You have given your best sales pitch. The customer seems to be genuinely interested. There is a strong use case for your product. Next comes the inevitable question – “What is your pricing?”. You disclose your commercials. “That seems too expensive” – comes the response – the one you were dreading to hear.
Price objection is probably one of the most difficult and common objections faced by sales reps, especially in large-scale B2B deals. However, we often find it difficult to counter pricing objections. Often sales reps immediately capitulate by offering a discount as a response. But we can do better.
The Benefit-Cost Gap
The key to successfully negotiate price objections is understanding a very simple equation.
Perceived Value = Perceived Benefits – Perceived Costs.
I have added the ‘perceived’ in the equation as value, benefits and costs cannot be determined objectively in most large-scale sales situations. It has a degree of subjectiveness to it – a fact that can be exploited by skillful sales reps.
So when a customer is saying that the solution is “too expensive”, it means that they don’t think that the perceived benefits are very high compared to the perceived costs. In other words, they are not convinced that the value of your solution is high enough.
There are only 2 ways to increase value – either increase the benefits or reduce the cost. All the tactics that we will cover below essentially try to do that – increase the perceived value in the eyes of the client. Once you are able to demonstrate that, they will be convinced of the pricing.
So here are 6 strategies that will help you to successfully counter any pricing objections and win the deal.
Ask why – Ask the customer a simple, direct question – “Why do you think this solution is expensive?”. In my experience, this is a very powerful approach. The prospect will often respond by sharing benchmark information (“Product X from company Y is 30% cheaper”) or financial information (“This year the budget is already allocated and I can’t add beyond $10K in unplanned expense”). You can use this information to offer a win-win solution. It could be highlighting why the competitive product is no match for your solution and hence justifying your higher price. May be you can offer a pilot implementation this year with a deferred payment option. The “why” question will almost invariably give you some ammunition to deal with the price objection.
Reiterate the exclusive features, advantages and benefits: Exclusivity increases value. So reiterate all the features, advantages and benefits that only your solution can offer. If during the call you have been able to ascertain certain features that resonated with the prospect, focus more on them. If your product has won any awards and accolades, highlight them.
Break it down to smaller units – No one wants to write a check of 100,000 dollars easily. Break it down. One approach I often use is to say – “Our solution can help your reps be more productive at the cost of less than a pizza per person per month”. This still adds up to $100k, but the benefits suddenly look much higher than the cost.
Alternatively, you might want to break down the price into multiple components – like initial implementation charges, solution charges and service charges. This might help clients distribute the budget across multiple heads. However, be careful – price breakdown can sometimes lead to item-wise negotiations, something we might want to avoid.
Subtly reinforce risks – Often the cost of doing nothing or buying a cheaper product is significant. You can subtly highlight the risks of buying a ‘cheaper’ option – quality, replacement cost, effectiveness, brand image etc. When I was selling executive education for a top B-school, I often justified our high per-day pricing by asking this question – “I know you can save $5000 by going to competitor X. But what is the value of 1 day of time for your top 30 senior leaders? Wouldn’t you go with the solution that provides maximum RoI on their time? ”. Guess what – every time customers chose to go with us. For most companies, the risk of losing the time of 30 senior leaders against $5000 is just not worth it.
You can quantify the cost of no action and compare that to the cost of your solution. However, reinforcing risk is a negative selling tactics, and needs to be done in a subtle way. If done overtly, it might lead to the prospect having a negative impression.
Give References – Whenever possible, give references of customers who are from similar industries or have similar use cases. Customer references increase confidence in your solution, decreases the risks and can be used to reinforce the benefits. Also, this can help to set anchor points for pricing. We always look for an anchor point during a buying process. Giving references of customers who have purchased from you at the given pricing gives the prospect an anchor point. This can also be used by them internally, to justify the solution pricing.
Offer Creative Solutions – There are many creative ways of delivering additional value without lowering the price. You can bundle products together, combine solution with servicing, offer different payment terms etc. Having an open discussion with the client by asking the reason behind the objection will often open avenues to maintain the price point while solving the customer’s concern.
Responding to price objections is not very difficult once we understand the customer needs and have established our value proposition. But it definitely needs practice and advanced preparation to anticipate the possible objection and respond accordingly.
Source: B2C
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