In an earlier post, I suggest maybe you’re not getting enough price objections. (Seriously, they are important.) Now let’s discuss how to handle them.
When someone says they want to buy, but they don’t like the price, you need to know why they are objecting.
If they were never really in the market for your services, this is a positioning failure. Take steps to avoid wasting time on discussions that cannot be fruitful. Even if you need to have a conversation with a prospect to generate a quote or proposal, put a “starting from” on your website. A web design firm put a form on their website to allow visitors to request a proposal, but they put a big “starting from $50,000” above the form. How much time do you think they wasted talking to people with $10,000 budgets? So if you’re dealing with someone who is simply not in the right place, politely suggest some better alternatives and take steps to position better.
Next, you want to know if price is the real issue. When people don’t feel comfortable with a purchase decision, they often say that price is the problem, even though, consciously or not, there are other issues holding up the sale. So ask what their price expectations are. If they say that they are ready to sign, they just don’t like the price, you know you can deal with a pricing problem. If they say they don’t like the price, and one of their colleagues has raised some issues and someone on their team thinks they should do it themselves, etc, etc, don’t talk about price! You will end up discounting without solving the real problem(s). Go solve the real problems, then discuss price.
Also, keep in mind that many buyers reflexively ask for discounts, because they know that many sellers will immediately cave on price. Wouldn’t you ask for a discount? (How are you training your customers to handle this part of the sales cycle?)
Now that we’re talking about price, there are 2 basic kinds of price objections:
1. We don’t think your offering is worth what you claim (even though we probably have the money).
This often starts with “alternative X does most of what you do, but it costs half as much.” This is a great chance to discuss your value. For example:
- True, X is much cheaper to purchase, but over the lifetime of the product, you have much higher maintenance costs and the cost of the production downtime ends up being much more expensive than the purchase price. Our product is designed to keep you running for years.
- True, X is much cheaper, and it’s in the same category as us, but that’s like saying a Kia and a Porsche are both cars. Here’s what we do that’s different that will end up having a huge impact on your bottom line. If they don’t value some of the differentiators, offer to remove them (if you can). This really helps clarify what the customer really cares about. If you can remove parts of your solution, and lower your cost, you can make money will saving the customer money. In many cases, the customer decides they really do want the value-added features they said they didn’t want to pay for.
Often, the discussion is really about risk. “If you can do what you say, this is great, but how can I be sure you can deliver? I’m in big trouble with my boss if we spend all this money and I can’t show results.”
- Remember you can’t reduce risk by reducing price. In fact, you increase risk.
- Offer as much guarantee or pay-for-performance as you can. In some cases, you won’t have enough control to offer very much.
- Acknowledge the risk, and discuss how you have handled it in the past, including what works well, and what you want to make sure you avoid. Be clear about your expectations of the customer’s contributions and commitments.
2. We agree with your value and your price, but we just don’t have the money.
Work something out. Just don’t discount and provide the value for less money without gaining something in exchange. For example:
- If you are dealing with a project, break it into phases.
- If you are selling a software application, offer a limited pilot for some users.
- Offer to reduce the price a bit if they pay entirely up front. (This works better if their budget almost covers the cost.)
- Offer a discount for a testimonial, press release, or other marketing help. (Happy customers are may be willing to do these things for free, but don’t discount without exchanging value.)
I’m lucky to have a good angle on these conversations. I can often short circuit the whole conversation with “do you really want to hire someone to help you reduce your negotiated discounts if they cave on price?”
What are your favorite stories of price objections and how to handle them (as a seller or a buyer)?