It may be the single most common hurdle a salesperson faces — an objection over price. Okay, often it's more than a hurdle; it's a fortress wall.
Being successful in sales means becoming an expert in such walls. You must know what they're made of, and why people put them up in the first place. Also, you must study every technique for ducking around them, climbing over them, digging under them, breaking them down, blowing them up, persuading the customer to come outside the wall and, perhaps most important, convincing the customer that he doesn't need to build the wall in the first place.
Price objections have always been a factor in sales. “Naturally, people want to make sure they're getting the best pricing possible,” says Mike Blanchard, director of the Inland Empire and Orange County division of B&K Electric Wholesale, City of Industry, Calif. It's your job as the salesperson to provide the customer that assurance.
In some cultures, haggling over price is a central feature of doing business. As local markets feel the effects of the nation's lingering economic slowdown, they can begin to feel like an open-air market in an ancient, walled city where old men bicker over the price of a chicken.
Customers whose business has been hit hard by the economy, especially large, publicly traded companies whose stock prices have taken a beating, are sending out demands for across-the-board price cuts, says Mike Harvey, vice president of sales, Standard Electric Supply Co., Milwaukee, Wis. “We're also seeing a lot of it from companies that have been acquired over the past three years or so. They're bleeding bad and sending out letters asking for concessions.”
In this environment, it's particularly important that you brush up on your techniques for dealing with price objections.
Stop it before it starts
As is true in most aspects of sales, your best advantage lies in preparation. You need to know the details of the customer's business inside and out — how they operate and the market they're competing in. This allows you to see where you can help him or her be more competitive, which is much more valuable than buying at a lower price.
You can head off many price objections by laying solid groundwork. Use every opportunity to focus your customer's attention on value. Establish in his mind a clear picture of the value of the products you're selling and the value your company adds in the process of supplying them.
One way to stop price objections before they start is to schedule meetings with customers that will help you demonstrate the ways your company is working to give them the best service possible. Harvey of Standard Electric Supply has found it useful to sit down with customers on a quarterly basis and share information on suppliers, on-time performance measures and insights on ways they can make their purchasing more efficient.
When you reinforce the impression that your relationship to a customer's business is more that of a partner than a supplier, it differentiates you from competitors and places the focus on the value of the relationship rather than mere price. “You can firewall yourself from competitors if the customer embraces the value you bring as a distributor,” says Blanchard of B&K Electric Wholesale.
When the price objection comes up, you must avoid making assumptions about the motives behind it. You may feel instinctively from previous conversations that you know where the pain lies, but making this assumption can lead you to spend a lot of time and effort countering a problem that isn't there. It's better to just ask.
Three of the more common reasons a customer will object on price are that they don't have the money, that they think they can get it cheaper from a competitor, or that they simply must win concessions in any negotiation they're involved in.
If the customer is simply in a situation where he doesn't have the money allocated to buy the product at your price, it's possible to help him find the money. This can take some imagination on the fly, but if you've done your homework, you might have noticed something he is paying too much for elsewhere, or a product he's buying that has more capabilities than he needs.
An even better approach is to shift his attention from the product's price to transaction costs and other “soft” costs that could offer even greater savings than the few cents per item discount that a customer requests.
“If I'm doing my job, I often can't give them any better pricing on the product itself, because I've been giving them my best price all along,” Harvey says. “But I'll say, ‘Let's look at the soft costs. If instead of faxing your orders you sent them to us by EDI, or if you consolidated your purchase orders, you could save this much and more.’ I can usually find the soft costs to take out, if they're willing to work with me.”
If the customer's objection centers on a belief that he can get that product cheaper from a competitor, find out as much as you can about the pricing and services that competitor is offering. Once you have that information, your best approach is to remind him of the relative merits of your product and why it may be a more effective solution to his problem. Follow that with the service advantages your company offers.
Don't go backward and try to justify the whole price of your product. You only have to concentrate on the difference in price and offer sufficient evidence to justify that difference.
If the customer's objection is ego-driven — he absolutely must win — help him find a way to win and still pay your price for the product. This can often be done using the soft-cost savings. Making him a hero to his boss, by giving him a way to save the company much more in transaction costs than it could save by whittling down the price, is a win for everybody involved.
“Once you discover where the customer is feeling pain, you can look for workarounds and find a way to provide a solution,” B&K Electric's Blanchard says. “If you go down that rocky road with him and win his confidence, you end up in a much stronger position than if you cut your price.”
You become an ally he can count to make his life easier, which differentiates you from competition.
Over the top
In many ways, the likelihood that you'll run into a price objection depends on who you are dealing with in the organization. A front-line purchasing agent will be highly likely to beat you up over product price, because his job is to get the best price possible. But if you can take the discussion to a higher level in the organization, you'll often find price is not as big an issue as the overall efficiency of the customer's operations.
“You must be able to articulate and demonstrate the value you bring as a distributor, and the ways you're in a position to help the customer,” says Blanchard of B&K Wholesale Electric. “When you take the discussion to a higher level, and focus on other savings you can offer in services like consolidated billing and consignment inventory, you can take the issue of price off the table.”
Salespeople who recognize the power of higher-level selling give themselves an advantage, Blanchard adds. “The salesman who wins is usually the one who knows how to use the resources available to him, and recognizes when he can make the sale by bringing in an upper-level manager to take that issue off the table.
“That's where I spend most of my time, getting out in front of customers and talking to them about the savings we can bring by forming a closer relationship.”
Sometimes your efforts to sell the benefits and savings of a closer, more streamlined relationship will fall on deaf ears. The customer can't see anything but the price, and he wants it five percent less. In that case, especially if it's a large account, it's worth your while to at least go back and look at the pricing and see if there is any way to shave a bit closer without cutting into flesh.
“When we get one of those letters, we will go back and look at our costs and try to find the savings. But when I do find it, for me that's an embarrassment, because we should have given him that break from the beginning,” Harvey of Standard Electric Supply says.
If there is no way you can cut the price further, one final option is to offer to write a letter the purchasing agent can take back to his bosses, showing that they are getting the absolute best price possible. If that doesn't do any good, it's best to just walk away and take the chance that the customer will take his business elsewhere.
One of your competitors may be willing to cut closer to the bone to get the business, but just because your competitors are willing to do something stupid doesn't mean you have to join them.