Expert's Panel

A collection of timely and important topics posed to our panel of experts.

How can we sell value in Korea, China and Japan. Our customers appreciate our better product, but are unwilling to pay a premium for it? Our competitor's product that is lower in price is often viewed as "good enough".

 (ep10128)
1. First off, everyone wants to buy a product as cheaply as they can. I don’t think the Asian customers are any different in that respect. They do, however, openly work a little harder at getting the cheapest price, particularly if there is a cheaper alternative. Until you can look one of their key decision makers in the eye and say, “No, I won’t go any further—that is my bottom price”, they won’t stop chipping at you. I sometimes have said that 3-4 times in a row until they got ticked off. It is not that they don’t understand that you have value, but they will keep trying if they think they can get more out of you. Know your product’s value and what you should be getting for it. Use a negotiating strategy that makes the final stop point one that is obvious to the customer. They want to make real sure that you are not going to come down again.
2. Keep in mind there has to be a customer “need” for the “value”. If not, you are over priced. There is a famous true story of the CEO of a major tool supplier. He knew the customer needed the “value” they were offering. He flew into Korea, and went directly to the customer, a major company. The first thing they asked for was a 50% discount. He stood up and said, “Obviously you don’t know the value of our tool.” He said goodbye and went right back to the airport—the customer was shocked. Two months later they asked him to come back over and demanded a 20% discount. He said exactly the same thing and left. The customer was furious and said they would never do business with his company. Two months later they had him over again and this time they did not ask him for a discount. When you get an unreasonable offer, that is a bad time to start the negotiation. Refusing to negotiate unrealistic demands, by the way, can be a good negotiation strategy. When they want a 50% discount, you don’t want to come back with a 2% discount. The statement of the CEO, we mentioned, was a good response. Remember, they are simply better negotiators than we are. They are taught the skill at a young age. If they need the value, they will ultimately pay for it.
3. Sharpen your negotiating skills, know the culture, and know your product’s value in relationship to the customer’s need. The customer will keep after you incessantly, but they will end up buying the needed “value” that is truly differentiated from the competition.
4. Here’s another good negotiation strategy. They say we have to have a 35% discount. You ask, “If we give you 35% do we have the order?” If they say yes, then say we can’t give you what is in our proposal for that price, but if we knock off (differentiated) features A, C and D, we can. If they say, but we have to have those, you now have them cornered and by going through the benefits of the deleted features you may well be able to build the price back up.
5. The other thing that happens so frequently in our business, particularly in Japan, Korea, and China. You don’t know if you are an actual bidder or just a shill for them. They may well have selected another vendor and are just using you to drive the price down with that competitor. Remember that because you may be the selected vendor and the competitor, the shill.