The Total Cost Approach For Dealing With Unmovable Prices

by drjim on April 23, 2010

Image CreditSome Sellers Say That Their Prices Can’t Be Moved, But Are They Right?

Some Sellers Say That Their Prices Can’t Be Moved, But Are They Right?

When a seller is standing firm and appears to have no desire to make any concessions to you on the price of the product or service that they are selling, what’s a buyer to do? I don’t care how charismatic you are, you can spend all day talking and still not make any progress on getting a better price. In this case, the best thing to do is to stop and take a different angle: try the total cost approach.

The Total Cost Approach

Deep down we all know that the purchase price of an item is not really the true price that we’re going to end up paying for it. There are lots of additional costs, fees, and services that go along with it. Ultimately it’s the total cost of what we’re going to end up paying that really counts, not just the initial purchase price.

As a buyer, once you realize that the seller is unable or unwilling to move on the price of what they are selling, the burden of finding a way to make a deal falls back on your shoulders. You’ve got your work cut out for you.

Case Study: Buying That BMW

Ahh, a BMW – if you believe the advertising, then it’s truly the ultimate driving machine. If you’d like to purchase one and everyone else is thinking the same thing, then there’s a good chance that you’re going to run into a fixed price for this car.

This is almost a classic negotiating case that calls for the total cost approach on the part of the buyer. Owning any car can be an expensive proposition, owning a BMW can be an especially expensive undertaking. Some things that you’ll need to take into account when thinking about the total cost of ownership will include tires, service, warrantee, financing, and perhaps purchase of your next BMW.

Once you’ve identified all of these items, you’re ready to come back to the negotiating table. How much of a price discount were you going for? Maybe $5,000? Taking the total cost approach you can negotiate some free or deeply discounted service trips for the first 25,000 miles (worth perhaps $2,000), add a year to the car’s warrantee (worth perhaps $1,500) and get a better financing deal (worth $1,000). This way you come out $5,500 ahead and made the fixed price for the car basically inconsequential.

What All Of This Means For You

Top sales negotiators realize that sometimes in life you will encounter a seller who is completely unwilling to make any concessions on the price of their product or service. You can keep beating your head against the wall or you can take a different approach to reach a deal.

The total cost method of dealing with fixed prices allows you as a negotiator to find a way around fixed prices. By realizing that any product has additional costs associated with owning and maintaining it you can keep the discussion going with the other side of the table.

The only bad deal is one in which both sides of the table can walk away feeling unsatisfied. When the other side of the table is unwilling or unable to bend on price, using the total cost technique is how you can still find a way to make a deal happen. At the end of the day, isn’t that what we are all looking for?

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Help For Technical Staff

Question For You: When do you think that the total cost method should be used – early in a negotiation or later after all other options have been exhausted?

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What We’ll Be Talking About Next Time

So there you are: the classic sales negotiator in the headlights. You’ve got a firm fixed price that you’ve been told to not budge on and yet you know that you’re getting ready to start a negotiation during which the other side is going to be hammering you to lower your price. Sure doesn’t make you want to get up early in the morning, does it?

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