You dread these responses to your pitch in all of their varied forms. “Your price is too high,” the prospect says. Or perhaps they tell you, “Your competitor has a much lower price.” And worst of all is when your dream client says, “You are our first choice, but I need you to sharpen your pencil.” These objections make you squirm not only because a price cut reduces your profit, but also because a concession would make it difficult, if not impossible, to provide products and services at your typical high standard.
It’s not really about price.
Before your next move, you should remind yourself that price objections aren’t really about price—at least not most of the time. The percentage of your prospects who would choose a lower price over greater value is far lower than you might imagine, because price objections really relate to the perceived value of what you sell.
So how do you handle price objections?
First things first: Don’t panic and immediately reduce your price. If you do, you’ll destroy your ability to capture the revenue that will allow you to serve your customers well. No, to overcome a price objection, you need to shift the focus of the discussion away from price and towards value.
The following three actions can help you do that:
1. Increase the perception of value.
Regardless of the words your prospect uses to bring up a discussion of price, what they’re really saying is that they don’t perceive enough value to pay the price you’ve quoted. So your immediate move should be to increase the perception of value. You do this by realizing that the client isn’t really buying the product or service you sell; the client is buying the outcome you offer. To that end, you steer the conversation toward the outcome, which is the real value of what you sell.
You need to make your customer aware that you offer a superior product or service to those of your competitors, and therefore that outcome is worth paying more to obtain. In your conversation about value, explain to your customers what they will receive from you that no one else can deliver.
2. Help your dream clients justify your price.
Always keep in mind that the contacts you’re selling to aren’t the only ones in their organizations concerned with what you sell and the price of your products or services. Your prospects are concerned that later, after purchasing from you, someone else in the company will ask why they didn’t choose a cheaper competitor. They don’t want to be embarrassed by appearing to be poor negotiators.
Part of increasing the perception of value means helping your clients justify paying more to obtain the outcomes they need. To that end, you provide them with proof, an analysis showing the greater value produced by what you sell. They need to see references from satisfied customers as well as case studies and whitepapers attesting that your outcome will be better and worth the added expense.
If your contacts see that they can use your proof to justify spending more, you increase the likelihood of maintaining your pricing and closing sales.
3. Increase the perception of risk.
In the drive to control costs, many of your prospects will underinvest in the results they need. You can counter that impulse by helping each prospective client understand the risk of underinvesting—that they won’t receive the results they need with a less expensive, less satisfying purchase.
You can point out that lackluster performance might cause their company to lose customers. Their company could in fact relinquish significant market share, being leapfrogged by a competitor making the necessary investments to innovate and woo customers away with faster turnarounds, customization or other desirable upgrades.
To be a trusted adviser to your clients, you must take responsibility for guiding them toward the best possible buying decisions. You help them avoid risks—especially when you can see the risks that they can’t.
This article was published in January 2014 and has been updated. Photo by Foxy burrow/Shutterstock