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Handling Price Objections (#video)0

By Tibor Shanto – tibor.shanto@sellbetter.ca

The video below is the third in a series of videos on Objections, and Objection Handling I did for BizTV, this one dealing with price objections. One of the most common objections sales people face is the price objection, especially late in the sale. Some buyers use this as tactic, some are genuinely trying to get the best deal they can, either way, the seller needs to be prepared for the objection and how to handle when it comes. In addition to the video you may also want to read The WOW Approach to Price Negotiations, these other price related pieces. And don’t forget to download the companion Objection Handling Handbook.

What’s in Your Pipeline?
Tibor Shanto

A couple of weeks ago I lost an opportunity I feel I should have won, and as you have read here in the past, you need to invest the time to understand why deals turn out the way they do. To do that I asked a couple of people I know, also involved in sales training to sit down to conduct the review, in essence to play the role of the manager, and keep me honest. The goal is to learn if the deal was winnable, if so what could I have done differently. If not winnable, are there any trends we can glean that we need to incorporate into future sales; or what can we learn that will help us recognize deals that are not going to happen earlier, so we can move on faster.

I was taken aback when the first question one of my peers asked was: “do you think you would have won had you priced it lower?”

Wow, what an uninspiring start. I guess if I gave it away free I would be busy five days a week, but my kids would starve. I looked at her hoping she would continue, and asked her why she started there, especially when I had shared with her and the other fellow involved the form/tool I use of our reviews, exploring many factors beyond price. What worried me even more is that this person was involved in working with sales teams, and this was top of mind here, what is top of mind when they are out in field.

The importance of reviewing both deals you win and lose, is understanding the trends behind the decisions. Every time a buyer does not buy from you is not a failure on your part, and the reviews will help you delineate between the two. There are buyers who will not pay for the value of your offering regardless of how well you communicated. It is important to understand which end of the communication failed. If it was you, then you need to work to change how you do things, and reviews will help. But if it was the buyer’s failure to understand/appreciate the value when you did everything you had to, it is better to know that and why, and how to recognize it moving forward. Communication is two directional, and it could well be that the buyer does not see the value or does not want to pay for it, yes they are cheap. And none of want cheap customers. The quicker you can spot one vs. the other, the quicker you can decide who is worth your time and resources, or which opportunities you can abandon early.*

Fine Print – the above is predicated on having a healthy pipeline of real opportunities, it is a lot easier to walk away from a bad thing knowing there are other opportunities to work on, than to walk away from the only thing left in your pipe.

Price is easy, in fact it is addictive; sellers need to be value competitive, not price competitive. Much better to get your clients addicted to your value/quality, then you becoming addicted to discounting. As with anything addictive, you run the risk of not just selling at a lower price, but for the wrong reasons. At first you figure you hey what’s a 3% discount. Once that is comfortable, you need a bigger fix. When you come up to the next resistance, you hesitantly try one more point, then another, and you are at 5%. You figure on $100,000 deal, say 8% commission, going to $95,000 will only impact you by $400, but could be the margin for your company. Remember that next time you wonder about investment in product development, marketing, resources, and all the things the $5,000 you gave away could buy.

What’s in Your Pipeline?
Tibor Shanto

As sales professional you work hard to get a sale to a point of proposal, and every day buyers will have you do things that could introduce unnecessary risk to the sale. Some can be managed, but some are harder, because you feel pressure, real or not, to take actions that you should not take. Specifically when buyers ask you to ‘send’ them your pricing/proposal/quotes to potential buyers.

Across a number of industries, sales people tell me that they have submitted pricing/proposals, and are “waiting to hear back”; what’s with this waiting? Along the same line they tell me that they “sent pricing in and promised that I will follow up on Friday”. Really, just send in pricing, like tossing the latest community paper on the lawn.

Here is a rule to live by, never send in proposal/pricing without a scheduled time for review!

