By Elizabeth Hilla, Senior Vice President
In today’s healthcare environment, profit margins are razor-thin for providers and distributors alike as companies seek to do more with less. Whether or not you have the autonomy to negotiate margins with prospective or current customers, there are other ways to deliver value without lowering prices. Here are some tips that can help you maintain your margin – and competitive edge – in an increasingly cost-conscious market:
Lead with value, not price
No business deal gets done without a discussion on price, but that doesn’t mean it has to be the first topic covered in meetings. In fact,leading with a price discount could establish you permanently as a “discount vendor” rather than a solutions partner. Begin your discussion by determining in which areas your products can deliver better returns on investment for your customer (be prepared to substantiate your claims with hard data when asked). Providers are receiving greater scrutiny on the quality of care delivered to patients, and reimbursement bonuses or penalties can have much more of an impact than price on their bottom lines.
Asking the price isn’t the same as objecting
When prospective customers ask about price, they may simply be asking for clarification or because they want to understand why your products and services are worth the cost. It’s your job to clearly demonstrate your value and show why an investment in your company can lead to better service or more reliable product options, for example. Encourage your custom ers to consider all of the costs related to acquiring and using a product – ordering, handling, invoice creation, etc. – which will move the discussion away from price while showing the value in your margin.
Trade value for value
A general rule of thumb in negotiating is to never give something away without get ting something in return. If you quote your products or services at a specific price, and then lower that price when a customer asks for a discount, the customer may think your discounted price is the “real price” and bewary during future negotiations. Offer alternatives that can be traded for that price discount – higher purchasing commitments or adding enhanced services, for example – and both sides will walk away from the negotiating table with realized value.
If you must discount, do so in small increments
Even if you’ve already established your value proposition, some customers still won’t be satisfied unless they think they’re getting a better deal than the competition. Offering discounts may seem like an easy way to close a sale, but it actually takes significant increases in overall dollar sales to recover lost profits, and exponentially so as the size of the discount increases. If you must discount, do it in very small increments – even fractions of a percentage – and target products with high price sensitivity. Using these tips can help you maintain your margin and even grow your customer base. You may also find that your customer discussions increasingly will focus on your value as a trusted business partner rather than an added expense. Four tips for maintaining your margin