One of my colleagues recently shared a good article by Brandon Redlinger on handling price objections from Sales Management. I wanted to add our thoughts to the topic.
Three Rules for Handling the Price Objection
ZEHREN◆FRIEDMAN Associates teaches both Selling and Negotiation skills classes, so we have a unique perspective on the topic. We have three general rules for sales negotiations that are particularly applicable to the price objection. Think of what happens immediately when we hear a price objection: it quickly becomes a negotiation! So here is our guidance:
Rule #1—Don’t Be Negotiating When You Should Be Selling
Sellers are way too quick to take their “sales” hat off and put the “negotiating” hat on. My own personal reaction to any objection, and particularly the price objection is, Why don’t they see the value the same way I do? Yes, I’ll even ask myself, Have I been unclear?
I was recently on a call with a client, who was interested in doing one of our classes virtually. When informed that the price was exactly the same as an in-person session, the client balked at the price. I explained that instead of a two-day class, the class would now be held as five, two-hour virtual sessions. The preparation and delivery alone would take a half-day each, or 2.5 days. (In reality, we’re not doing other training on those days, so in effect, it takes five days of instructor time—our only sellable commodity.) Oh, and it takes two of us to deliver virtual classes, instead of one of us to deliver an in-person class.
Rule #2—Grow the Need, Cost Becomes Less Concerning
Grow the size of the need, so the buyer is less concerned about the cost of the solution. The bigger the need, the more urgency the buyer feels, and the less concerned they become about cost. The less concerned they are about cost, the less negotiating they will do over price. (Like most sales training firms, we have a probing model we teach people to use in our classes—its entire focus is to grow the need in the mind of the buyer.)
One of our consultants was trying to sell training to the Purchasing Manager for parts suppliers to one of the Big Three auto manufacturers. Our person asked the Purchasing Manager, “What would it be worth, if all of your purchasing folks were so good at negotiating, that your cost-of-goods-sold went down 1%?” The Purchasing Manager responded, “It would have a $200 million impact on our business, and everyone in the department would get a big bonus check.” Needless to say, we got no pushback on price when we revealed what a class would cost.
Rule #3—If You Must Reduce Cost, Reduce Price Last
If you have to reduce the cost, focus first on issues other than price. Many sellers make this fatal flaw when dealing with the price objection. If I only cut the price, we’ll be done. Cutting price first will usually lead to other concessions that need to be made in order to consummate the deal. If price is what’s most important to me, why would I consider cutting it? What are ALL of the components of price in the mind of the buyer? What other costs can I negotiate with without cutting price?
Years ago, one of our salespeople was talking to a client who wanted to negotiate on price. Our seller determined that one of the client’s cost issues was not having a training staff to handle the administrative issues surrounding our classes. Our seller offered to arrange for the room/equipment at the client’s site, handle the invitations and pre-work for participants, and track the rosters for the classes. The client was so relieved that they actually paid MORE per class!
The price objection is a common occurrence for most of us in sales. Obey our three rules, and you’ll close more sales! AND, you’ll close more sales on your terms!