I know this seems simple and straight forward, but it seems not, people do it every day, look to your left, look to your right, and I’ll bet you saw at least one rep who does this if not more.

If the prospect requests a proposal or pricing, the clear course of action is to set up a time to present and review it together. Obvious, yes; reality, not always. If you can’t get the appointment to present, schedule a specific time for a call; if they are hesitant, ask yourself why. I know it is hard, but you have to believe that a potentially sincere buyer would see that as a good next step, if not, you need to think about why, are they just trying to rationalize a decision they have already made, will they use your proposal to get concessions from a current provider, why not take the time to review it together, is this a game you are willing to play?

There are times where you can schedule the review by offering to send in the proposal in advance. But again you need to make sure you are on a level playing field. Send it in too far in advance and it can work against you. They may love the proposal, and then spend time on how to negotiate further. You want to be in a position to take in their initial visceral reaction, not once they have had a chance to rationalize with time.

So here is the plan, say you schedule a phone presentation for 2:00 pm Thursday. Most would send in the document a day or two in advance or even the morning of. My idea of advance is 1:59, hitting the send button as the ringing begins on the phone. Again, the goal here is to be able to work with the buyers real reaction, not a tempered contrived reaction. Of course some of this can be addressed if not eliminated early in the sale, but if you do find yourself in this situation, you can still work on a level playing field.

What’s in Your Pipeline?
Tibor Shanto

Every day you hear people griping about the price of gas, spinning conspiracy theories, claiming collusion, just going on and on about the price of the fuel. In Toronto they actually have a special segment on the radio telling you what the price of a liter of gas will be the next day. Bizarre, not only because many will burn more than they save while their engine idles while they wait to save half a cent on a liter. For context today’s price at the pump in Toronto is about $1.26 Canadian per liter.

While I understand that the mystery around pricing can be frustrating for many, it is worth remembering that while we have choices in which outlet we purchase our gas at, green vs. blue, in the bigger picture gas stations are the only choice we have, other than buying an electric car or finding other means of transport, but if you chose to drive a conventional car, you are headed to a gas station near you.

The same gas station where many will buy their bottled water, currently about $1.00 Canadian, for less than half a liter, or about twice as much as the liter of gas we complain about. Now in most places you have numerous alternative for getting your drinking water, not the least of which is a carton of 24 at most retail outlets for less than three bucks.

So what’s the point?

Our choice comes down not to price, but perception and to a lesser degree convenience. Somewhere along the way, folks have determined that it is acceptable to pay twice as much for a readily available resource, just to quench the thirst brought on by complaining about another resource that in comparison is quite cheap.

Now I am not here to carry the flag for the gas companies, but there is a lesson for sellers to learn here. Focus on the perception, mapped to value held by the buyer, and it is possible to sell past price. In fact, price is not an issue in the water discussion. Yes, the environmentalist will have their say about bottled water, but even there it is never about price, but environmental impact.

The opportunity for sellers is to position their offering in a way that it is more like water, not gas. By focusing on the outcome rather than the means, you can get buyers to get past price and see what is in it for them. This means forget features/benefits, and focus on impact from the buyer’s perspective.

Next time you see an ad for BMW, note how they speak to the “experience” more than anything else. There are plenty of vehicles that will get you from here to there, but few offer the experience BMW boasts, real or not, it’s the perception of the buyer, and most will pay a premium for that experience.

So what is the impact, outcome, experience your offering will leave the buyer with? Focus on that from their perspective, and you can soon sell water to fish.

What’s in Your Pipeline?
Tibor Shanto

We all know the challenge price presents in today’s B2B selling environment. We all love to talk ‘value’, but often fail to define to ourselves before we engage with a buyer; then fail to define it with/for our buyers, and leave them wanting once “we’ve delivered our value proposition”. Our job as sales people is not to propose value, but to deliver it, and ensure that we and our companies are fully compensated for that value, which once again takes us back price.

