REACH Marketing Magazine. It takes a village. If you believe in that approach, you can build your brand. Just ask Amy Graver; she'll tell you that...
The Art of Overcoming Price Objections
REACH Marketing Magazine. Remember where you are in the discussion, be as accurate as you can be, and move the conversation forward by being open and genuine. You haven’t lost anything if your solution isn’t for them and both of you can walk away unscathed; sometimes, it’s the best decision.
By Greg Chambers
My work in lead generation results in a special by-product. Pricing discussions. What I have found is that there is a framework and language that clients find helpful in working through price and pricing.
Following are three ideas that will help you navigate pricing conversations and price objections – items that sit on most of our daily to-do lists.
No. 1 – Where in the decision process is the discussion happening?
Pricing comes up in two distinct places in a decision process:
- When determining resources
- When it’s time to purchase
It’s important to keep this in mind because when you’re in the determining resources phase, you want to know if you and the client are in the same ballpark regarding value and ROI. The “price” during the resource stage is not meant to be accurate and detailed, because you’re unlikely to close business in this phase.
The closing phase, in contrast to ballparking, is when you and your client discuss pricing in very specific and accurate terms. The closing phase is what comes to mind when most people hear “price objections,” because it’s at that point where negotiation is likely to take place. When both parties are interested in producing the best deal.
My point? Don’t negotiate in the early stages of pricing discussion. Good ballparking language is general and covers all the relevant resources needed to build a solution. To jump into the ballparking discussion, which is usually early in the search for a solution, you can use this:
"These are interesting objectives and we are known for that work. In our experience, one thing we’ve learned is that regardless of the outcomes, there are resource limits that need to be considered. These include time, personnel and money. Do you mind running through those with me?"
- Ask about timeframes – pause for concerns – check that you’re in the
- Ask about personnel – pause for concerns – check that you’re in the same ballpark
- Ask about the budget – pause for concerns – check that you’re in the
In “pausing for concerns,” if your prospect needs help quantifying, help them. You do this all the time. Most buyers may only purchase your solution once or twice, ever. “Other’s like you, looking for the same results, have used [this timeframe/dedicated this many personnel/allocated this much budget] does that sound right to you?”
To help the discussion, use a range, keep it within 50% of accurate at the most, and make sure you’re aligned before moving ahead. Yes, they’ll remember the low number, but you’re not trying to trick anyone, you’re trying to help them make a good decision.
- Time = If you say four to six months, the actual timeframe can fall anywhere from three to seven months based on ballparking.
- People = If you think you need five to seven people giving 10-15 hours a week a piece, and the actual comes in anywhere from four to eight people, eight to 17 hours a week, you’re in the ballpark.
- Budget = If the suggested budget is $40-60K and the actual comes in anywhere from $30-75K, you’re in the ballpark.
“Eugene, based on what we’ve been talking about, other businesses like yours, looking for similar outcomes, have invested between $40,000 and $60,000. Does that sound about like you were expecting?”
Ballpark it. It’s not a negotiation. You’re simply trying to determine if the conversation should continue.
When should it not continue? If you’re too far off. If you think it will require a $50,000 investment and the client thinks they only need $5,000, you’re too far apart. It’s better to know that now. Which brings me to the second point.
No. 2 – Does the budget match the desired outcome?
For years, I sold a list to marketers called “Opportunity Seekers.” It was a sweepstakes list of consumers that had responded to big prize advertisements. I use that example when talking about matching the budget to the outcome because you will have some clients that are looking for, and need, the big prize.
They need a place to invest a small amount and get a huge payout. They are opportunity seekers, and that’s okay. If your client’s budget is a tiny fraction of their expected outcomes, bring it up.
In my experience, it’s unusual to invest in anything and get a consistently giant ROI. Price should match outcome. Big wins happen, but you can’t plan for them. If they expect a $1MM outcome and they are investing $10K, there is a mismatch. In the direct marketing business, we used to say “invest $1,000, expect $1,000.”
It’s reasonable to talk in terms of a 10X return ($10K investment for $100K return), just remember that your company has to deliver, so be sure the outcome is possible.
If there’s a mismatch, try this language: “I’m confused. We’ve been talking about a giant benefit to your company, but it sounds like you’re only willing to invest a small amount to get there. What am I missing?”
Again, you’re trying to determine if the conversation should continue. If there is too big of a return expected, it’s best to know now. A similar thought is going through the prospect’s mind.
No. 3 – What does your price represent to the buyer?
Economists tell us that we all carry around a built-in bias toward pricing. Before we begin shopping, there is a bottom price below which we think the product won’t deliver, and we have a top price above which we won’t consider purchasing; no matter what the return on investment.
I sat in on a discussion with a bank prospect, and our rep ballparked the low end of our estimate at $20,000, which the banker agreed was a good price, piquing my interest. Later, outside of the decision process, I asked her why she thought $20,000 was reasonable. “Because I’ve learned that if any software solution is under $20K, it probably means it won’t meet the security protocols we have here,” she said. She let me in to see her ballparking decision shortcut in action.
To help you hear what this sounds like:
“Mr. Prospect, at some point I’m going to go back to my lair and will work through these outcomes to come back to you with ideas on how to get there. Out of curiosity, I know we’ve talked about what people invest for these outcomes, but is there a price that I would propose that makes you lose your head?”
It tends to strike close to negotiation, but it’s still pre-proposal. If they can’t come up with a price, use this pre-qualification language that Steve Blank teaches in his lean startup methodology: “What if it were free? If I could get you these outcomes for free would you be interested or skeptical? Conversely, what if it were $100K? Is that just too much
If they still hold their cards close to the vest and don’t talk about the dollar resources required to get the outcomes they want, we tell clients not to propose. Easy for us to say, hard for you to do. However, if they can’t trust you to do what’s in their best interest, you’ll never meet their expectations. Get challenges out on the table right away.
Next time you’re about to talk price, remember where you are in the discussion, be as accurate as you can be, and move the conversation forward by being open and genuine. You haven’t lost anything if your solution isn’t for them and both of you can walk away unscathed; sometimes, it’s the best decision.
Greg Chambers is the founder of the sales-and-marketing consultancy, Chambers Pivot Industries LLC (www.chamberspivot.com). Chambers helps entrepreneurial companies create sales-and-marketing practices. His latest book, "The Human Being's Guide to Business Growth: A Simple 3 Step Process for Unleashing the Power of Your People for Growth," teaches readers the easiest way to grow their business. He can be reached at firstname.lastname@example.org.