Picture it. Your meeting with a new prospect is going so well. If you can just get this one signed then you've hit target for this quarter. Then they ask 'what's the cost of all this?' You pass the price list across the table. With hardly a glance your prospect slides the price list back as if it is soiled in some way and says "I can't believe how expensive you are'.
What do you say now?
It's part of your client's job to challenge your price. It's part of your job to know how to respond. It's time to plan how you will respond.
Do you always buy the cheapest in your personal life? The answer is probably 'no'. Whether we are buying a flight, shoes, wine, a mobile phone, a builder, price is ONE factor, but usually not THE ONLY factor.
Generally, price is No.3 or 4. in importance. If it is the most important factor, you are essentially selling a commodity as far as your client is concerned. In which case why would anyone pay more for a commodity? So you need to work out what the other factors are that are influencing your client's decision and their relative importance to the client.
We hear the client's price challenge as a demand to drop our price whereas it is actually just a statement. Perhaps they may even want to buy from us and simply need justification. How do you even know the client is telling the truth? Because we may feel defensive we can go onto the back-foot and lack confidence. If we are under-target we lack even less confidence. Your confidence is critical to your ability to handle price challenges by clients. If you aren't confident in your price and value then you will find it hard to convince your client.
The first person you must sell to is yourself.
Clients often want to commoditise your price to make it easy to compare. Think carefully about what differentiates you. What are the different factors which are really important to the majority of your clients?
Make sure you deal with the decision maker and not a 'messenger'. Decision makers have authority and budgets, messengers don't! Messengers can be influential but tend to be predominantly focused on price. Senior decision makers are typically more focused on value, value for money and the bigger picture - and generally a little less price sensitive. We need to move up the food chain to deal with those senior decision makers.
Dropping our price or under-pricing our work is a slippery slope. The price drop will come straight off your profits. It sets a precedent that will be hard to reverse. It is easy to come down in price and very hard to increase your price. Under-pricing can even infer your service or product is actually inferior to your competitors.
Here are three possible responses to tackle "you're more expensive than the other companies we use".
- "That's right. That's because our clients get results"
- "Putting price aside for a moment what else is important to you?"
- "I didn't realise you wanted the cheapest. I thought that xyz was important to you."
Don't be too quick to drop your price. The quicker you drop your price, the more the client thinks your price can drop even further. If you really believe you need to reduce your price then think about what you can get in return.
"If you commit to spend x with us over the next 12 months then I can offer you a volume discount".
Finally, when clients challenge your price it should not come as a surprise. You should have anticipated their challenge and have prepared how you will respond.
In summary, here are seven tips to help you respond to clients challenging your prices.
1. Anticipate. Consider what the typical price challenges are that clients throw at you? Plan for those objections; prepare your response in advance.
2. Pre-empt the client. Perhaps drop into the conversation "we're not the cheapest, our aim is to be the best….."
3. Ask questions. Find out what the client really values beyond price. What's really important to them? Get curious.
4. Remain confident. Your confidence is vital. Make sure you are in the right frame of mind and on the front foot.
5. Deal with senior decision makers. Avoid dealing with people who can only say 'no'. They have no budget to spend and no authority to say 'yes'.
6. Think carefully about your language. Make sure your language supports you rather than gives away your nervousness.
7. Finally, avoid being over-dependent on any one client. No client should represent more than 15% of your total sales.