While we would all prefer not to deal with price, it seems almost unavoidable, almost a cultural must when it comes to buying/selling, and hey we do it when we are spending the cash. This leaves you only with the option of how to mitigate or minimize the negotiation dance; and you have a couple of choices as to how to do that best.

The first, and most popular, is a method I call Build Up and Defend. This is where you pack your offering, pitch, and proposal with “tons of value”, and throw it at the client with everything you got, and then defend that “value”. We’ve seen this in different formats, but the goal is to wow the buyer, and persuade them that they are getting everything they had defined as being required, and more. While this works, and there is nothing wrong or dishonest about it, it just seems like so much redundant overkill, which draws on unnecessary resources on the part of the seller, and usually overwhelms the buyer, thus introducing risk to the sale. This usually ends with the buyer looking for the “real value” in the form of price concessions, and the seller either conceding because they need to make quota, or better sellers taking things out of the mix in order to balance to make concessions equitable.

An alternative to the above is to be more methodical, and leverage the Discovery stage, and the information exchange to build value with the buyer. You do this by a) Building Better Questions, focusing in on only the most important and relevant factors for the buyer, rather than every “potential” irrelevant data point, whether it has value or not. With the base value points identified, you then use that foundation to drill down, and further establishing where the buyer will find value in our deliverable based on their specific requirements, a process called GAP Selling.

From a pricing standpoint, this allows you to build from that base and bid the price up with every element of value you and the buyer mutually establish and agree on. There is no rule that states price discussion has to start at a point and then be ratcheted down. Done right, you can build value with the buyer, on their terms, and at the same time bid up the price, not down.

What’s in Your Pipeline?
Tibor Shanto

Price continues to be the boogie man for many sales people; soft economies just serve to compound and heighten the situation giving buyers an obvious lever in sales negotiations. But it doesn’t have to be that way, and that is not just me trying to be enthusiastic and up beat, it is a fact, unfortunately a fact that sales people don’t use to its maximum impact.

Survey after survey of buyers, show that when asked for reasons they buy from the companies they buy from ongoingly, show that price is rarely in the top three, in some cases it is not in the top five. Given that, I ask why sales people choose to focus on price, when there are clearly other factors buyers rank higher than price. Let me state right here that at times things are said in response to surveys that don’t always correlate to behaviour when buyers are in buying mode, but there is also enough evidence to show that price is not top of the list unless it truly is a commodity; even then I have worked with people selling commodities who have been able to leverage the other reasons/factors on the list above price.

As with all things worth doing in sales, there is some work involved, despite what some soothsayers will tell you, there is no silver bullet in sales. First, identify those things above price, and those item that help balance or neutralize price. You can start with checking out “How to Sell at Margins Higher Than Your Competitors : Winning Every Sale at Full Price, Rate, or Fee“. You need to also understand why it is people buy from you and your company, which is easy if you get into the practice of not just doing won/loss/ND reviews, but also to go back to the buyers who went with you and ask them straight out what factors impacted their decisions. Clearly you want to lead with the ones that are working and address to alter those that are working against you.

While not universal, you’ll find that serious long term buyers, especially those who understand that a healthy supplier makes for quality products and satisfied downstream customers. Yes everyone wants to economize, but that does not equal low prices. It is up to the sales person to help the client understand why the price equals relative value, not an absolute number. Most sales people are familiar and speak to the concept of “total cost of ownership”, but do not a complete job in engaging the buyer with it. Often laying out the story but not filling in all the pieces, making the assumption that the buyer will recognize the advantages, they don’t, that is our job. It may take work each time, but it will pay dividends every time, both by helping you close more of the right buyers, but also in eliminating price shoppers.

Next Steps

Find out what your existing customers value beyond price
Develop a process for raising and leveraging things you uncover in the above point
Lead the process rather than hoping the buyer will put everything on the table in a neat way

What’s in Your Pipeline?
Tibor Shanto

A few weeks back I gave you permission to go ahead and sell on price, so long as specific conditions were met and adhered to. One central condition being that you can deliver full “value” at your price.

