Imagine spending six – nine months trying to close a deal. The customer is ready to buy, but they tell you, “Your price is double the competition!”
On this show, Paul answers Jeff’s question:
“We consistently compete on price because our product is always the most expensive! When we compete on technical capabilities, we always have an advantage. But justifying the higher cost is a challenge. How do we avoid going through a long sales cycle and losing the business at the end? Customers always see the value in our extended capabilities but have trouble justifying the 2X cost.”
Paul responds, “The key is figuring out what makes your solution different or better and why that is meaningful to the customer.”
In this type of selling scenario, there are going to be multiple decision makers, and they are getting involved at different phases. You must identify who is involved and how they define value. This needs to happen early on in the buying process.
“How are you going to sell them on your value, if you don’t understand how they define value?”
Additionally, multiple decision makers can complicate the buying process. “There are group dynamics you just can’t ignore.” Paul explains, “Groups want to conform.” On the show, Paul demonstrates how to facilitate group conformity. “It’s not enough to just gain individual buy-in with decision makers…”
How do you respond when your price is double the competition?
“Being double the competition is a big hill to climb, but you can climb that hill, if your solution is worth it.”
“Don’t focus on the price of your solution. The key is to…”
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How do I manage price objections at the end of a long sales cycle?
(Transcribed from podcast)
Jeff is the person who actually filled out our form. Jeff is a salesperson for one of the world’s largest organizations, and he sells software. Here’s what he has to say:
Paul, we are consistently competing on price because our product is always the most expensive. When we compete on technical capabilities, we always have an advantage. But justifying the higher cost is a challenge. How do we avoid going through a long sales cycle and losing the business at the end? Customers always see the value in our extended capabilities but have trouble justifying our cost since it is twice the other alternatives.
“Twice the alternative.” That is a big hill to climb. Let’s be realistic; when you are double the competition, that can be tough. However, I’m guessing you’re double because you’re probably four-times better. The key is having to figure out what makes your solution different and better, and why that’s meaningful to the customer. We’re going to address this question today. Again, the question is
How do I avoid going through a long sales cycle and losing the business at the end because of price?
Salespeople in multiple industries face this, however, let’s dive a little deeper into Jeff’s unique challenge. Jeff, I’m going to make a couple of assumptions here. The first assumption is that you’re having to sell through multiple decision makers. You’re probably working with some engineers, some technical people, procurement-type buyers, contract administrators. And then, also, given the size of the deals you’re working on, I’m guessing you’re having some senior-level management involved in the decision making. The key in this type of selling arena is that each one of these decision makers will define value differently. The VP of production will define value differently than the lower-lever procurement type of buyer, so you’re going to have different levels that you’re dealing with. You’re also dealing with a longer sales cycle. I’m guessing that some of these mid-level influencers—these are the decision makers that are the most open to your solution—are your biggest cheerleaders. They view your solution as a must-have. The problem is they don’t control how the money is spent. They certainly can influence it, but they don’t have ultimate control. You’re going to need to meet with all of the decision makers throughout this longer sales cycle.
That’s the first tip. You have to engage all of them. I know that some of your mid-level influencers might try to guard you from other departments, other high-level decision makers, but if you don’t meet with all the other decision makers, then you don’t get an opportunity to understand how they define value. And, until you figure out how they define value, how are you going to sell them on your value?
You’ve got to meet with all of the key stakeholders. You can usually clarify who they are by asking a couple of good qualifying questions with the influencer you’re meeting with. Questions like, “This sounds like a solution that can really impact your company, and you seem pretty excited to move forward. In addition to yourself, who else is going to be involved in this decision?” Or, “Who else is going to be impacted the most from this decision?” “Who do you need to gain final approval from to put the budget into place?”
