During tough times you will face price objections. In this episode, Paul shares five ideas to manage price objections.
Show Notes:
In good times or bad times, buyers want value. When buyers question price, they’re really questioning the fairness of your price for the value they receive. Price is only an issue in the absence of value.
“The first step is clarifying the objection to uncover the root cause.” The root cause is what you need to address. During tough times it could be cash flow, uncertainty, lack of budget, etc.
“Create flexible options for your customers.” Get creative and help your customers through this tough time.
“Buyers want control during these tough and uncertain times. These ideas will give your buyers a stronger sense of control…”
“Invoke a little empathy and cast a little doubt.” The buyer’s greatest fear is not overpaying; it’s losing their sense of security and peace-of-mind.
“Leverage every concession into an additional opportunity.”
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How do I manage price objections in tough times?
(Transcribed from podcast)
We’re going to continue our theme of how to sell during uncertain times. This episode is going to focus mainly on price objections.
In a recent webinar, a salesperson asked about price objections. They said, “After we get through this pandemic, we could be in a recession. We’re going to face some tough times. How do you manage price objections during tough times?”
The salesperson highlighted an example of the Great Recession. Albeit ten years ago, they shared examples of how some of their loyal customers that never really complained about price, all of a sudden started to get really price sensitive. That’s what we’re going to focus on today.
Before we get into answering that question though, I wanted to give a shout-out to my sponsor, The Creative Impostor Studios. Again, if you’re thinking about starting a podcast, they do a wonderful job. Reach out to Andrea. There will be information on the Show Notes page of our website. Check that out. Visit TheQandASalesPodcast.com.
Let’s get right into handling price objections. The number-one reason why buyers object on price is because of a lack of equity. They just don’t believe that the product or service you’re selling is worth the price that you’re selling it for. They don’t see the complete value in it. There’s a discrepancy there and that causes them to focus on price. Most salespeople are going to respond to that by lowering their price when, in fact, the best thing to do is not to lower your price, but increase the value that you bring (versus just focusing on price). Let’s go through a couple of tactics—some ideas—to help you manage price objections.
Any price objection you get, it’s important to clarify, to get to the root-cause of the objection, before you start responding—before you try to tackle the real problem. I would encourage you, when a buyer does mention price, clarify and see what’s going on. For example, if a long-time customer calls you up and says, “We just looked at our invoice and that price seems a little steep for that product. We’ve been buying this for years. The price seems a little bit higher.”
I would say, “We haven’t changed anything on our end. The pricing is consistent. It’s fair. What’s driving this?” Ask them to elaborate and just see what’s going on. You might realize that maybe something bigger is going on. That buyer might tell you, “Right now, we’re concerned with cash flow. We’ve been told to take a look at all of our pricing; get competitive bids.” That tells you right then and there that maybe the issue is not that your price is too high, but maybe another competitor came in and offered a lower price. The key is figuring out the root-cause of what’s going on. Once we get the buyer talking…they say, “We need to focus on reducing our cost over the next few months” then, you can focus on ways to help reduce their costs. Maybe they need better help with managing cash flow. Maybe you can come up with some creative or flexible options to help them get past that. The key is to clarify. Once the buyer mentions price, ask a clarifying question to keep them talking.
Here are a few ideas to help you manage price objections and respond to them during tough times.
Idea #1: Be more flexible. It’s important that you create flexible options for your customers during these tough times. I was working with a company just a few weeks ago. This company decided that during this tough time, they were going to extend their payment terms; they were going to give their customers an extra 30 or even 60 days to pay their invoices. They didn’t lower their price. Instead, they became more flexible.
One customer I work with, who’s selling a lot of equipment, decided to offer partial payments—do some financing options—that they traditionally wouldn’t offer customers. They’re showing support through their flexibility. That’s important.
Another customer typically sells a bundled package of product and services. They have now identified an “a la carte” menu of services that they can offer or take out of the deals they’re working on. That’s a way for them to show their flexibility.
Offer your customers a different way to buy. If it’s through online ordering options, or just other ways that they can purchase, smarter ways that they could be buying. For example, if they’re buying onesies and twosies here from a bunch of different suppliers, why don’t they package that all into your basket? That would be way for you to help change their ordering habits; it might be a way for them to save some cost in the long run.
Get flexible. Be creative in how you can support your customers.
Idea #2: Add more value. If there is a customer that is complaining about price, part of the reason why is that they just don’t see the value in your solution. To close that equity gap, add more value. Do something to sweeten the deal for them. Make it worth their while: add additional services; offer some complimentary trainings; create some new services that you can package in (things you didn’t do before). What we know about tough times is that they will help you become more creative. Give yourself time to think about ways to become more supportive/creative for your customers in adding more value.