Ah, value, the ever-present and undefined term in sales, so before going further let’s define value right here:

Definition of Value: Those offerings that remove barriers, obstacles, or helps bridge gaps present between where the buyer is now – and – their objectives!

Buyers will attribute value in your offering if can see, understand, and accept, that it will help them eliminate barriers and/or bridge gaps between where they are now and the objective(s) they are seeking to reach. Absent that you are condemned to sell by adjusting your price, usually downwards, until it is low enough for the buyer to rationalize the relevant value. Of course I want you to do is build relevant value to the point where YOUR price is great value.

Once you master building the value (using the EDGE Sales process and the GAP Selling methodology), you can develop the means and conviction to deliver your price with the confidence and knowledge that it will help your buyer to achieve said objectives.

But let’s be real, even when you execute well, buyers will still bring up price as an objection, it is almost expected, and we need to deal with it.

So there you are cruising down the freeway, armed with the factors above, and hot breakfast in your belly, you are ready to present your proposal. You cover everything and gain agreement on key elements, leaving the price for last, you present the numbers, with confidence, and the buyer pushes back, now what?

First, don’t get excited, if you have executed the process, continue leveraging it, calmly ask the buyer, “OK, please share with me, (tell me) what price (number) you had in mind?” after all, you need to frame what you are dealing with, based on events you had to put a number on the table, it is only fair that you know what number they were working with. BTW, you can often avoid this by establishing their budget, budgeting process, and how they have dealt with budget/cost over runs in the past. Knowing that early, when there is much less pressure can be a real advantage.

When they come back with a number, do be offended, don’t get excited or defensive, a – it’s their number not yours; b – its just a number without context. Instead, politely ask, “how did you come up with that number?” Remember above I said you need to be confident in your number, know why it is that number, know and quantify the value you will deliver for that number; so if you were asked to explain how you arrived at your number you could do it, and with practice, do it easily, so it is only proper that they should be able to explain how they came up with their number. Sometimes they can, in which case you will have to evaluate your options, one of which is to walk away. But in the process of them explaining, you will gain the insight you need.

More often, they can’t explain their number, they either had a number in mind without much back up, they pulled it off the web, they got a price from another competitor, or some other less than relevant source. But without the ability to reason things out, it will facilitate an opportunity for you to review the facts and issue you covered during Discovery. At this point you can decide if you can help them understand your pricing, where their will see an ROI, and make full use of all the impactful thing you uncovered during the Discovery stage. In the end you still have the choice of re-establishing the value or moving on to the next prospect.

Next Steps

Become proficient in understanding where and how you deliver real value
Be ready and confident in your price
Read ” The WOW Approach to Price Negotiations“
Make sure you have plenty of real prospect in your pipeline so can afford to walk away

What’s in Your Pipeline?
Tibor Shanto

We all know the potential pitfalls of “selling on price”, but usually that statement is incomplete. If you were to sell at a price that represented full value for you, your company, and the buyer then there wouldn’t be that much talk about the whole thing would there? Why not, because everyone realised value, and since value is subjective, it is not tied to a specific number, but to other elements, usually the buyers’ objectives and the challenges they perceive in attaining them.

So rather than spending time talking and worrying about price, sellers need to spend that time and energy building value in the mind of buyer, based on their current requirements and circumstance. First thing we need is a definition of value. Because this is such an important element of sales success, the tendency among many in sales and those talking to sales (people like me), to over complicate the definition, often introducing the attributes rather than focusing on defining value; once defined you can look at some attributes, and how to leverage those in establishing the level of value required by the client and you.

Lets start with the definition:

Buyers will see value in those things that eliminate barriers and gaps between where they are now, and their objectives.

If their objectives were easily attained, they would get to it and do it. The fact that they may be seeking a solution, suggests that they are facing some challenges, obstacles and gaps in their ability to attain those objectives, or what I call opportunity.

