Paul shares tips on handling price pushback in those service-based industries.
What does the movie Tommy Boy, T-bone steaks, McDonald’s, and Panera have to do with price objections?
Point out the dissonance between the outcome they want and the price they’re willing to pay. “Is the price you’re willing to pay consistent with the outcome you’re hoping to receive?”
Is it a matter of perceived equity? Bundle in more value while maintaining your price point.
Acknowledge price but change the conversation to how your service helps the customer make money (or achieve the desired outcomes).
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How do I overcome price objections in a service-based business?
(Transcribed from podcast)
On today’s episode, we’re going to talk about overcoming price objections in a service-based business. Here’s what triggered this episode. I was on a webinar earlier today and one of the participants mentioned that she is in the healthcare and fitness industry selling her services. And she said oftentimes people will come to her and they want to get healthy, yet she will get some pushback on her fee, and people will ask for discounts. So I’m going to give you some ideas on how to respond in this situation, but they’re really relevant for all service-based businesses.
Now, before we get into it, just a reminder, pick up your copy of Value-Added Selling. Value-Added Selling is your go-to guide for preventing price objections before they ever happen. The best way to manage an objection is to prevent it from the beginning. In Value-Added Selling, we detail how to make that happen.
So on today’s episode though, we’re going to get back to overcoming those price objections. You know, I’m always a big fan of using an analogy. And that’s going to be the first tip—using an analogy. Whenever I think of analogies in sales, I always think of Tommy Boy. You know, “You could get a good look at a T-bone…” and you guys know the rest. But I think about analogies. And this one’s interesting because the objection came from someone who wants to get healthy. So imagine you’re a fitness instructor or a health guru, whatever it may be, and someone comes to you and says, “I want to get healthy, I just don’t want to pay that fee.” And I would turn around and use an analogy and ask that person, “Okay, would you agree that Panera Bread is healthier than McDonald’s?” Of course they’d say, “Well, yeah, of course. Panera is definitely healthier than McDonald’s.” “Well, at McDonald’s you can get a cheaper meal, but think of the outcome you get. If you go to Panera and you want to be healthy, you’ve got to pay a little bit more. So the question I have for you is, are you looking for a McDonald’s result or a Panera result?”
You know, thinking about that, we’re tying it to health, which was the core issue here. And by doing that, they’re going to make a connection, and that can help them overcome their reluctance to pay the full fee. So I would encourage you to use an analogy.
Number two—call dissonance to what they’re willing to pay versus the results they want to receive. I remember working with—. There was a interior design designer who came into one of our public training seminars, and here’s what happened. She also was getting pushback on her fee, that her fee was too high, the design contract was too high, whatever it was. And here’s how we approached it. In order to properly use this response, we need to make sure we have a thorough understanding of the customer’s needs. Here’s how this would go.
Let’s imagine that you’re offering a design solution, and the customer says, “Oh, this looks great, but you know what? The price is just way too high. That’s not what we’re willing to pay.” We want to turn around and say, “Okay, Mr. Customer, I understand that the price may be a little more than you expected, but let’s go back and review your needs. You said you wanted this, this, this, and this. Now my question for you is, is the price you’re willing to pay consistent with the outcome that you’re hoping to receive?”
And what we’re doing is we’re calling their attention to a disconnect between the price they’re willing to pay and the outcomes that they told you they want to experience. By calling attention to that, it can help them overcome that gap. It can nudge them forward to making that decision. So that’s the second idea.
The third idea—we call this bundling. And really with bundling it’s about adding more value. At the root of most price objections is a perceived lack of equity. The customer is looking at the price that you’re charging for your services, and they just don’t think it’s fair. Part of the reason is, is because of the service-based business. With service-based businesses, there’s not a tangible product. They don’t see all the energy, the effort, the experience that has gone into what you are providing them. And so, we need to make them aware of that. And so, you can emphasize the value that you bring to the table, you can emphasize the experience and all that stuff, but at the end, you may need to bundle in a little more value.
So, here’s how you use this response. When the customer says, “Okay. Well, your price seems a little high,” you can acknowledge that and say, “Okay. I understand price is your concern. It sounds like it’s a question of the value you’re receiving for the price that you’re paying. And if that’s really the issue here, why don’t we look for ways we can add a little more value into this project?” And at that point, what you can do is add on some additional services, some additional value, to help it seem more equitable. By adding a little more value, you’re still maintaining your price point. So we call that bundling.
Last but not least, we’ll get into the fourth one here. Showcase to the customer how you can help them make more money. So, if you’re in a service-based business, I would get clear as to how you help your customer make more money. Let’s say you’re in the consulting business, for example, and the customer looks at your overall package. They look at your solution and they say, “Man, that price is pretty high here. This is more than I wanted to pay,” or “I could do this cheaper somewhere else.” Whatever the objection may be, you want to acknowledge price, but then change the conversation to money.
And you can do so by saying this. Okay, so the customer says, your price is too high. Respond by saying, “I understand price is going to be one of the factors when making this decision. But the reason you bring price into it is because you really want to make sure that you make the most money on this project. Is that right?” And the buyer will agree to that. And then you say, “Well, if making more money is your real concern, let me highlight all the ways partnering with me is going to help you make more money.” And then at that point you can emphasize how you help save them time, enhance productivity, improve their quality. Whatever it is, tie each one of those value-added extras to making more money, and you’re now speaking your customer’s language.
All right, everyone. That is a show for today. Again, just a quick recap. When you’re overcoming price objections in a service-based business, number one—use an analogy just like the McDonald’s example I gave you. Call attention to the dissonance, which means highlight the difference between the price they’re willing to pay and the outcomes they want to receive. You can also bundle, which means add more value. And finally, shift the conversation to money and showcase all the ways you help them make more money.
Make it a big day.