As a sales guy, one of the things that you are almost inevitably going to encounter is the price objection. This is always a tough one – not least because it usually crops up at the fag end of what is often an exhausting sales cycle. After months of effort in getting the prospect on board, understanding their specific business issue, building consensus around the solution you are providing and ensuring all technical and logistical objections are addressed it is sometimes deflating to hear something along the lines of “We like what you are offering but your price is too high.”. In most cases, this prompts a rush back to HQ with a frantic “We need to drop our price if we want to get the business.” I have been guilty of such panic attacks as much as any other sales person but somewhere along the way, I learned to ask a Question that I believe dramatically improves the chances of success of any follow-up action. The next time just when you are expecting to close a sale if a prospect tells you “Your price is too high.” ask them “Compared to what ?” The answer to that Q will give you a crucial guide to what your response should be.
1. The obvious one is you are more expensive compared to a similar solution from a close competitor. To an extent this is a solved problem – there is enough material out there on what to do in such a situation to prove your solution better or yourself more deserving than your competitor or failing that a calibrated discount.
2. It could be that your price exceeds the available budget – this is a tougher one to solve. Assuming that not much room is available for dropping your price or for stretching the budget you would have to look for creative solutions – maybe break your offering or the billing across multiple budget allocation periods or make a distinction in the offering between Capital & Ongoing Maintenance or services that can be budgeted for under separate heads.
3. Another possibility is the price is higher than what the prospect was assuming he would have to pay – this is usually the result of an expectation mismatch. This situation is better avoided than addressed in that it’s far easier to ensure early on in the sales cycle the prospect gets a reasonable understanding of what this is likely to cost him than to try to convince them otherwise once the objection is raised.
4. In some cases the price offered may be more than what the prospect is willing to pay to solve the problem he is facing – basically just not worth the money. There’s really no solving this. This is a case of improper qualification at a much earlier stage of the sales cycle.
5. A variation of the previous theme is the prospect may not agree that the solution should cost so much. I had heard an old story about a space agency using a pencil instead of developing a pen that wrote in zero gravity. That being said the agency may have been willing to spend hundreds of thousands of $s to develop the pen but it is unlikely they would spend the same kind of cash for the pencil even though it solved the problem. This is the human tendency – we ascribe intrinsic value to things so we feel something simple should cost less. Like a magician keeping the mechanics of his trick under wraps maybe the best way is to retain some of the mystery if you want to avoid falling into this particular trap.
Assuming you have done most of the earlier steps in the sales cycle right the answer your prospect gives you to this particular “loaded” Q and your subsequent reaction may prove the difference between a futile last-ditch discount that may or may not work and a carefully calibrated response that provides a very specific solution to a genuine objection. After all don’t you need to know what is the Question is before you Answer it?