Knowing what those objectives are require leveraging experience, work and discipline. Let’s be clear, this does not exclude new sellers, experience includes leveraging the collective experience of your company and fellow sales people.

Experience involves reviewing outcomes of previous deals, not just those you win, but losses, and the ones that went to no decision. Simply stated, understanding the wins will help you understand what to look for and repeat. The other two, allow you to spot changing trends and help you avoid the tunnel vision created when you look only at the wins. The bonus to the no decision camp is the opportunity to rekindle the opportunity with elements learned, and create a win in shorter time frames.

Couple the above with the core elements that impact buying decisions, that is why people buy, and more specifically why they buy your product, and from you. You now have the base to build from, building the question set, you need to nail the objectives, the related obstacles and gaps. With this in place you are now ready to Mine The Gap for success. The interesting aspect of this is that while it is simple, it takes real work to execute, and offers no short cuts; in fact if you do try to short cuts, it will punish you with failure. Sorry, no silver bullet here.

On the other hand, if you do develop the discipline, you will be able to engage with those who seem to be all set or uninterested, and be pleasantly surprised by the fact that people see the value you bring, and be willing to pay full value for it. So go ahead, sell on price, full price.

What’s in Your Pipeline?
Tibor Shanto

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Free Does Not Make a Sale47

The Pipeline Guest Post – Mark Hunter

Your company has come out with a new service. It’s a significant improvement over the last version and the entire sales team knows it’s going to be a success.

You and the rest of the team feel good, but within a very short time, obstacles begin to pop up. Customers are hesitant to buy the new version because they just don’t see enough of an improvement.

We’ve all been in this situation and some of you are in this situation right now. After discussing the situation with marketing, the decision is made to allow customers to try the new service for free. Everyone is still sold on the idea that the new service is so superior that once people try it, they certainly will buy it.

Without hesitation, customers begin jumping on the offer to try the new service for 30 days. The response is so phenomenal that everyone in marketing and sales feel great. The problem is behind you, right?

As customers near the end of the 30-day trial, the sales team will reach out to the customer, hear glowing comments about the new service and boom – customers will upgrade! The beauty is the upgrade will mean more money to the company and more money to each salesperson.

Suddenly the next problem emerges. Customers at the end of the trial period aren’t exactly jumping on board to upgrade. They’re saying, “Thanks. Love the new service, but we’ll just stick with the existing service.”

Yikes! Suddenly it feels as if it’s Groundhog Day all over again. The sales team begins arguing with marketing, and marketing begins complaining about how sales can’t sell.

The problem is simple – free does not make a sale.

When a customer is offered something for free and there’s no obstacle to taking it, they will take it. This then means the customer is taking without investing anything themselves – which is a big problem for you and your company. The customer now associates the upgrade with the word “free;” even though you meant for them to think about it that way for only 30 days.

Here’s a better approach – never offer anything for free. Never. It just doesn’t make sense. If you’re going to offer the customer something, make sure they have to invest something in it. The investment could be any number of things, but the key is the customer has to be invested. Until the customer makes an investment, there really is very little reason for them to see value in what they’ve received for free.

Yes, offering customers a test is a valid strategy in today’s marketplace, but if you do it, make sure you do it with a plan in place to ensure the customer has a vested interest in truly testing it.

I’d rather offer fewer customers a test and have a higher close ratio at the end than offer everyone something for nothing and have a dismal close ratio.

About Mark Hunter

Mark Hunter, “The Sales Hunter,” is a sales expert who speaks to thousands each year on how to increase their sales profitability. For more information, to receive a free weekly email sales tip, or to read his Sales Motivation Blog, visit www.TheSalesHunter.com. You can also follow him on www.Facebook.com/TheSalesHunter, www.Twitter.com/TheSalesHunter and www.LinkedIn.com/in/MarkHunter.

