We all have problems with price. Between myself and my clients, I’ve probably been through every single situation that you’ve ever dreamed of with regard to price resistance and I’ll try to give you the best points that I’ve been ever able to find. I am answering the question in two parts:
1- Three basic ways to minimize a price resistance in the first place.
2- Seven points on handling price objections.
Lets start with Three basic ways to minimize a price resistance in the first place
1- Don’t Start The Selling Process With A Lower Level Person In The Organization:
Never go to a lower level person to begin with.
The lower you go in an organization; the lower is the power to take a decision.
The lower (in terms of spending money) is the spending allowance.
Moreover – the reason for their high-price-resistance is that they are not exposed to high numbers as might their seniors be and hence are not attuned to value-adding ideas.
MOST Important – Lower level people insist on saving money and that is how they will present your proposal internally – whereas Higher level people want to make a profit and will view your price to calculate a justifiable return on investment.
Finally the higher you start, the easier it is to get a real decision maker. The only reason salespeople go to a lower-level person is to get an easier level of entry – BUT it complicates everything.
2- Willingness To Pay And Ability To Pay Are Two Different Things:
Nobody’s ever willing to pay, nobody ever wants to pay money out, but whether or not they can, is totally different. Most people can.
They can find the money if they really want the product badly enough, but whether they’re willing to or not is a different thing. The way that you increase the willingness to pay is by increasing the buying desire, by talking more and more about the benefits of the product or service, because the more the person wants it, the less concern they become about the price.
Remember – It is absolutely alright to be High Priced. It is absolutely unacceptable to be ‘perceived’ expensive. Therefore always focus on benefits that increase the return on investment for the client.
You should always leave the person with at least three such benefits – not more than three because he or she is likely to only remember three. Never less than three because no matter who you are selling to in an organization, this person will still have to sell your offering to others in that organization and is going to need three very compelling reasons to pull it off.
3- Shift The Buying Criteria:
This becomes especially important if you are selling a product that is priced higher than the competition in the market. Shifting the buying criteria means changing the reasons why the prospect will buy. Changing the ‘industry’ positioning.
Few examples from our clients:
A leading office automation MNC was positioning it’s product in the way the industry does – Looks, features, reliability, stability, warranties And because everyone else was doing all this too – the positioning shifted to price, payment terms….
They shifted their positioning to the corporates – “Are you interested in saving 20-30% in your administrative costs.” - How many people do you know who are likely to say ‘No’ to that question. They then developed a mechanism to prove how their products can do that for their customers. This company has seen a 30% increase in closure rates since then.
A real-estate company we were working with - guarantees that any property they sell to you will be rented within 120 days of your purchase or they will pay the fair market rent for up to two years. They charge a 2% higher commission than the market and Get It.
A TV Company (you probably watch your television on this company’s set) recognized that their customer is the retailer and not you and me - and so it offers to buy back any sets not sold by his retailers in the first 180 days at the retail price (not at the factory price) such that the sale happens anyways. Now which TV do you think would the retailer prefer to stock. And which TV do you think would be most easily available in the market for you and me to buy.
A car dealer in Bangalore, we worked with doubled his business by offering- no questions asked- a two week, 100 percent money-back guarantee on any new or used car purchase.
No dealer had ever offered that. If you were going to buy a car, why in the world would you buy it from another dealer when you might make a mistake and regret it a week later?
His volume shot up. He had a small number of people who did bring the cars back. But surprisingly, the vast majority didn’t want their money back – they wanted to trade up to a larger model or a more luxurious one. So the dealer actually made more profit that he did on the initial sale.
These aren’t extraordinary examples. These are just normal business people shifting the buying criteria. The possibilities are endless.
Now Seven points on handling price objections.
All of these might not apply to your situation, however you will be able to modify or use at least some of them. Here they are:
First of all, don’t mention the price until the customer asks the price. Do not bring up price at the beginning. If a person says, “Well, that looks like an interesting product. How much is it?” Say, “Could I come to that in just a second? That’s the good part.” That’s one of the things I’d say, “That’s the good part. Can I come to that in just a second? I just want to go over one or two more things quickly.” And then come to the price. Put the price off and bring the price into the conversation where you want to bring it in. In my sales presentations, I have a specific place where price appears and at that point either the customer says, “Oh, by the way, how much is it?” or I say, “I think you’d like to the investment.” But it doesn’t come up until that point and if it does, I put it off.
Number two is, always focus your presentation on the benefit they receive, not on the money you receive. Talk about what they are getting rather than what you’re getting. If the price is coming too often into the conversation – you have already made one of the three basic errors mentioned above.
Three. Always justify the price with sound reasons. Always explain why it costs this much.
Four. Never discuss price without mentioning values and benefits at the same time. If a person says, “How much is this machine?” never say, “This machine is x number of RUPEES” What you say is, “This machine, including this, this and this, plus these attachments, plus 90 days warranty and a supply of 1000 sheets of paper will cost you ONLY x number of rupees per month.” Very important to use the word only. It removes ‘expensive’ perception.
In other words, always precede the price by restating the values that the person is going to get as a result of paying that price. Your job is to increase how much they want, not to argue over the price.
A salesperson is not there to tell the prospect how much the product costs. A salesperson is there to engage the customer.
Five. You can compare the price with more expensive articles. When a person says, “That costs too much.” A perfect answer is compared with what, Mr. Prospect? Sometimes, they don’t understand what you’re talking about. They have no idea what things cost. They may not have bought one of these for 5 years and don’t realize that the price has gone up 200%. You say, compare it with what? If they say compared with ABC’s product. “Mr. Prospect, ABC’s product in the same line, is 5000 more than ours is. As a matter of fact, here’s there recent price sheet.” - or whatever.
You have to find out what they’re comparing you with. If you say, “This is a Mercedes automobile.” He says, “That costs a lot!” “Compared to what?” “Compared to Honda.” “That’s true. But there are very, very distinct differences why it costs so much more, would you like to know what they are?” So, always compare apples to oranges.
Six. Stretch the life price over the life of the product, which is a very, very good way to do it. The person says, “God that costs a lot!” You say, “It costs 50,000 more than the other machine, but Mr. Prospect, this machine has a five year life. That works out to about 10000 a year or more which would is about 800 a month more, for all of the additional qualities, the accessories and facilities that are built into it. Is it worth 800 a month more is basically the question, which comes out to approximately 25 a day or more. Is it worth 25 a day more to have all these features involved?”
The more you stretch the price over the life of the product, the smaller it appears to be.
Seven. Never argue Price.
Never argue price. The prospect says, “that’s a lot!” You say, “Yes, Mr. Prospect, it’s not cheap. However, there are very good reasons for the price and I would like to explain some of them to you. There are very good reasons why thousands of people have examined this product carefully and compared it with our competitors and decided to pay more and buy this product. Would you like to know what they are?” And the person will almost invariably say, “Yes, why?” “Because and these are the benefits and values that you get.” It’s so logical.
Remember at the end of it, it might still seem high but as long as it doesn’t seem too expensive, you’re ok.