for your business.
How you present your concessions and incentives can make a big difference in how your client perceives and responds to them. You want to communicate your value proposition clearly and confidently, and emphasize the benefits and outcomes that your client will gain from accepting your offer. You also want to use positive and assertive language, and frame your concessions and incentives as win-win solutions that address your client's pain points and goals. For example, instead of saying "We can lower our price by 10% if you sign today", you could say "We are happy to offer you a 10% savings if you join our loyal customers today".
Try to sell rather than negotiate. Negotiations are but a small part of the selling process. The selling funnel has proven to be a very successful tool.
First ensure your sales team have confidence in the prices, before talking concessions and incentives. This means the sales team understands how prices are build up - whether the company used a cost plus strategy or a market oriented or a value based - and that they know how to explain those prices. Before starting to negotiate. The price setting is far too often a black box for sales team. Very few companies involve their sales team in setting prices. This comes as no surprise that negotiation occurs too quickly and profit is left on the table.
Correct, the way you present the proposals makes the difference between accepted as valuable incentive or non-accepted as you are not self-confident on it. Alternative conditional proposals are a good approach, to build the final decision makers a business case where each part is included on final call.
Negotiating your concessions and incentives is not a one-way street. You need to listen to your client's feedback, objections, and counteroffers, and respond with empathy, respect, and creativity. You also need to use effective negotiation techniques, such as anchoring (setting a high initial offer), bracketing (giving a range of acceptable offers), or trading (exchanging concessions or incentives for other benefits). The goal is to find a mutually acceptable agreement that satisfies both parties and builds trust and rapport. You also need to know when to walk away if the deal is not worth it or if the client is unreasonable or unethical.
Flexibility is key. Be prepared to adjust your offers based on their reactions. If they're not responding positively to your initial offers, consider other options that might appeal to them. If they are hesitant due to certain aspects, offer concessions that show you're willing to compromise. For instance, if they're concerned about the price, offer a discount or a flexible payment plan.
Concessions and Incentives should not be used as an avenue to boost sales or bring a new lead on board rather they should be more of a reward for loyalty with no hidden terms & and conditions. This should be done with flexibility so that adjustments can be made where necessary so that it can be a win-win for both parties.
Concessions and incentives must not be sales “tactics” but symbols of collaboration and goodwill. By focusing on the real problems you solve and quantifying the opportunity cost of inaction, you transcend the need to compromise on value. What’s essential is the ‘give/get’ philosophy, listening to client’s feedback and responding with empathy and creativity. Techniques like anchoring, bracketing, or trading help in finding a mutually acceptable compromise. It’s not just about what we give but what we gain in return, always keeping in mind when to walk away.
Agree, trust and respect I would add are the mandatory ingredients on building a strong partnership. Let's keep in mind that both parts are together on any negotiation process and both are interested on same topic and need fulfillment on the best way.
The final step is to follow up and deliver on your concessions and incentives after you have reached an agreement with your client. You need to confirm the details and terms of the deal in writing, and thank your client for their business and trust. You also need to ensure that you fulfill your promises and obligations, and that your client receives the value and benefits that you promised. This will help you maintain a positive and long-term relationship with your client, and increase the chances of repeat business, referrals, and testimonials.
Clients will always have objections and updates on their expectations. Make sure to take detailed notes and create amendments to contracts where necessary. If it is not in writing then the relationship with the client will suffer. You always want to create a balance between the client's expectations and the service you want to deliver. Always follow up with the client on a quarterly basis and as long as you build that positive relationship you will always have a brand ambassador that creates referrals for you organically.
If there is no clear guidelines as per: - what is the company s financial objectives using incentives - what is the right incentives for the right clients It should come as no surprise that each individual account manager will create his/her set of incentives. And consequently that the implementation is CRM, SAP, or any pricing software will be cumbersome. Leading to…. Negatively impacting customer satisfaction, more time for the back office to manage orders and less visibility in profit performance at client/product level reporting.
The best practice to secure the deal when you approach client to find his pain and present him the solution. And during the meeting let him talk .
I would like to add that, over the years the salaries have gone skyrocketing but the product prices are going step by step. Somewhere there has to be balance, Also I agree that on comparing the cost of living ten years back It is justified for higher salaries. The accounts team is always under pressure, they promise sky and once the deployment starts the team realises that this is impossible. Over the years "honesty" is really not appreciated I guess.
I recall a negotiation where both parties were initially pretty far apart. By shifting the focus from concessions to understanding the underlying needs and presenting solutions, we bridged the gap. I applied techniques like bracketing and trading, not as tricks, but as ways to align interests and values. It wasn’t about winning a deal; it was about forming a partnership where both sides were invested in each other’s success.
The biggest error made in Account Management is often not signposting the concessions and incentives you are giving clearly enough. Using your judgement on when to 'help things along a bit' is fine, but so often the action is lost in the wider context of delivering products and services.
I think generally the article addresses well some of the modern sales challenges that we all face from solving the customers challenges, figuring out the right pricing (or discounts) etc. but there is a point that I would like to add and that is "What is in it for me?". Somehow we in the sales tend to think that the individuals on the other side always think solely the company they represent but this is not 100% true. We should elevate the thinking by adding the individual. What is it in for this particular individual? E.g. you have a IT Manager who recently started in a company and you can offer SMS for a lower price than the previous vendor. Wouldn't it be a nice feather in the hat for the new Manager to save x € for the company?