Don’t Feel Pressure About Price

Imagine the following scenario.  After a few meetings with the prospect during which you examined his current situation and analyzed his needs and future goals, you developed and presented an approach for what you believed to be the best-fit solution to meeting his challenge.  The investment necessary to obtain and implement your solution is $12,800.

The prospect, while impressed with your solution, commented, “That’s a bit more than we expected to spend.  We were hoping that we would be looking at something around $10,000.”

What would you do?

Some salespeople react to price pressure by immediately reaching for the calculator and computing the various costs associated with the solution.  Then, they rework the solution – perhaps, in this example, by cutting back on or eliminating one of the four steps – in an attempt to bring the total cost closer to the prospect’s number.  While they might succeed in narrowing or closing the gap between the prospect’s expectation and the originally proposed cost, they also succeed in creating a gap – a credibility gap.

Why?

If the scaled-back solution does in fact meet all of the prospect’s needs, then the prospect is likely to view the first solution as excessive… and overpriced.  However, if the first solution was indeed the best-fit, then the second solution will be viewed as inadequate – not a “best-fit” (and not in the prospect’s best interest).

Scaling back the solution and its cost may occasionally “save” the sale…and your commission, but it will be at the expense of your integrity, which will adversely impact any future dealings with the customer.  And, if the scaled-back solution doesn’t completely satisfy all of the prospect’s needs, you’ll have an unhappy and short-lived customer.  Neither situation is ideal.

Other salespeople respond to price pressure by attempting to “negotiate” the price.  They also reach for the calculator, but only to rework the numbers…not the solution.  Typically, they will present all the evidence available to justify the cost, and then attempt to get the prospect to increase his number.  It might sound like: “Tom, I realize $12,800 is a bit more than you expected.  Suppose I could get the number down to $11,500; could we strike a deal at that price?”

You may save the sale, but again, it will be at the expense of your integrity.  After all, if you can provide the solution at $11,500, why didn’t you present it at that price in the first place?

So, is there a better strategy for handling price pressure?

The best strategy for “handling” price pressure is to eliminate the likelihood of its occurrence in the first place.  Before working on solutions, get a sense of the prospect’s expectations, allocations, funding, or budget – whatever is appropriate for your type of product or service.  You might ask, “Is this project funded?” or “Is there an allocation for the acquisition?” or “Is there a budget range you’re shooting for?”  If the prospect’s answer is “yes,” you can ask him to provide you with a “ball park” number or share the amount with you in “round numbers.”  You’re not looking for an exact number.  You just need a sense of where the prospect will be comfortable.  

What do you do if a budget hasn’t been established and the prospect has no concrete budget expectations?  Based on your experience and knowledge, you can suggest a range within which an appropriate solution might fall and ask the prospect if he can be comfortable with an investment in that range.  If there’s going to be any pushback on price, you want to find out as soon as possible.  Many contractors will make the mistake of suggesting a number way to narrow.  If you ask a prospect if they would feel comfortable between $12-17,000 they will quickly figure out about where you are, resulting in a similar bad outcome.  However, if you were to tell them that the last thing you want to do is to waste their valuable time (or yours), and would they feel more comfortable between $6-12,000 or between $12-24,000 you will be more likely to get an answer from them that is real.  If they pick the lower number (which they usually will), we can begin to ask questions to help them discover that the job cannot be done properly with such a number.  You can say things like, “ok, at that number we’re going to have to remove some things.  What do you want to take out?”  When arranged this way, they will usually not want that outcome.  “Well, we would have to take some shortcuts.  Are you sure that’s what you want to do?”  Again, arranged this way, they will typically not pick this option.  If after careful scrutiny you discover that they simply cannot be “sold” on the value, and have no compelling reason to change what they are doing today, when would you like to find that out?  Right away, agree?

Also, make sure you’re not attempting to solve a problem that doesn’t actually exist.  Let’s revisit the previous example.  The prospect said, “That’s a bit more than we expected to spend.  We were hoping that we would be looking at something around $10,000.”  Was he actually objecting to the price…or simply reporting that his expectations were less than the quoted number?  Is it the prospect’s “fault” that they decided to buy on price…or the salesperson’s “fault” that they could not ask the right questions so the prospect could discover the value?

If your solution was, in fact, a best-fit, and your pricing was fair, you can stand by it.  Your response to the prospect might be, “Tom, I suppose I could scale back the solution to meet your investment expectations, but I wouldn’t be giving you the best-fit solution.”  Not only do you maintain your integrity, but the “pressure” is now on the prospect to decide if a less-than-best-fit solution is acceptable…or if he needs to adjust his expectations.  Again, if their mentality is on saving dollars only at this point, we have either not done a good job selling or they have no emotion over solving an issue.

Also, by sticking to your solution and its associated “price tag,” you open the door to more creative ways to resolve the number “problem.”  Perhaps you can phase in a solution over time so some of the cost can be allocated to a future budget.

Most price-pressure situations at closing time can be eliminated by simply dealing with all investment issues early in the sales development process.  The time to have a discussion about “price” is before you invest your time and energy crafting a solution.  Information about the prospect’s budget expectations should be one of the building blocks for developing an appropriate solution, not a roadblock to closing the sale.   When you bring up budget early, and let them now that you are comfortable talking about it, it puts everyone on the same page immediately, avoiding confusion later when it is time to discuss the proposal.