How To Handle Price Objections
You put together a great offer for your prospect. You pricing is keen but fair to you both. You know that you can truly help your prospect achieve their aims. Then it happens – the client hits you with the ultimate closing killer – “… that’s way more money than we budgeted for”.
Here’s how to handle price objections when you are negotiating with a prospect.
One of the trickiest things to handle when talking to a prospect is the discussion about money. You have carefully considered what price to pitch your services at based on the value you will bring to the prospect, but there is a nagging doubt buried in your mind that makes you worry that you my be going in too high. This is especially true if you are just starting out in consulting or coaching.
Most people are now predisposed to expect a discount as some sort of right. From supermarkets and malls, to car showrooms and real estate, everyone looks for the offers and the bargains, and this expectation crosses into business life. Because you too like to find the ‘great deals’, you know that you are going to give your prospect a discount if they ask for one, because hey, that’s normal right?
So you submit your proposal and the prospects hits you with “ that’s way more money than we budgeted for.” You respond by either telling them you can look at your prices again and maybe shave of 20% or so, or worse still, by asking then what they can afford to pay!
And in just a few short seconds, you have stitched yourself up forever with this particular client. Not only will you have to chop your fee down for this engagement, but for all future engagement, they will expect a similar price hack.
So the question is, how should you react when a client either tells you they don’t have the budget for it, or that your fee is too high?
The most important thing to understand about price objections is that it is very rarely an issue of affordability. Your prospect is almost certainly already wasting more on other things than you are asking for. They are almost certainly pumping budget into areas that will give them way less value than you will deliver.
Pricing objections are an issue of value perception, or more accurately an issue of value misperception. In other words, the prospect hasn’t fully appreciated the true value of the results that your engagement will deliver to them.
So rather than responding to the prospects financial argument, you must pivot the conversation to focus the client on the value the engagement will bring to them or their business.
The first step in doing this is to get the prospect to explain what value they actually perceive your engagement will bring. So for example, you might say something like…
“That’s not an uncommon reaction, but before I respond let me ask you a question. If we went ahead with the engagement, what value will it deliver to you?”
In asking this you do two things. Firstly you acknowledge the prospects objection, and secondly, you steer the objection towards value and away from cost.
Now, listen carefully to the prospects response. You will find that it will almost always fall into one of three arguments, each of which needs a different response from you.
Argument 1: The prospects perception of value is too small.
The prospect may not have fully appreciated the value that your engagement will bring, in which case you need to restate the true benefits. For example, they may not tie a new sales lead funnel with an increase in conversions and hence a boost to their bottom line. Another example may be that an increase in their self-confidence would lead to higher productivity from themselves and their team, leading to a boost in output and ultimately more money.
Argument 2: The value isn’t sufficiently impressive
The value of the engagement may deliver value, but it is not a priority for them. For example it may be that your engagement will streamline the invoicing process, but this will not be a priority if the company is finding it difficult to close on sales leads. The urgency to find and close leads far outweighs the urgency to deliver an efficient invoicing process. In this case you should seek to re-scope the engagement and hit something that is a priority fo the prospect.
Argument 3: The prospect wants to negotiate the price, regardless of the value
In this case the prospect fully appreciates the value the successful completion of your engagement will bring, but they would like to haggle on the actual fee you have put forward. This is the trickiest situation of all, and I have found that the best way to handle it is to hold firm. Re-state the value you will bring. Then re-frame the value in terms that underline that value. So for example you may tell the prospect that your usual daily rate is $2,000, and in terms of the engagement the 20 day project should be charged out at $40,000. However you have taken into account the duration and already discounted the price by 20%. You may also consider adding a ‘YDDI’ statement to your own argument. A ‘YDDI’ is a ‘You Don’t Do It’ statement such as …
“My usual daily rate is $2,000, and in terms of the engagement the 20 day project should be charged out at $40,000. However I’ve taken into account the duration and already discounted the price by 20%. I am sure that if one of your customers simply asked you for a generous 20% discount you would have to politely decline too. Does that make sense to you?”
So there you have it, my strategy for handling price objections from prospective clients. The key takeaway is that the objections are almost always generated by a misperception about the value you will deliver. So push, push, push the value.
Remember, if you have a burning question on any aspect of starting a consulting or coaching business or growing an existing practice, reach out and I’ll do my best to respond.