Your Price is Too High! How to Handle this Most Common Sales Objection
During a recent workshop session an attendee asked, “What should we do when the customer comes back saying that we were not selected because our price was too high?” Excellent question! And in fact it’s pretty common for clients to give price as their reason for picking one vendor over another.
So what should you do about it and how can you help your team manage pricing pressure? Let’s start by understanding what the client might really mean when they say “your price is too high”.
What Could Be Going On
There are 2 potential scenarios to consider.
First, you might actually provide the same thing as another vendor for a higher price. Unfortunately, you need to recognize that rarely will another vendor offer the exact same solution as you. Unless you are selling a drop-shipped commodity, there is always room for differentiation.
Second, the client has another reason why they selected the other vendor; however, they thought saying “Your price is too high” would be more polite than telling you the real reason.
Let’s Say You Were the Customer
Imagine this example: You have a new project at your company. Several vendors bid on the project, including your friend’s company. The selection committee picks another company because they thought your friend’s presentation was horrible. Your friend asks you, “What happened, why wasn’t I picked?” Not many people would say, “Your proposal sucked.” Alternatively they might say to the friend, “We selected another vendor who we thought were a better value”.
It’s not a secret that buyers sometimes tell a “white lie” to spare a vendor’s feelings. It feels better as the seller to say “they undercut us” than to say “they outsold us”.
What If It Actually Is About Price?
I’m covering this section just to be polite. I promise that it is almost NEVER about price. But, if it is, here is what probably went wrong. You jumped right to what you were selling instead of focusing on the issue they needed to solve. You failed to engage the customer in a discussion about their past experiences in similar projects. You did not share stories about issues other clients faced that you helped to solve. In short, you did not do anything to help you stand out from the competition. So, you reinforced the customer’s initial belief that you were just selling a commodity.
You might be thinking “But it is a bidding situation. We didn’t have access to anyone”. Think about a time when you were on the buying side. When your organization was making a purchase with a bidding process, did each member of your team have a ‘favorite’ vendor… the one they hoped would win? Of course. Your customers do, too. If you are not the one they are hoping will win, someone else is.
Ask yourself what percentage of deals do you win when you don’t have a chance to discuss the project with the customer in advance. If the number is less than 10%, then make a decision to not bid those projects unless you can have a conversation with the customer. If you think the number is greater than 10%, then you might be kidding yourself. In most cases, we discover that companies win less than 5% of pursuits they chase without prior customer interaction.
How Can You Improve the Odds
Fight for that opportunity to speak with the customer. Can you provide the best advice to them if you have to respond without any additional information? Of course you cannot. It is in both your best interest and your client’s that you ask thoughtful questions to determine if there is a fit between their situation and what you offer.
The key, however, is to make an honest assessment. You just might learn that you are not the best alternative. In that case, let them know: “In this situation, we may not be the best solution. Would you be upset if we declined to participate?” You might be surprised at how quickly you get invited to the party for the next opportunity.
See, clients are used to vendors insisting their solution is the best, even when it isn’t. Your candor will get noticed, and in most cases rewarded.
Demonstrate that you are always looking out for the client’s best interest. Make it clear that finding the right fit is more important that making the sale. If you do these things right, you just might become the vendor they all are hoping will win.
Help Your Team Manage Pricing Pressure
Pricing pressure is generally a symptom due to lack of understanding and the seller not demonstrating value to the client. Price matters most when the person selling thinks price matters most. Usually the customer isn’t as price sensitive as the person selling thinks they are. Without having context for value, both the seller and buyer can feel that any price seems high.
When guiding your team through pricing pressures, ask them questions about the value their customer puts on the proposed solution. The more your team understands the impact to the customer, the less they will feel a need to drop your margin. Remember, if you sell at a 50% margin, a 10% discount represents 20% of your profit. So, what might appear to be a marginal discount, could take a big bite out of your bottom line.
It’s Your Turn
When do you see clients doing things that are not in their best interest? Share your story in the comments section for this article. The best pricing story shared will receive a signed copy of Same Side Selling when it ships in March.