Price is No Object
No matter what else we’re talking about in seminars, workshops and coaching sessions, I’m always asked the same question: How do I deal with price resistance?
My answer is easy when price is the only issue. Present the buyer with the lowest price option and win the deal.
A lot of the time, however, price is not the only issue and it’s merely being used as a smoke screen. You are getting price pressure for a lot of the usual suspects that you already know—the buyer believes that they should push for lower price, uncreative people want more for less and so on.
I want to challenge you to think of price in a different way. If you are not offering a commodity, price is a byproduct of other issues. You must be clear on these issues with the prospect or client so you can get control of the price discussion.
- Price is relative to business problems.If you are selling in the iron-triangle of Service, Quality and Price, then you are not selling value that solves business problems. You are selling into a comparative matrix that boxes you into a same:same measurement with our competitors. When you solve business problems – Time, Money and Risk—then you are in a very different dialogue. An example of this comes from one of my clients. They sell programming services on a particular operating system. This typically means that they are being compared on a bid with other vendors by how many hours it takes to complete the job and what the hourly rate is. In other words, they are a commodity in that market.However, they changed the conversation by saying the following:
“If you need this project completed in a year, anyone in our industry can do the work. If you need this completed in 6 months, we can give you a list of 5 firms that can do this work. If you need this completed in less than three months…we’re it.”
By defining the business problem as a time problem, price became a smaller part of the discussion. The interesting thing is that for those companies for which time was not the major driver, my client was still able to win business at their price because an important value of time and ability to finish the project with confidence was elevated in the conversation. The issue for all of us is how we frame the business problem apart from price.
- Price is a reflection of confidence in outcome.If there were a 100% guarantee that there would be a resolution to a buyer’s business issue, then his or her willingness to pay that price could go up. When I get price resistance on my proposals, I ask this question, “If we could get you a $20 million increase in sales in one year, would it be worth a million dollar investment?” Their answer is almost always yes. Then I say, “Well, this discussion is not about price then. It is really about your confidence in the outcome of this proposal. So, let’s talk about what would give you greater confidence in this proposal and also let’s make certain that all of your concerns are on the table.” In responding to price resistance on large account sales, focus on the issues of confidence before you discuss price or terms.
- Price is a reflection of measurement context.In the world of business solutions, there is no such thing as a true “apples to apples” comparison. Complex solutions are almost never exactly the same in the solution architecture between two competing companies. That means that there is no valid comparison between you and your competitor in the area of price. I recently used the example that you would not ask a nurse to remove a tumor, or a neurosurgeon to cure a cold. On the spectrum of care, these represent the same industry, but different problems and different solutions. This happens to you as well. A lower quality provider in your market is held up as “just as good as your solution” by your prospect, so therefore the only point of comparison must be price, right? Only if you allow it to be.
- Never Haggle. The difference between negotiating and haggling is simple. Negotiating is when you are making adjustments in terms, conditions and scope of work between two parties. Haggling is when you are asked to do the same work as you have proposed, but for less money, period. I don’t believe in haggling. If your work is priced correctly, then any adjustment in price will require an appropriate adjustment in scope, terms or conditions.
In my experience, the price resistance comes when no better context has been established for the discussion. Establishing the right context for the evaluation of your proposal is 100% our responsibility. If you are getting price resistance and your offering is not a commodity, then the context needs to be adjusted.