Before you answer, think about this question from the buyer’s perspective. Most likely, there are two reasons why they ask you that question:
- It’s their responsibility to get the best price. They may like the additional value you offer, but it is their job to get the best deal they can. They have to check.
- They do not perceive enough value to pay the price that you are asking for. You haven’t convinced them that your offering is worth paying more for. You are seen as equal as your competitor. Their objective is to replace the competitor with you, at a lower price, so that they enjoy a similar service and a cost-saving.
So, do you sharpen your pencil, or do you sharpen your value? Giving in on discounting automatically reduces the perception of value. Discounting confirms that you and your competitor are equal. You will achieve the opposite of your objective. Some salespeople go even further and dive under the competitor’s price to gain the business. This is the riskiest tactic; you devalue your company’s brand, capabilities, and solutions,. Offering less than your competitor opens the gate for your prospect to go back to their current supplier for an even better price. This is a downwards spiral where nobody wins. It is beyond me why salespeople still offer to beat the competitor’s rates, while they know the competitor’s capabilities are nothing close to yours and will never create the value you would for your prospect.
Price versus cost. Better is never found with cheaper. It’s often true, that the lower the price you pay for something, the more it costs. Think about that cheap gardener, painter or electrician you got to do a job for you. More often then not, you had to ask the more professional company to undo the damage done – and in the end, it has cost you more to get the results you wanted in the first place. A conversation about price needs to be a conversation about cost. You need to address the real cost the prospect will endure when choosing for the lower-priced competitor or to stay with the incumbent supplier.
You are better off increasing the perception of value. When you are asked “Can you lower your price?”, think twice and reflect where you have gone wrong and failed to deliver greater perceived value, which should be helping the prospect to create a strategic outcome. You need to believe in yourself that as a Trusted Advisor you can really help businesses achieve better results. Focus on their business objectives. How can you help? What risks do you see for your prospect’s business when remaining their status quo? Share stories of how you have helped similar businesses, facing similar challenges. Bring insightful information to the discussion table. Would changing to you deliver a better strategic outcome for their business? Help your change-champion with justifying paying a higher price. They will only get other stakeholders involved if they are clear on a proper return on investment.
A fair price. The reason your prospect is talking to you is that they are after a better service offering, meeting the new needs and business objectives….at a fair price. Before your next meeting with your prospect, you need to believe your price is fair.
Here is the thing, if you discount now on your initial proposal then, you agree the proposed price was not fair! If you stick to your proposal you say: “This is a fair price”. In other words, discounting is in your hands. The moment you discount you devalue your service offerings, which you truly believe are different from your competitor and will add the value your prospect is looking for. Discounting makes you again equal to your competitor.
My advice: When your prospect reacts with: “you are very expensive” you say: “Yes, we are more expensive than others – it is, however, a fair price”
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