Paul shares three ideas to overcome price objections from procurement.
Identify the root cause of the objection by asking the customer to clarify. There is nothing wrong with asking the buyer why.
Procurement managers are trained to ask for a discount until the seller says no.
“To me, this sounds like an attitudinal based objection” This buyer feels like they are entitled to a discount.
Demonstrate the fairness of your solution. “Buyers want a fair deal, not a discount.”
Incorporate other decision-makers and influencers. “There is one thing the buyer fears more than paying a higher price…”
Don’t give the 40% discount. They’re going to buy it!
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How do I overcome price objections from procurement?
(Transcribed from podcast)
On today’s show, we have a question coming all the way from India. In fact, India has been crushing it with downloads lately. It’s, I think, within the top five countries downloading the podcast, so, thank you for the support.
Today’s question comes from Vinay, and it sounds like Vinay is selling some sort of training software for technical training. Here’s the situation. He has reached out to some key decision makers: a business unit head, and also, a learning and development type manager, and both of these decision makers are on board with his solution. They’re big fans of it because of the quality and the instructors that lead the training. So, they are sold on the idea, the concept, his solution. The challenge he is facing now is that the deal has gone through procurement. They want to move forward—meaning the L & D manager and the B-U head—they want to move forward, but procurement is now demanding a 40 percent discount in order to close the deal. So, Vinay wants to know, “How do you overcome that price objection?” That’s what we’re going to cover on today’s episode of the podcast.
Before we get into that, though, a quick shout-out to our sponsor, Andrea, over at The Creative Impostor Studios. I’ve said it so many times that the podcasting is a great way to connect with your audience. I know that many of you are fans of different types of podcasts, and maybe you have an idea for your own podcast. Well, I would encourage you to reach out to Andrea. She can support you. She can help you. She’s going to make it easier than trying to do all this on your own. She can help answer some questions that you have. And she’ll probably be able to ask some questions that maybe you didn’t think to ask yourself. So make sure you check out the information we have on this episode’s webpage. Once you go there, you can click. That’ll take you directly to her website and she’s got more information available. And also, you can schedule a consultation with her.
Also, you pick up your latest edition of Value-Added Selling. If you’re dealing with price objections, the best way to manage a price objection is to prevent it from ever happening from the very beginning. That’s what we teach you in Value-Added Selling. Pick it up wherever you get your books. It’s available on Amazon; that’s one easy resource. Barnes and Noble, Chapters, if you’re up in Canada. Or, you can find a publisher abroad as well. I know it’s now being published, I think, in maybe 20 or so countries. So anyway, we have it available for you. Make sure you check it out.
Now, we’re going to get into this question: How do you overcome price objections from the procurement department? Now, Vinay, I don’t know all the details about this particular scenario, but I’m going to go ahead and make just a few assumptions. You’ve already talked to the other key decision makers, meaning the L & D manager and the business unit head. They’re sold on the idea. The challenge you’re facing now is that procurement is brought into the process because they need to issue a purchase order, sign off on the agreements, and all that. And now, they’re asking for a discount.
The first thing we’re going to go through is how to diagnose this price objection. To me, it sounds like this particular procurement manager or buyer, they came up with this 40 percent number arbitrarily. It’s like, where did they get this 40 percent? Why are they demanding a 40 percent discount? They could do that for a number of reasons. Maybe they have experience buying this software in the past, and that’s the type of discount they received. Or maybe they’re just playing a game with you. They’re just throwing this number out there to see what they can get. Because, remember, procurement managers— they are trained to ask for a discount until the salesperson says, “No.” So, we’ve got to realize, maybe this is just part of the game.
The first thing I would do, Vinay, is you’ve got to clarify what’s really going on. You’ve got to ask the buyer why they need that discount. This is called clarifying the objection—getting to the root cause of what the real issue is. My first advice to you is to go back to this procurement buyer and just ask the question, “I understand that price is one of the factors here, but if you could, please explain why you’re going for this 40 percent discount. What’s causing this? What’s leading to it? What’s really going on here?” Ask the buyer why and you might get a couple of different responses, and that can determine how you respond. So, figure out why they’re objecting on price.
Now, my instincts tell me that what you’re dealing with is what we call an attitudinal price objection; an attitudinal price objection which means, for some reason, this buyer feels like he or she deserves a discount. For whatever reason, they feel like they are entitled to a discount. And that could be just based on their experience with salespeople in the past. It could be because those are the demands placed on them in their position.
Whenever you’re dealing with an attitudinal price objection, realize that you’re not dealing with logic and reason. You’re dealing with the emotion of that procurement manager, that buyer, where they feel like they deserve it. There’s a couple of ways you can respond then. When you talk to the buyer and you get a sense that, yeah, they just feel like they deserve a discount, respond to them by demonstrating the fairness of your solution. Remember that the reason buyers will ask for a discount is not necessarily because they want a discount; it’s because they want a fair deal. If you can demonstrate the fairness of your solution, that should put this objection to rest.