Reprinting of this article is welcomed as long as the following is included:
Mark Hunter, “The Sales Hunter,” www.TheSalesHunter.com, © 2011

Nov 18th, 2011 Attitude, Business Acumen, Buying Process, execution, Guest Post, Price, Proactive, Productivity, Sales Success

Attitude, Commitment, execution, Guest Post, how to sell better, Price, Proactive, Sales Success

How To Stretch Your Value to the Max! – Sales eXchange – 10630

Through the mid and late 1990′s I sold an information solution, delivering live content directly into companies LANs, allowing them to create alerts. Not that big a thing today, but keep in mind this was before the Web, and while the delivery is no longer a challenge, functional and useful alerts, now marketed as triggers by many of the same folks, are still being sold, if not always bought.

The leaders of the company used to carry out a strange annual ritual that demonstrated their desperation and lack of sound business thinking. This specific product sold for $3,000 a month or $36,000 for the required minimum annual subscription. Every December the “Leadership”, would roll out the same special offer, an annual subscription for $30,000 if the customer committed before the all-important year-end, a $6,000 discount for those who bit.

The plan, theory, hope, as it was explained, was that once the service was flowing through the customers’ networks, and they had a chance to experience it, renewing them 12 months later at full price would be a mere formality. Right! To this day I am not aware of one client who renewed at full pop, all the renewals were all at $30,000 never $36,000. Not only did they never recover the cost of acquiring the account, but ended up paying a further $6,000 penalty for as long as the client maintained the service.

There were a couple of lessons and I learned from this, one right away, there other got clearer over time, especially as I sold more involved solutions.

The most important lesson set in after a couple of years of this silliness, when I realised how to leverage the reverse of the phenomenon. Our losses stretched out as long as the client maintained the service, $6,000 per year, four years, $24,000. Therefore, the same had to be true when a client was realising value from our service.

If you can get agreement from a buyer that using your service, they will save $20,000 a year; or using your service they can increase sales resulting in a $25,000 increase in net earnings, you can then extrapolate that out over the life of the service you sell. Most sales people don’t go this extra step, they will stand their ground on that first figure. So if your product costs $20,000 it may not look that attractive at either $20K 0r $25K return; but what if they had the benefit of your product for four years. That changes things; they now have the potential to see an $80,000 benefit from a $20,000 investment.

It is important that you establish two basic things, first, and I mean first, the duration of the positive impact of your offering, it has to be established first, not that hard if you follow a disciplined approach to Discovery. Second, the value gained, whether that is increased sales, reduced costs, longer asset life, reduced time to market, you name it, (well actually let the buyer name, you ask the questions that lead to that). Armed with those two things, you are not only set to achieve full price for full value, but the elimination of a lot of daftness from the sale, for both you and the buyer.

For example, if I can get a buyer to see that my training will bring in an extra three sales a year, and he tells me that each nets $1,200, that’s $3,600. If his average tenure for a rep is five years, that brings it to $18,000; makes the initial investment of $1,500 seem like a steal, even if we added in an annual refresher at $500, still total investment of $3,500 per rep, still leaves a return of $14,500 of the five years. (Note to self, need to raise my prices).

The other obvious lesson learned was not to sell at a discount. Once you sell it at $30,000, you have established the value, and all the dancing and barking you do when trying to renew does not change that fact and the value you set at $30,000. Yes, there are arguments you can make, proof of worth you can present, but all that is just decoration, the fact is you sold it at $30,000, and that’s what it’s worth. Some of the leadership threatened to withdraw the service, but not only did they lack the anatomical make up to do that; but they and the local rep had become addicted to the crack-revenue, and no one was going to suffer the withdrawal pains. Besides, they would have to go out and replace what they lost, and they have shown that that was beyond their means.

What’s in Your Pipeline?
Tibor Shanto

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Dealing with Price in the Real World26

Go Ahead, Sell On Price – Sales eXchange – 12717

Free Does Not Make a Sale47

How To Stretch Your Value to the Max! – Sales eXchange – 10630