Paul addresses the most common and frustrating challenge that salespeople face. Paul also explains why buyers object on price and he gives you the best way to respond.
Price objections are what prompted the original edition of Value-Added Selling. Salespeople constantly experience price resistance, yet they are woefully unprepared to manage price objections.
“Price is not the most important thing when making a buying decision.”
Only about 15 percent of buyers focus on price when making a buying decision. This means that roughly 85 percent do not buy on price. That’s great news!
“Most price objections aren’t real price objections!”
Oftentimes, customers will mention price as the objection but there is usually something deeper or hidden we need to uncover. So, when the buyer mentions price, clarify with a follow-up question.
“The number-one reason buyers object on price is because of a perceived lack of equity.”
Fairness is critical in buying decisions. Buyers must feel they are getting as good as they are giving. Your response to price objections must build a perceived sense of fairness.
Paul also provides the hands-down, best way to respond to any price objection.
“Mr. Buyer, the reason you’re concerned about price is because…”
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How do I overcome price objections?
(Transcribed from podcast)
We have an exciting question that we’re going to answer. This is by far the most common question that we get in our training seminars and in our keynote presentations. In fact, this question is what prompted the original writing of Value-Added Selling. That question is
How do I overcome price objections?
This is such a big question that we’re not going to be able to cover every aspect of this question today, but we are going to give you a practical way to respond to price objections.
Before we get into how we respond to price objections, we need to talk a little bit about them and understand them. One thing we need to begin with is looking at price shoppers. Oftentimes, salespeople believe that buyers purely focus on price, or a majority of them focus on price. That’s just not the case. Price is not the most important thing when making a buying decision. Our research does show that there is a certain percentage of shoppers out there that purely focus on price. Trying to sell value to these types of customers is a waste of your time because they’re not going to buy on price. They never will. But our research shows that it’s just one out of six (12-15 percent of customers out there) purely focuses on price.
Here’s how we came up with that. A few years ago we did a study and we had decision makers from Fortune 500 companies, small-to-medium sized businesses. We surveyed business owners, procurement people, and every other decision maker in between.
What we found is that there is a group that purely focuses on price. One of the questions we asked them was based on buying criteria. The basic question was, “What’s important to you when making a buying decision?” We gave them about a dozen variables to choose from. About 12-15 percent of the respondents said that price was the most important thing. So, there is a certain group out there that buys on price. If one in six buys on price, that means five out of six do not. So, that is good news, although some customers might make you believe that price is the most important thing, our research shows that it is not. The key is figuring out how they define value.
The other thing . . . knowing that five out of six do not shop on price, we do need to understand the nature of the objection when they give it. So, when a buyer tells you that your price is too high, the first thing we need to do is clarify what they mean. When a buyer says your price is too high, it doesn’t give us all that much information. We need to dig a little deeper and say, “You say that our price is too high. What do you mean exactly” or, “could you elaborate on that?” Ask a clarifying question that gets that buyer talking. And whatever they say next is typically the root-cause of that objection. For example, the buyer says “Your price is just too high.” And we say, “I understand. Could you please elaborate on that? What do you mean when we’re too high?” And if the buyer goes on to say, “We have a budget in place for this and you’re just outside of our budget,” I would argue that that is not a true price objection, that is more of a budgetary objection. That’s a different way to approach that particular type of objection.
So far, remember, about five-out-of-six buyers will focus more on value than they do on price. But there is that one out of six that purely focuses on price. Understand the nature of the objection. We do that by asking a basic clarifying question. So when your buyer says your price is too high, we’ve got to clarify and say, “Could you please elaborate?”
Now, we’re going to get into how to respond to price objections.
When we look at price objections, we want to figure out why people do object on price. A couple of years ago, we embarked on a separate study. The purpose of this study was to understand why people object on price. Because, if you understand why they object on price, it becomes easier to overcome that objection. In this price-sensitivity survey, we revealed the top four reasons why a buyer will object on price.
The first reason a buyer will object on price is because of a perceived lack of equity. They just don’t believe that it’s fair. They don’t believe that what you’re charging for what they’re getting is fair. Now, this creates what we call an equity gap. To close this gap, a lot of salespeople just say, “You don’t think our price is fair? I’m going to lower the price so you do believe that it’s fair.” That’s not what we’re doing here. Instead, we need to increase the value. We need to explain why what we are offering is worth it.
