Close the Sale: How to Overcome Price Objection
Imagine the following scenario. After a few meetings with a prospect during which you examined his current situation and analyzed his needs and future goals, you developed and presented a four-step approach for what you believed to be the best fit solution to meeting his challenge. The investment necessary to obtain and implement your solution is $12,800.
The prospect, while impressed with your solution, commented, “That’s a bit more than we expected to spend. We were hoping that we would be looking at something around $10,000.”
What would you do?
Some salespeople react to price objection by immediately reaching for the calculator and computing the various costs associated with the solution. Then, they rework the solution—perhaps, in this example, by cutting back on or eliminating one of the four steps—in an attempt to bring the total cost closer to the prospect’s number. While they might succeed in narrowing or closing the gap between the prospect’s expectation and the originally proposed cost, they also succeed in creating a gap—a credibility gap.
If the scaled-back solution does in fact meet all of the prospect’s needs, then the prospect is likely to view the first solution as excessive…and overpriced. However, if the first solution was indeed the best fit, then the second solution will be viewed as inadequate—not a “best fit” (and not in the prospect’s best interest).
Scaling back the solution and its cost may occasionally “save” the sale…and your commission, but it will be at the expense of your integrity, which will adversely impact any future dealings with the customer. And, if the scaled-back solution doesn’t completely satisfy all of the prospect’s needs, you’ll have an unhappy and short-lived customer. Neither situation is ideal.
Other salespeople respond to price objections by attempting to “negotiate” the price. They also reach for the calculator, but only to rework the numbers…not the solution. Typically, they will present all the evidence available to justify the cost, and then attempt to get the prospect to increase his number. It might sound like: “Tom, I realize $12,800 is a bit more than you expected. Suppose I could get the number down to $11,500; could we strike a deal at that price?”
You may save the sale, but again, it will be at the expense of your integrity. After all, if you can provide the solution at $11,500, why didn’t you present it at that price in the first place?
So, is there a better strategy for handling price objections?
The best strategy for “handling” price objections is to eliminate the likelihood of its occurrence in the first place. Before working on solutions, get a sense of the prospect’s expectations, allocations, funding, or budget—whatever is appropriate for your type of product or service. You might ask, “Is this project funded?” or “Is there an allocation for the acquisition?” or “Is there a budget range you’re shooting for?” If the prospect’s answer is “yes,” you can ask him to provide you with a “ball park” number or share the amount with you in “round numbers.” You’re not looking for an exact number. You just need a sense of where the prospect will be comfortable. You might also check out this blog post on some good script suggestions on responding to budget objections.
What do you do if a budget hasn’t been established and the prospect has no concrete budget expectations? Based on your experience and knowledge, you can suggest a range within which an appropriate solution might fall and ask the prospect if he can be comfortable with an investment in that range. If there’s going to be any pushback on price, you want to find out as soon as possible.
Also, make sure you’re not attempting to solve a problem that doesn’t actually exist. Let’s revisit the previous example. The prospect said, “That’s a bit more than we expected to spend. We were hoping that we would be looking at something around $10,000.” Was he actually objecting to the price…or simply reporting that his expectations were less than the quoted number?
If your solution was, in fact, a best fit, and your pricing was fair, you can stand by it. Your response to the prospect might be, “Tom, I suppose I could scale back the solution to meet your investment expectation, but I wouldn’t be giving you the best fit solution.” Not only do you maintain your integrity, but also the “pressure” is now on the prospect to decide if a less-than-best-fit solution is acceptable…or if he needs to adjust his expectations.
Also, by sticking to your solution and its associated “price tag,” you open the door to more creative ways to resolve the number “problem.” Perhaps you can phase in the four-step solution over time so some of the cost can be allocated to a future budget. Lease and lease-to-own programs may be appropriate for certain types of products.
Most price objection situations at closing time can be eliminated by simply dealing with all investment issues early in the sales development process. The time to have a discussion about “price” is before you invest your time and energy crafting a solution. Information about the prospect’s budget expectations should be one of the building blocks for developing an appropriate solution, not a roadblock to closing the sale.
Need more ideas on closing 2015 out with a bang? Click here to download this free offer.