"Your price is way too much!" We've all been told this many times, no matter what we are selling. I sometimes feel that no matter what my price offering is, my prospect will tell me that it's too much. It's like a knee-jerk reaction they are taught to respond with. Maybe they really are trained to do this? After doing some research, my theory is that every consumer reacts this way and should act this way, even you and me. What I found is that we are psychologically conditioned to react the way we do whenever we see a price and for pretty much anything we buy. Let's take a deeper look into why this is.
The Price Realization Gap
Let's be honest, customers never pay MSRP. The prices that consumers see in catalogs, websites, car stickers, shelves, or quotations are hardly ever the costs that we actually fork out. Pricing experts call this gap between asked-for prices and the actual price that is paid, the "price realization gap." What is actually paid is referred to as the "pocket price." This gap is found in every industry across almost every product and service out there.
The main reason for the price realization gap is that sellers give incentives to customers in different variations in order to make the sale. This could be due to a highly competitive situation, an end of quarter deal, a new product release, an inventory control mechanism, or perhaps you need this particular sale to hit your bonus! Regardless of the reason, consumers are trained to believe that the price shown is only "suggested" and the price we actually pay will always be lower.
Did you know that 85% of Americans use coupons when buying groceries and packaged goods? On top of that, when we check out at the grocery store, we type in our phone number and additional dollars magically disappear. If you are buying a car, popular sites such as Kelley Blue B0ok, Edmunds, and TrueCar provide you the "fair purchase price" and with a couple clicks you can print out what you really should be paying, take it to the dealership and slap it on top of the sticker and say, "this is what I will pay, take it or leave it!" Doing some online shopping? Retailmenot gives you discount codes to use at the checkout for tens of thousands of online retailers. It goes on and on and on.
So what has this all done? What's n0w happened is that there is no single fixed price for really anything anymore. The posted price for a product or service simply translates to the highest possible price someone could pay for something. You are basically a sucker if you pay it! So you can't blame your prospect for their response that your price is too high, it probably is in most cases unless you come out of the gate with all your discounts & incentives up front. We are psychologically trained to react the way we do whenever we see a cost for something so don't let this irritate you when you hear it from your prospect.
With that said, what should we do as salespeople when we get the price is too high objection?
4 Ways You Should Respond:
1. Silence!
First thing you should do is take a couple seconds before you do anything. This gives you a chance to gather your thoughts but more importantly opens the door to the prospect explaining their justification. A couple seconds of silence typically prompts someone to start talking and if it's the prospect, it could be highly beneficial as they may provide you a lot of key information you can work off of.
2. "Give / Get"
When customers ask for a discount, ask what they would be willing to give up. This will align with selling based on value and not on price. For example, if your product or service has lots of different features, find out which ones they would be willing to forgo in order to get a cheaper price. If your product is bundled, un-bundle it if you have to. Too often salespeople do what is called a "unilateral concession" which is when you give a concession without getting anything back in return. This makes it look like you were over-charging your customer in the first place.
3. Ask Questions
It's important to understand where the customer is coming from and asking the right questions will help you get to the root cause of the objection. Here are some great questions to ask:
Too expensive compared to what?
Have you found a less expensive solution?
How much higher are we?
What price were you expecting?
Are you referring to the initial purchase or the long term cost?
Is price the only thing in the way of you signing?
Is there a specific ROI % that you are trying to hit?
4. Customer References
A great way to counter this objection is to reference 3 or 4 of your customers who are of similar size, same industry, dealt with the same challenge, and felt the same way. Nobody is going to be able to sell your customer better than another customer. Get them on the line with this other company and let them share their story and their results. Follow up w/ an email of several case studies of additional customers that highlights the ROI they received from using your product or service.
Final Thought
Remember, it's never really about the price, it's all about the perceived value. Customers purchase products and services to solve business problems and achieve results. Tie everything back to value or you risk commoditizing your offering and eroding your margins.
Find this article interesting? Check out more blog posts by James Purvis about "negotiation"