First remember customers are not in business to be concerned what your costs are.

Never respond immediately, say “I will have to get back with you on that!” and never give out detailed information that justifies the cost for your service or product and make sure your staff knows that this is a hard and fast rule. You don’t want to educate the consumer as to where you make your money!

Courtesy buzzin.net

All the customer cares about is a lower price and the fact they are asking is evidence they may have found one with a competitor. The reality is if you haven’t already! Now you had better take the time to know what your true cost of producing and delivering your product or service is. Otherwise you are operating in a dark vacuum.

If you don’t know what competitors are offering and how they structure the pricing you are at a disadvantage. There are many companies who have mastered the technique of breaking their price out over many surcharges. They give a basic price and then if you want delivery, add this, if you want a printed invoice, add this, if you use less than this, add this. So when the total invoice is added up it may actually (and usually does!) cost more than yours.

In tough economies many companies have a process of reviewing prices and shopping everything out there. Whenever I go in to perform a turnaround of a failing or stalling business I start out shopping every item I can for price reductions. If your customer can’t make a profit your relationship value has moved to the back of the bus. But you may be able to based on a longstanding and good relationship get someone there to give you background on what is causing this request, who the competitor is and what they are offering?

If you can find out who is offering the lower price try to find out what the invoicing practices are. This is not easy and if it can cost you a serious amount of money, but it may be worth hiring a professional to get the information you need.  This can be anyone from a mystery shopper, a friend or private investigator or a close vendor who supplies you and the competitor.  Don’t blush, this is business and your livelihood is at stake!

Finally if you are forced to accept a lower price be sure to get the customer to surrender some kind of compromise or trade off i.e. faster payment terms on bills due you, pricing that is tied to volume so if their purchase volume drops the price goes back up, also in case it goes up then you can offer a rebate for the increased volume. Ask for a longer contract, or get written commitment as exclusive supplier. Don’t drop to your knees and immediately cave.

Start by asking what prompted them to ask for the price reduction? Why now? What problems are you dealing with? Maybe we can work together to keep both of us profitable and happy.

The best defense is a good offense and that would be never getting yourself in a situation where if you lose any particular customer you will fall below breakeven. I know it is not easy, especially for new companies.

If you feel strongly that there is no way anyone can offer a better price and give equal service or product, (be sure they understand that are not getting equal product or service first before doing this) tell them “I hope it works out well for you and if you find yourself dissatisfied and want to come back give me a call!”  and start walking for the door.  (This means you should do this face to face) 9 out of 10 times they will stop you before you get to the door. But only if you are on top of things with accurate information, have the best quality, and yours is the best value proposition.

Let me end by saying it is an important practice to review your prices to customers, from your vendors, and calculate your actual cost of production twice a year at least. That way you have current and solid confidence in how you stand in the industry for your pricing. If there are swings in pricing from your vendors due to circumstances like war, weather, oil prices etc. do it especially then.

Let’s review some of the tips mentioned above.

1. Never react immediately “ I will have to get back with you on that”

2. Never give out specific information trying to justify your costs, and make sure it is well understood in the company that no one is to do that!

3. Know your pricing and competitions pricing practices.

4. Find out what is happening, why now and what prompted this request?

5. Always ask for some kind of concession, like shorter payment terms, price adjustments if volume of orders drops. Lesser level of service to offset the price change. Lengthen the contract; perhaps get written commitment as exclusive supplier of the product or service.

6. Finally always leave the door open unless there is some strong reason you don’t want them back. There are few!