Here’s how I would do it. I would respond to this customer and say, “I understand that you’re looking to make sure that your company is getting the best deal possible on this training software. I want to reassure you that this is a fair deal. You’re receiving the best pricing—the same pricing that we will charge our best customers (or whatever it is).” Highlight that. Just mention that they’re getting their best deal possible. Explain the benefits and say, “For what you’re going to gain, we believe this is a fair solution. Here’s what your company— or, here’s what your department is going to gain once they start utilizing this software.” Then reassure them that nobody’s getting a better deal than they are. Just appeal to their sense of fairness. That’s what we’re dealing with here is that attitudinal type of objection.
Also, in your response, you want to reflect what they’re missing out on if they choose not to go forward. You might say to that customer, “I understand the importance of staying within budget or making sure you’re getting the best deal. And I understand the importance of saving on costs. In fact, saving on cost is one of the primary reasons why your company reached out to us to begin with. They’re looking for effective cost-saving ways to train their employees. So, rather than thinking about the 40 percent discount that you’re trying to get, let’s think about the total cost of not moving forward, and what this could cost your company in the long run.”
And then, you can highlight the cost of not moving forward—the cost of missing out—however your training solution helps reduce costs within the organization. Highlight that. Because, you got to remember this buyer, their goal is to try to reduce their overall cost, and if you can show them the cost of not moving forward, that could be enough to encourage them to move forward.
The final tip here: remember that the buyer you are interacting with, they’re scared of something more than paying that 40 percent extra. And here’s what that is. They’re more afraid of their stakeholders—the L & D manager and the business unit head—coming to them and saying, “What are you holding up this process for? We need this. We’ve got to move forward.” They’re more afraid of that then that 40% premium.
So, we need to leverage that. And what I would encourage you to also do is to reach out to those key decision makers that are already on board—the L & D manager, the business unit head—reach out to them and say, “I’m excited to move forward on this project. We’re thrilled to be partnering with you. We’re facing some headwinds, though, in the procurement department. We were working through the pricing piece and we’re always leading with our best price, but we’re getting some unrealistic demands as far as a 40 percent discount. Can you help us out in getting this pushed forward?” You’re asking those other key decision makers to get involved.
In fact, I remember an example of this early on in my sales career, when I used to sell tools and fasteners for the Hilti organization. We had a fastening solution that was literally 15 times more expensive, as far as the price, than the competitive solution that one of my customers was using. I remember working with the strategic account manager who managed this account. His name was Norm; great guy. Great salesman, too. Norm and I were working on this opportunity and we got the customer all excited about it. We demonstrated the new fastening system. The engineers were on board. The superintendents, the project managers, they were all on board and they gave us our commitment. They said, “We’re going to forward with you. We’ve got to send this through procurement though.”
In our mind, it was almost a done deal. We put together the proposal. We sent it over to the procurement department just to get a PO, but I got a call back from the procurement department and they said, “We’ve got your proposal here, and we wanted to give you an opportunity to fix the mistake that you made. And I pulled up the proposal. I said, “Hold on one second. Let me take a look at it and I’ll figure out what we did.” I looked at it and I said, “I’m struggling to see where we made a mistake.” They said, “Well on your price tag here, it shows about $15 per fastener. That’s what we calculated it at. Our current solution is about $1.00. So, it’s clear that you meant to say $1.50 per fastener instead of $15.”
At that point I said, “No. that that is the price, $15 per fastener sounds about correct. That’s the price.” And they said, “Oh, I’m sorry. Well, there’s no way we can move forward. We’re not going to spend $15 for a part that we’re currently paying about a $1.00 for.” So, when the buyer said better luck next time, I reached out to Norm and I said, “Norm. Procurement said, ‘We’re not going to move forward.’ They said the price is too high. They’re comparing us to what they had in the past.” I said, “What are we going to do?” He said, “I’ll take care of this.” And Norm hung up the phone, and he made a phone call. And sure enough, about ten minutes later, I received a purchase order for the full amount; the same price. We didn’t discount or anything.
I called Norm back and I said, “What did you say to that procurement manager?” He said, “Paul, I didn’t call the procurement manager. I called the engineer, I called the superintendent and I asked them to call the procurement manager.” He said, “As soon as they made that call, they decided to buy in.” And Norm—it was a great lesson that I learned in sales that day—he said, “Paul, why am I trying to sell this to procurement? Let’s get our champions. Let’s get the folks that are really on board with it to sell this to procurement.” That’s exactly what he did. We got the PO—done deal.
So, Vinay, you can try that same approach. Incorporate those other decision makers. Make them put a little pressure on this procurement manager. And realize that this company is going to buy. Don’t discount; don’t cave in and give that 40 percent, because they’ve already committed to buy. You’re just working through the details now. So, don’t discount. Take some of these tips and apply it.
Make it a big day.