These types of questions should help you understand who is involved. Once you figure out who is involved, you need to find a way to get in front of them. Another thing, once you get a chance to meet with all the decision makers and you understand how they define value, you’ve got to look at the group dynamic that’s going to be in play. There’s a tendency for the group to want to conform (Conformity). In fact, there was a whole book written on this—and you’ve heard of groupthink before. The title of the book is Groupthink. It was written by Irving Janus and he made that his life’s work. What he found in his research is that groups like to conform. That’s important to remember because if you’ve got several different decision makers that all have their own ideas, their own input, they want to conform eventually. And, as the salesperson, part of your job is to help that group conform. One way you can do that is by gaining internal buy-in with each one of the decision makers, meaning, internally you get each decision maker to buy in to your solution. But that’s not enough for the group to conform. You also need to make other decision makers aware of each other’s conformity. If you were to say, “Jim in engineering really feels like this could help him in this aspect. And Roger, and Samantha, they’re all on board as well because it’s going to help them.” Making each individual decision maker aware of everyone’s buy-in makes it easier for them to conform. We want that conformity because it’s going to help move the process forward.
The first two tips: You have to meet with all the right decision makers, understand how they define value. Then you have to get the group to conform. The best way to do that is to reach out to each individual decision maker and gain their buy-in, but, also make each decision maker aware of the shared buy-in. Make them aware that everyone else is on board with the idea. That helps build conformity.
The next thing we’ve got to do – we’ve got to understand how and why our solution is different. In Jeff’s question, he mentions that we have a technological advantage. And when they sell on those advantages, it’s easier for them.
Now, you have a group of decision makers that are sold on your solution, and you’re starting to get some of that price resistance. So, yes, being double the competition is a big hill to climb, but you can climb that hill if your solution is worth it. Let’s remember that. If you offer something the competition doesn’t and can’t offer, that technological advantage has a huge impact on the organization, it can become a no-brainer for them. So, here’s what I recommend… When a client of yours says, “Your solution is $100,000. The competition is at $50,000. Your price is just too high.” I wouldn’t focus on your solution as a $100,000 solution. Instead, I would focus on the difference and explain to that buyer “I understand there’s a $50,000 difference in our price. Let’s talk about what you’re getting for that $50,000 and, furthermore, how that’s going to impact your business in the long run.” You have to be able to take your technological advantage and translate that into meaningful impact for that individual decision maker.
That’s the third tip; focus on the difference, not just the total dollar amount, and explain how your technological advantage is going to translate into meaningful impact for that individual decision maker.
The other thing… At this point, you’re probably meeting with some higher-level decision makers. When you’re getting into price and some of the details, and trying to figure out how to move it forward, you’re going to have some high-level individuals involved. What we’ve found with higher-level decision makers…They’re not as concerned about the details of your solution. What they’re really concerned about is what it means to them – how it’s going to impact them. So, when you’re selling to these high-level decision makers, focus on how your solution helps them be more competitive in their industry. Understand how your solution helps them achieve greater profitability. Talk to the high-level decision maker and see what their outcomes are – what they’re looking to achieve in the next couple of years. Then, take your solution and show them how it will help them get a little bit closer.
So, there are a few tips on how you can sell value in this situation.
The final tip I’d like to share with you is more related to a long sales cycle versus just pure price. In a long sales cycle, there are plenty of opportunities for salespeople to get frustrated. In fact, when you think about it, a lot of things have to go right for that sale to take place. So, Jeff, another piece of advice – I would recommend looking at a recent success and then go through and identify all the small wins that led to the ultimate sale. When you’re navigating a longer, complex sales cycles, use those small wins as benchmarks along your path to success. When we focus on small wins, it keeps us motivated; it keeps us engaged; it keeps us moving forward. We’ve all been in sales where we look at an opportunity and it’s so big that it is motivating, but it’s hard to even get started. So we focus on those small wins to help us achieve those outcomes.
One final tip: You’re at double of whatever the competition is offering. The easiest thing to do would be to just cut your price . . . I’m kidding! Don’t do that! That would be a terrible thing to do at this point. You’ve already created a lot of value for them. The key is just getting over that hump.
I hope those tips are going to help you out.
Make a big day!