Here’s how people responded and how we came up with that equity piece. They would say things like “I want to make sure that I’m getting a fair deal. I want to make sure I’m getting as good as I’m giving.” That’s the number-one reason why buyers object on price.
The next thing is fear and scarcity. That’s the second reason why buyers object on price. Any time you have a scarce resource like money or time, you fear misusing it or giving it up. So people in the survey responded, “I object on price because I don’t want to spend more than is necessary,” or, “I’m afraid of spending too much for something.” That’s how we came up with that fear and scarcity piece.
Number three. People would say, “I have limited resources or funding.” That’s the third most common reason whey people object on price. People would say “I have a budget that I must work within,” or, “I have limited funds that are available.” That’s the third reason.
The fourth reason—a lack of differentiation. Buyers just don’t believe there’s anything different between your alternative and any other alternative. To get past that, you’ve got to be able to explain what makes you different. People in the survey responded by saying, “I can buy the same thing cheaper online,” or, “I don’t see much difference in the products.” To us, that shows lack of differentiation.
Now that you have an understanding of why buyers object on price, again—One, it’s equity (they want to believe it’s fair); two, fear and scarcity (they don’t want to misuse their money); three, they just don’t have the funds available; and four, it’s a lack of differentiation. If you can address those concerns in your response, you are going to eliminate most of the reasons why buyers object on price. Craft your response based on that information.
Let’s get into how to respond to this objection. We’re going to use a framing technique. A framing technique means we’re going to change the conversation. We’re going to try to get the buyer to think differently than before. Here’s how we do that. When a buyer says “Your pricing is too high,” we’ve got to clarify as I discussed early and say, “What do you mean exactly?” They say, “I’m looking at your price. I’m looking at some other alternatives. It just seems high to me.” Now, we’ve to change that conversation. We change that conversation away from price and change it towards money. Money is a much better conversation to have with your customers than price because money is broader. Money gives you more opportunity to sell your value.
Here’s how the response might sound. I’m going to role-play with myself a little, so bear with me. Let’s say a customer greets me and says “Paul, I love the solution that you provided. Everything looks great, but the price is just too high.”
I want to clarify first and say “Okay, Mr. Customer. You say our price is too high. What do you mean exactly – what are you comparing us to?”
“I’m looking at your solution. I’m looking at the other solutions. They all seem about the same. But your price seems higher.”
At this point, I want to change the conversation to money, because money is a much better conversation to have. Here’s how I would respond. “I understand that our price is different than all the other alternatives that are out there. But, the reason that you are focused on price is because you really want to make or save the most money on this decision or on this project. Is that right?” The buyer’s going to agree to that.
Then, I reverse the objection and say, “If your real concern is making or saving more money, then that’s all the more reason to go with us. And here’s why I say that…” Then you can start listing out all the ways you help make that customer more money.
Remember—change that conversation from price to money. Money is a better conversation. It’s broader, and it gives you the opportunity to go out there and sell your value versus just focusing on price. Because if we continue to talk about price once we have that objection, we’re more likely to discount. But if we can change that conversation to money, we’re going to be able to sell our value.
Just to recap what we covered today: One out of six customers will purely shop on price. These customers are a waste of time when it comes to selling value. You don’t to waste all your energy and effort trying to sell value to a customer who’s purely going to shop on price. The good news is, five out of six customers will pay more for your value-added solution. Remember, once you get an objection, clarify what that objection is. Ask they buyer to elaborate—get them talking and understand the root-cause.
Our research shows that there are four primary reasons why a buyer objects on price:
- Equity – a perceived lack of fairness
- Fear and scarcity – they don’t want to misuse their money
- Limited resources that are available – they just don’t have the funding
- Lack of differentiation – they don’t see a difference between any number of solutions
When we’re responding to a price objection, we want to alleviate those concerns.
And, finally, when a buyer does talk about price, clarify their objection, but then change that conversation to money.
I know that might seem like a lot of things to do just to handle a price objection. Your other option is to just discount and cave in. I’m kidding! Don’t do that. The focus here is to sell on value.
Make it a big day!