Price, without the context of value, is expensive no matter who you’re asking.
If you’ve been in sales long enough, you’ve undoubtedly had a buyer tell you your price was too high. When this happens, the customer is not necessarily objecting to what you are charging for your product or service, but rather, they are failing to understand the value of it. In other words, the buyer is viewing the price as a cost or expense vs. an investment of tangible value. Let’s break this down further.
Differentiating Price and Cost
Price is the same for all customers— it’s the value determined by you, the provider of the goods or services for your particular offering. Price is influenced by a number of factors, including the cost of goods, competition in the market, and likely part of an organization’s positioning strategy, especially if your product or service is a higher quality than the alternatives.
Cost, on the other hand, varies by buyer and their use case situation. Cost represents an outflow of cash for the buyer, and it’s your job as a salesperson to demonstrate the value to be returned.
To illustrate, let’s say you’re out on vacation and break your sunglasses.
You go to a local store for a replacement pair, but the price for new glasses is $500. You feel it is too high, so you ask the clerk to see sunglasses that aren’t as expensive.
The clerk responds with a question, “May I ask, is it the price or the cost that’s of concern?” You give him a puzzled look so he probes further, “On average, how often do you lose or break your sunglasses?” You tell him at least once, maybe twice a year, but you generally pay about $350 for your shades. “Good to know,” says the clerk. “And where do you live?” You tell him Denver, and he proceeds to tell you they have 5 locations on the front range and 209 across the US. He then goes on to explain the significance. “We understand our customers better than any other retailer— we know sunglasses get lost and broken— life happens. That’s why we fully replace your lost or irreparably-damaged sunglasses once per purchase, as long as it’s redeemed within 3 years. All you need to do is walk into any location, they’ll look you up in our database, they’ll let you pick out another pair in the store, and you can walk out. Zero cost to you.”
And just like that, the $500 price turned into a $1,000 value.
The alternatives— continuing to buy $350 glasses twice per year— carried a $750 price tag, $250 higher than the shades you thought were too expensive. And going without is no good either, considering the glare and eye strain involved. You make the purchase, realizing spending $500 today to receive $1,000 in value was a much smarter decision than buying cheaper shades now and another pair down the road.
The moral of the story: the price today was small in comparison to the cost of the alternatives.
When to Discuss Price in Your Sales Conversation
Raising the price discussion is always a bit tricky. Bring it up too soon, and you can scare off a prospect. Leaving the price discussion to the very end of a call can leave you high and dry, if your prospect simply cannot afford your product.
According to research by Gong, the highest-performing sales reps discuss price 40-49 minutes into a sales conversation, whereas average performers tend to reference price throughout the call. Of course, look for the prospect’s buying signals and tailor your conversation to match.
“If you know a prospect is cost conscious or the competitors are considerably less expensive, then it’s important to discuss price early on,” commented Alex Buckles, Sales Executive and CEO of Forecastable. “Sales reps who can identify pricing objections early in the sales cycle are better positioned to proactively address product value sooner rather than later, improving their likelihood of closing the deal.”
The pricing discussion is also a tactical discussion, and one that should be rehearsed in advance.
Preparing for the Price Discussion
Price is part of all sales conversations, and how you approach it matters. Many sales reps fear talking about price as the pushback is uncomfortable and feel pressured to offer a discount. But be careful. While discounting has a place and value, discounting can also lower the perception of your product or service, not to mention drop your margins.
“Practice the price discussion over and over in your head, so it feels natural and you can talk about it with confidence,” advises Buckles. “And remember, ‘real’ deals aren’t fragile; both the buyer and seller should be willing to talk openly and transparently about the difference of price and cost.
Discussing price also gives you purchasing insight, enabling you to verify budget availability, and opening the discussion about the approval process plus other influencers involved in the buying decision.
Discussing Cost and Demonstrating ROI
Equally essential to a sales rep’s success, is the ability to shift the conversation to discussing the prospect’s options— if they don’t buy your product or service, what will they do instead? Then, dig into the price of the alternatives to arrive at the true cost of their decision.
According to Qwilr’s Buyer Experience Study, buyers want sellers to partner with them to assist in making the best purchasing decision possible. Additionally, 28% of buyers look for clear, achievable ROI. ROI, of course, is a value discussion, and is the comparison of a buyer’s potential return in relation to the price paid.
Questions to ask to help uncover the value:
- If you could overcome the challenges you’ve identified, how would that impact your company's financial situation?
- If you were to move forward with this purchase, what would it mean for you?
- How would implementing these changes affect your competitiveness in the market?
- What won't happen if you choose not to move forward with this?
- How will you evaluate the success of this initiative?
- If you don't solve [insert the challenge here], what kind of difficulties will you face going forward?
Once you have this information, ROI can be calculated manually, (although is a bit of a chore) or an ROI calculator tool can be used to save time and add flair to your sales proposals. Be sure though, that you’re illustrating an outcome that’s meaningful to your prospect, whether that be time savings, additional revenue, or cost reductions. Any time you can demonstrate ROI and it’s provable, you build buyer confidence and accelerate the purchasing decision.
Closing the Deal
To be successful in sales, you need to demonstrate to your buyers how working with you is going to improve their situation, both personally and professionally. The most successful sales reps are strategic and intentional in their pricing discussions, actively listening for buyer pricing cues. Proactively discussing the value of your product or service can help ease the concerns of price-sensitive buyers and build a stronger case for choosing you over your competitor. Delaying or avoiding the cost conversation, or even jumping too soon to discounting, is a sure way to lose a deal. Because price, without the context of value, is expensive no matter who you’re asking.