Posted: Mon 23rd Jul 2012
Recently a consultant friend of mine mentioned that his daily rate he wanted to charge a new client was rejected as "too expensive", writes Andy Preston (pictured left). He went on to say he was a bit surprised, as he doesn't normally get that kind of reaction. Now I know this consultant well, and I know that he's good value for money, but what was most interesting were some other reactions to this. One person commented: "You can't be too expensive. You're value for money. They must have cashflow issues!"
Now while I would agree the consultant concerned is most certainly value for money, there are four quick things we can learn from the other person's comment.
The problem I see here is that I think you can be too expensive. One of my favourite sayings when it comes to sales, and pricing in particular, is that people's beliefs are reality to them. What I mean by that in this example is that if someone says "that's too expensive" it may be that in the moment they do consider you too expensive - as long as it's not a negotiation tactic to bring your daily rate down of course. Now of course there will be some context behind them saying that. They might think it's too expensive compared to their budget. They might think it's too expensive compared to what daily rate they've paid in the past even for other roles. They might think it's too expensive compared to what they were expecting to pay. However, unless you deal with the fact that right now they consider you too expensive, it's unlikely you're going to be able to turn this around and win the work at the daily rate that you want. Fail to change their belief and therefore their reality and you'll fail to pick up their business.
If someone says to you that you're too expensive, make sure you don't dismiss them and the sales opportunity too quickly. As an ex-sales director, I often used to hear my team come back from new business appointments with excuses like "they weren't ready to buy", "they didn't have the budget", and "our price was too rich for them". My response was usually something like "Ah, so you failed to deal with their price concern then?" My belief is that the majority of the time, a price concern or price objection is normally the salesperson's fault, not the prospective customer's:
- It might be that"¦. the prospective customer doesn't see enough value in hiring you to think it worthwhile paying the daily rate you ask for. So it's your fault for not positioning your value to them correctly.
- It might be that"¦. the prospecive customer doesn't have the budget to pay the daily rate you want - your fault for not finding that out, or speaking to the person, who can make a new budget.
- It might be that"¦. the prospective customer has bought a similar product/service in the past and not paid anything like the daily rate you want to charge them now - your fault for not finding out their buying history and positioning correctly against it.
- It might be that"¦. the prospect won't see enough value from hiring you in order to generate return to justify the fee you want - your fault for not qualifying the sales opportunity well enough in the first place.
How many of the above are you guilty of right now?
One of the biggest reasons people get price objections is that the price they want to charge isn't what the prospect was expecting to pay. This often occurs when the consultant fails to find out, manage, or on some occasions set, the price expectations of their prospective customer. In the old days, sales managers used to lecture their reps "make sure you get the customer's budget before talking about price!" While back then that was pretty solid sales advice, these days people don't always have budgets. They don't always have cash available right now. But they always have price expectations - and if you don't find out what they are, re-set them if necessary or even set them in some circumstances - then you're always going to struggle with objections to your price. How well do you set prospective customer's price expectations currently?
Another reason I find consultants come up against price objections is that often they're sat in front of, or speaking to, the wrong people. People that may not have the money to be able to pay the price the consultant wants to charge, or have the authority and ability to find extra money if necessary. This is usually caused by a failure to qualify well enough or hard enough earlier in the process. This often results in the consultant spending lots of their precious time dealing with people that aren't able to buy what they offer at the price they want to charge. Often this leads to the consultant becoming frustrated, having to walk away from deals, or heavily discounting just to win the business - none of which are good outcomes for the consultant. If you take these tips into account when making sales, you should find that you start to make more sales at the price you want.
Photo credit: Banalities