The Price Is Too High

One of my best customers always threatens to pull the business if I don’t reduce price

One of the biggest obstacles to many a sale is the price objection. Yes, it’s true, even with podcasts, hybrid cars and 500 cable channels, some things never change. Some customers will always tell you your price is too high. Yawn. Wait a second. You can’t just ignore it. And here’s why.

If salespeople rely on price only to capture and retain business, they reduce whatever they’re selling to a commodity. Once that happens, there is no customer loyalty. If that’s the case, taking the scenario a step further, there is really no need to have a salesperson at all. Customers can simply make a few telephone calls or search the Web and buy the cheapest product or service they can find. Then all a company needs is order takers. Forget about value adding, partnering and becoming a true consultative salesperson. If that’s your situation, the reality is that a salesperson’s career and income hinges solely on the price of goods and services sold, which literally could boil down to pennies.

So how does a salesperson deal with this issue? The sales managers we interviewed both agreed not to cave in on price but to get to the crux of why customers are obsessed with negotiating a better deal.

Joe Poche, vice president of marketing and sales for physician management information services in Denver, CO feels that if this is a recurring objection, then the salesperson is not paying enough attention to the customer. This violates the first rule of sales, which is listening to the customer.

“Salespeople have to listen and if they’re talking more than 25 percent of the time, they’re talking too much,” Poche says. “Language can be misunderstood and misinterpreted and salespeople need to recognize that what they think they’re saying is not what the customer is hearing and that can lead to confusion.”

“The customer needs to outline exactly what their expectations are to make sure that we know what they want us to do,” Poche says.

You have to listen on a continuing basis and make sure you stay in contact to determine if their needs change. You need to have some special time set aside to interact with them to make sure they understand the value of what they’re getting.

Give them a call, drop them an email and become a value-added resource.

Certified professional coders
“Vendors not only have to listen to the customer, but also look at the market to determine what is really fair pricing. We had a situation where we had a client who signed a three-year contract for medical coding and the first year we actually lost money, the second year we covered our expenses and the third year, we made money because he grew so much. We decided to renegotiate the contract at a lesser rate. It was the fair thing to do and we established ourselves as a true partner.”

If the salesperson is facing a price objection, Poche’s bottom line is that they haven’t communicated enough with the customer and sometimes it’s work to “bring in the big dogs.”

“Salespeople need to let the customer know that they want to be partners and that the customer’s success and their success are tied hand in hand,” says Poche. “You owe it to your customers to come back to them with direct answers and specific proof that justifies your price based on their needs. We do comparables, just like it’s done in real estate.”

“Bring in the boss and meet with the customer to identify exactly what is going on and show them that you care enough about the relationship to bring in the principals,” Poche says. “It’s not coincidental that Ross Perot and Mort Meyerson of EDS did the sales pitch to General Motors. Sometimes it’s the meat in the game and the dog in the hunt.”

“Continually reemphasize the benefits that you’re bringing to the table and the value added that you’re providing them and the fact that you’re leveraging the resources,” Poche says. “If our doctors don’t get paid, we don’t get paid.”

Let’s switch gears. Suzie Brown is the global vice president of sales development for the Valassis Corporation, an international advertising and marketing corporation. When it comes to a price objection, she says, salespeople need to understand the reason behind the desire to drop price.

“Reverify the requirement. Is the price changing because the requirement has changed or is it because of other factors?” Brown asks. “For example, if I’ve sold someone a Cadillac in the past and now they only need a Chevette, then the price for what they need could come down. Now we’re talking about different deliverables.”

Once a salesperson has verified that the need is the same, they have to dig deeper to find out what the competitive environment is and also reverify the customer’s values.

“Determine if there is an external competitive threat. Or has something changed inside the customer’s company and, if so, what?” says Brown. “Salespeople need to know if personnel have changed, if the budget changed or if the company direction changed.”

“The key is that the seller needs to align with the buyer,” Brown adds.

“Reconfirm what the customer values. If they value service, civility and scalability, then match what you’re delivering to what they value, because that may have changed,” Brown says. “It’s not just about the product or service, it’s also about the intangibles.”

“In our case there are things that we don’t necessarily charge for and are value added,” Brown says. “But salespeople need to keep in mind that value-added benefits are only valuable if the buyer views them as such. I can build all kinds of things either into my relationship or my deliverables but if the customer doesn’t care, then yes, I might be able to bring my price down.”

According to Brown it’s the salesperson’s duty, especially in ongoing relationships, to quantify, in dollars and cents, the value of the intangibles they deliver to customers at all times.

“As salespeople we get really comfortable and not as diligent as we should be in terms of quantifying the services that we deliver and making sure that the customer really understands all of the value-added things that they receive,” Brown says. “Even if it’s the stripped down model, they still get added value.”

“Salespeople need to continuously reinforce the value of what they’re selling. Make sure that the customer knows that here are the last five things we did for you and if you had purchased these kinds of services, here’s what they would cost,” Brown says.

What’s Brown’s Bottom Line?
“At the end of the day it all comes down to what are you delivering to the customer and what is that thing doing for them and their business…that’s all they really care about,” says Brown. “If you’re getting a continuous price objection, their parameters may have changed, your product or service may not be performing at the level they want it to and it’s the salesperson’s job to figure out how to get it back the way it originally was.”

“It’s all a matter of realigning with the buyer and determining if it is a mutually beneficial relationship,” Brown says. “It may turn out that the total cost of ownership of that customer is just too high and it’s better to simply walk away.”

“That frees you up to work on deals that are more profitable,” Brown concludes.

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