I’ll give you one example. Recently, we were going to go on a vacation, but with the travel bans, obviously we canceled that. The company we booked the vacation through, rather than just returning the money, they made an alternative offer. They called us back and said, “Here’s the deal. We’re happy to refund your money because that’s part of our agreement. But, if you decide to just keep the money with our company and take a credit instead of a full-out return, we’re going to increase your travel-budget dollars by 50 percent.” They basically said take the money you were going to spend on vacation anyway, keep it with us, and we’re going to give you 50 percent more as a credit toward your next vacation. That’s a way that they creatively added more value. You could do the same thing.
Idea #3: During a negotiation, or if there are price objections coming up, buyers want a perceived sense of control. They want more control. By giving them additional options to choose from, by getting their feedback, it’s going to help increase their perceived sense of control. And by doing that, they’re going to be more motivated to buy.
Here are a couple of examples. If the buyer starts to complain about price, present a different solution to them. Go about it this way. Don’t just say, “If you don’t want to pay this price, we’ve got three options to choose from.” No. Instead, acknowledge that and say, “Why don’t we do this? Let’s have a discussion about your needs and how they have changed over the past couple of weeks and into the upcoming months. Let’s have a discussion about your needs first.” Talk about their needs and how they changed and what’s going on. Then say to them, “Based on how your needs have changed, why don’t I put together a couple of different options that are better suited for you during these tough times?”
You can change your package. You can go back and determine what they have to have versus what they want to have. Become clearer on what they really need and you can present a different option. It’s not like you’re lowering your price, you’re just presenting a few different options.
The other thing you can do…Present your total value-added solution and then ask them what they can live without. When the buyer says, “Your price is just too high,” here’s another way to approach it. You take that customer’s objection and say, “Let’s take a look at your needs again and let me go through everything that’s included in this solution.” Make a bullet-point list of all the value-added extras that are included in this solution. Then, ask the buyer this question. “Based on what you’re seeing here, what can you live without?” You’re asking the buyer to cut out some of the value added. This is called subtracting value or unbundling. What you’re doing is giving the buyer an out. You’re letting them have control in designing their solution. One thing you’ll notice at this point, as a buyer looks through this list, they’re going to start saying things like “We have to have this.” “We need this.” “This is part of why we worked with you to begin with.” They’re going to realize that maybe they can’t live without some of these value-added services. Since they can’t live without them, it means they can’t live without you as their partner. Make sure that you remind them of that value added. Ask them, “What would you rather cut out?”
Idea #4: Invoke a little empathy and cast a little doubt. Invoking empathy is about letting the buyer know you understand what they’re going through. If a buyer says to you, “Right now there’s a lot of uncertainty. There are tough times. We’ve been sending product out to bid and we’ve gotten some cheaper prices.”
I’d respond to that customer and say, “Like you, everyone’s facing some tough times. During these tough and uncertain times though, it really wouldn’t make sense to bring in a new supplier. That could be a little risky because you’re familiar with us. (You’re familiar with how we take care of you. You’re familiar with our product. You’re familiar with our software). The only unknown here is how that newer competitor—that person that put together a bid—how are they going to take care of you? Do they understand your complete set of needs? Why would you want to introduce that element of risk?”
What you’re doing is casting a little doubt around that question. In the event that one of your competitors comes with an obscenely low price, it’s also important to acknowledge that. Talk to the buyer and say, “Given the differential in our price, does that concern you at all? Are you sure that the other company is even going to be able to come through for you?” Or, “That seems a little desperate to come in at that price.” You’ve got to remember that during tough times, competitors can do stupid things. They’ll take on new business at a loss just to keep product churning or just to take on new projects. We don’t want to make that mistake. It’s important to remind our customers that they don’t want to make that mistake either. Because a cheap price that promises the same value is often too risky because they’re going to fall through. We need to remind our customers that in a subtle way.
Idea #5: Leverage any concession into a new opportunity. If the customer is asking for a discount, you can’t just discount the price and not change the package. If they’re asking for more favorable terms; if they’re asking for a price concession, leverage that into additional value along the way. Not only that, you need to also change the package. Anytime you change the price, you need to change the package. You have to leverage any concession that you make into a brand new opportunity.
One example of this, a salesperson recently on one of our webinars…A customer called them and said, “We need to change up the solution that we’re buying from you guys. It financially doesn’t make sense right now.”
The salesperson said, “Okay. We’ll take a look at the package that we have. We’ll put together a new solution for you. But, in order to present this, we’re going to need to get buy-in at other levels within your organization. Can we have a meeting with the owner of the company to go through some of these changes?” They leveraged the concession into getting a meeting with a high-level decision maker. That’s what we’re talking about here: leveraging any concession into more opportunity for you.
Just as a reminder, clarify that objection once it surfaces. Figure out what the root-cause is. Is the real concern cash flow, uncertainty, a lack of differentiation? You’ve got to get to what the real objection is. Then…
Idea #1: be more flexible with your options
Idea #2: figure out a way to add more value
Idea #3: give the buyer a sense of control
Idea #4: invoke a little empathy and cast a little doubt
Idea #5: make sure you leverage any concession into a new opportunity
Make it a big day!
