As a sales rep, there’s one objection I know you hear nearly every day. I was recently talking to a sales leader who went as far as to say this objection is so prevalent that it consists of half of all objections.
Yes, it’s the dreaded price objections. Admittedly, 50% sounds a little high if you’re selling big-ticket items B2B, but nonetheless, this is still the number one objection sales reps face.
We’ve all got that email or call before: “I’m interested, but the price is a bit steep. What kind of discount can you offer?”
For many sales reps, it can be tempting to quickly respond with a reasonable discount in an effort to wrap up the sale. But this isn’t always the best response. In fact, more often than not, it’s a pathetic response. After all, if your product provides real value, the prospect will benefit – even when paying full price.
Although offering a discount or negotiating on price could be acceptable at the appropriate time, it’s isn’t where you should start. Instead, consider clarifying the value of your service and re-emphasizing the time, money, and energy that the prospect will save by working with you.
Finding the Real Reason They’re Not Ready to Buy
Asking the price is part of the buying process for not only consumers but businesses as well. A smart buyer will ask about price because a) they need to know how much budget to reserve, b) it’s a natural instinct, c) they’re price-shopping for the lowest cost, or d) they’ve learned the first quoted price can be talked down.
If you get the price objection, it doesn’t necessarily mean they’re not going to buy. How you learn to handle a prospect when you get the price objection will determine your success as a sales rep. So, the first thing you must do is discover and establish the real reason the prospect is asking about price.
First, listen to the entire objection and don’t cut you prospect off early with a sly objection-handling technique. After they’ve put everything on the table, only then can you start to read between the lines and begin to determine the real objection.
Next, get permission to explore the objection further. This communicates to the prospect that you understand him, respect him, and genuinely want to help. If you don’t get consent to explore the subject further, you may be met with a brick wall, causing your deal to stall completely.
After that, you can begin to ask questions and get clarification. Here, you want to restate his reasoning to make sure you fully understand so you can address the issue correctly and to assure your prospect that you fully understand so they feel heard.
Finally, show the buyer the real value of what you have to offer. That’s what the rest of this post is going to cover.
Transitioning the Conversation Away From Price
When it comes to a 30-second ad placement, what’s a reasonable price to pay? Is it $5, $500, $50,000, or $5 million?
Obviously, you need more information before answering this question. For a recently launched podcast, $5 might not even be a worthwhile investment. Meanwhile, there were plenty of businesses willing to pay the $5 million price tag for a 30-second commercial placement in the 2016 Super Bowl.
The deciding factor isn’t the price, but the value for the price.
When talking about your product, the discussion shouldn’t revolve around the cost, but rather on the ROI. However, sometimes, the prospects don’t understand the full value, so you must translate the value for then.
Here’s the truth: your product is only as valuable as your prospect perceives.
If you want the prospect to pay the list price, you must translate the value so that the return on the investment is obviously, without question, more than the cost. It’s also important to note that the return they’re getting doesn’t always come in the form of money — it could mean things like time saves, peace of mind, pride gained, etc.
If you’re charging $100 for your product or service, you better be able to show how NOT spending that $100 is costing substantially more because of what your prospect could lose.
How will using your product or service impact not only the prospects key business metrics but also their most important values – and to what degree?
Focus on the Impact of Your Product to the Prospect’s Bottom-Line
The sooner you can put a dollar amount on the value of your product to the prospect, the faster you’ll be able to close the sale.
If your service saves a business $1000/month, then any amount up to $999/month makes it a worthwhile investment (within reason). And the same goes for added income. If you help a client make an additional $10,000 on a sale, then the client benefits from your service as long as it costs them under $10,000.
The next time a prospect objects on price, don’t become defensive or resort to discounting. Instead, ask questions and listen. Explore, with the prospect, how your product or service will impact their business economics.
Depending on your offerings, ask the prospect variations of the questions to guide the client to an understanding of the true value of your product or service:
- How are you currently managing this process/activity?
- How much time would using our service save you and your team?
- What is the monetary value of the saved time?
- Are there any other costs that would be reduced by using our service?
- How else is not having this issues handles impacting your team?
- What would it take for our product to pay for itself (how many saved hours, added clients, etc.)?
- What is the realistic likelihood that our service will meet your needs in a cost effective manner? (A question more for the sales team than the prospect).
By walking the prospect through questions like these, both of you are able to calculate the true value of your service. If it obviously pays for itself, then the client should have no objection paying the full price. Meanwhile, if the clarity is blurred around the true value of your product, then discounting or readjusting your price structure may be necessary.
To help us and our clients understand the value of our service, at PersistIQ we gather case studies of past clients. These case studies reveal that sales reps save anywhere from an hour a day to a full work day every week after implementing our tool! This makes it very easy for a prospect to calculate the value of our service. After all, if we can save a day a week for 10 reps earning $50k a year, PersistIQ is worth $100k to that client.
When you are able to directly tie the value of your service to the client’s bottom line, you create an anchor for measuring the true cost and ROI for the prospect.
Are They Still Unconvinced of Your Value?
Particularly when making big-ticket purchases, entrepreneurs and managers are rightfully cautious. There are far too many stories of brands investing substantially in a strategy that fails to meet expectations – or even cover costs.
Therefore, even if it appears that your product could benefit their bottom line, the decision maker may need additional convincing. But remember, the issue is never around cost, but around value. Don’t focus on the price of your service, but rather on the benefit and savings it will provide to the prospect.
Why shouldn’t you jump straight into negotiating a better price? Here are a few reason Mark Hunter echoes throughout his blog the Sales Hunger Blog:
- Negotiating may cause the client to expect additional discounts in the future.
- Negotiating could impact current client relationships.
- Negotiating may hurt the perceived price-value of your product.
From my experience in selling, consulting and building teams, I would add one last thing that is probably the most detrimental of all: negotiation sets the precedent for negotiating in other deals. You then become reliant on negotiating to close a deal. Just like a drug, you get hooked and immediately fall back to reducing the price every time.
Ultimately, if your service offers substantial value to clients, then there is no need to negotiate.
When exceptions arise, and you absolutely must negotiate a deal (for example, you’re trying to close a cache client) always make sure you’re getting something in return. Use the reciprocity principle of persuasion from Robert Cialdini’s bestselling book Influence.
This idea states that, by human nature, people feel indebted to others if they’re received favors. Cialdini says: “The implication is you have to go first. Give something: give information, give free samples, give a positive experience to people and they will want to give you something in return.”
Whenever you have to negotiate, it’s also important to get their commitment first. Don’t say, “I can give you X% discount, can you give me Y?” Instead, say, “If I can get the price of X dollars, do you think you can give me Y?” Make them commit first even if you’ve already had the discount approved. Also, notice I didn’t say “I’ll ask my boss.” It’s much easier to argue that you couldn’t get something approved by the board on your end because of company policies than it is to argue that your boss didn’t allow it.
Here are some things that you might consider asking for in return during for a price discount:
- Contract terms (length, scope, number of users, etc.)
- Introductions to other influencers (other departments, other connections in the industry, etc.)
- Discounts for using their product or services.
- Case studies, testimonials, endorsements, etc.
This all goes without saying if you have no other choice than to negotiate, make 100% sure you’re speaking with the decision maker. The last thing that you want is having to negotiate twice. Chances are you’ve already laid your cards out on the table, and you don’t have any more bargaining chips.
The Alternative to a Permanent Discount
When you have a value-add SaaS application, ideally clients should become dependent on your service and the benefit that it provides. Once they invest time into integrating and learning how to use it, chances are they will want to continue to use it.
If a client is nervous about the cost of your service, the best way to overcome their price objection is to help them discover the value of your product by using it.
Therefore, rather than offering a permanent discount, provide the prospect with the opportunity to trial your product to confirm it’s value for their business model.
How do you do this? Through free or guaranteed trial periods.
If a 30-day trial period doesn’t seem to be enough for a client to validate the usefulness of your product and they ask for an additional discount – consider offering another 30 days free or a 3-month trial at a 50% discount.
By offering a free/discounted trial period your product maintains its price integrity – while giving the prospect the opportunity to become invested in the benefits that your service offers. The prospect recognizes that your service is worth what you’re charging, but still receives the “bonus” they were looking for.
If you opt for this approach, you must make track conversions through the funnel and make sure the business economics work. Here’s what I mean. If you know that 90% of your free trials convert to paying customers, the hurdle is lowered for people to try your product or service, and you can afford to allow more people and justify the cost (for SaaS businesses, free trials can be expensive for your business. It takes away time from your support team, it may costs money for service your business uses, etc.). On the other hand, if you only convert 10% of your free trials to paying customers, this lowering of the hurdle and influx of non-paying users can cost your business substantially.
Conclusion
Trying to win on price is never a winning strategy. Jeffrey Gitomer states that “Being the least expensive won’t get you anywhere if the prospect has no confidence to buy.”
The best way to overcome price objections is to evaluate and confirm the value of your service to the prospect. Once they are confident in the ROI that they will receive from working with you, the discussion no longer revolves around price, but how to maximize the effective use of your product.
To do this, first listen to the prospect’s needs and discuss the time and money savings/benefits of implementing your product. Next, offer an extended (or discounted) trial period that gives the prospect an opportunity to become fully invested and knowledgeable regarding your application.
However, if you’ve done this with a qualified prospect, be prepared to walk away. Matt Heinz states, “If you know that the prospect needs what you’re selling and is convinced that your company can provide the best solution, then walking away isn’t going to lose you the deal. It’s going to call their bluff. And if it doesn’t, if they don’t have a sense of urgency to solve a problem or capture an opportunity, then your deal may not have been well-qualified to begin with.”
By integrating these strategies and tactics into your conversations, you can expect to close more deals at full-price.
What have you done to overcome the price objection? If you have any thoughts, questions, or comments, feel free to share them below.
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