Do your salespeople wait until the customer asks them what the price will be for your product/service/solution?
Is your salesperson’s proposal the first time that your customer sees your pricing?
How does your ‘potential’ customer react?
If you’re like many leaders who share that pricing is discussed/presented at these two junctures for the first time, you will know that a ‘sticker shock’ “how much?!” or “that is more than we had budgeted for/thought it would be” reaction from the potential customer is pretty typical.
That’s when and why many of your opportunities end up in ‘negotiation’…sometimes known as ‘discounting’.
And, it’s because your salesperson hasn’t pre-framed or pre-conditioned the price conversation effectively or early enough in their sales conversations.
Here are some thoughts on how to avoid this negative customer reaction – qualify out poor quality opportunities earlier, mitigate discounting and win more deals at full price.
If you or your salespeople are leaving customer calls or meetings without an idea of how much the customer is thinking of investing/what their budget is, then you or your salespeople are in the business of mindreading not selling.
I say this to you intentionally, in my experience, many leaders are shy or don’t know how to artfully ask about budget or expected levels of investment either. This is a case of you needing to model the behavior you want and expect of your salespeople.
Your potential customer will have a budget (or they may not), a range of investment in mind, or their own preconception of what something will cost (their own version of mindreading over which you have no control until you understand how they came up with that number).
You and your salespeople need to:
Qualify and establish early on* which of the above is the case and;
If there is close parity between your price and what the customer is thinking of spending/investing
It’s at this point that you will establish/qualify if there is an insurmountable gap between their budget, their expectations of investment and your price – or that you are aligned and the sales motion can continue.
Here are a couple of ways of asking for the budget with good EQ (emotional intelligence).
"May I ask if this is a budgeted initiative?"
If yes: "Can I ask what your budget is?" (You may be pleasantly surprised when they share. And if they’d rather not, see the "Sharing a Budget Range" sections below)
If no: "Do you have a sense of what will be available for this project?"
"Is there an established budget for this project?"
If yes: "Great, can I ask what your budget is?"
If no: "Do you have a sense of what will be available for in this project – and where it will come from?"
"What level of investment do you have in mind for this initiative?"
If they share: You’ll know if you are in the right range
If they’re not prepared to share or ask you to share: see the "Sharing a Budget Range" sections below
Sharing a Budget Range (when they won’t share their budget with you)
If the customer is NOT comfortable sharing their budget or investment range, you or your salespeople can use this as an excellent opportunity to qualify the opportunity out or in, before you invest the time writing a proposal that youhopewill get pushed through – saving you time, energy and money and allowing you to focus on high probability opportunities instead.
Use this response to decide if there is an opportunity or not.
Client is not comfortable sharing budget: "I perfectly understand. And, so that you can decide if we are in the same ballpark, may I share an investment range with you so that you can decide if you want to keep the conversation going…or not as the case may be?"
Client will say yes: "When working with other companies who are looking to achieve the results you are looking for, they will invest between, $X, $Y and $Z."
"Can I ask if you can see yourself investing somewhere in that range?"
If yes, clarify by asking if the budget is closer to $X, $Y or $Z (provide 3 numbers so that they don’t anchor on the lowest of 2 numbers). You can even ask if they then have a specific number in mind after going through this sequence and they will often share the specific budget amount. Magic!
If no, ask if they were lower or higher and where that number came from. (If lower, it may be all that’s left in the budget and you can determine if you want to de-scope the solution to meet that or part as friends. If higher, you may want to clarify how they got to that number and determine if there are additional elements you could bring to the solution that you hadn’t considered. Or perhaps, just have a delighted client who is pleasantly surprised.)
Sharing a Budget Range (when they don’t have a budget or know what their budget is)
If the customer doesn’t know what their budget is (warning: you are most likely not speaking to the ultimate decision-maker), you can still share a budget range to see if the opportunity is worth pursuing.
Use this response to decide if there is an opportunity or not.
Client doesn’t have a budget or doesn’t know what the budget is: "So that you can decide if we should keep the conversation going or not, may I share an investment range with you?"
Client will say yes: "When working with other companies who are looking to achieve the results you are looking for, they will invest between $X, $Y and $Z."
"Can I ask if you can see yourself investing somewhere in that range?"
If yes, clarify by asking if the budget is closer to $X, $Y or $Z. You can even ask if they then have a specific number in mind after going through this sequence and they will often share a specific budget amount.
If no, ask if they were lower or higher and where that number came from.
If “I will check with my boss” or “can you send me a proposal to share with my boss,” then it’s time to ask for a meeting with their boss.
Client: “I will check with my boss.”
Your response: "Great. If you’re excited by this opportunity, it would be great to get your boss's input and perspective on this as well – so that he/she feels emotionally engaged too. To minimize the risk of getting a ‘not invented here’ reaction, can I ask that you set up a meeting and together you and I can share what we’ve covered today, get his/her perspective and then talk about level of investment face to face?" (Asked this way, this request will usually result in an introduction to their boss.)
Client: “Can you send me a proposal to share with my boss?”
Your response: "Hmm. Before I write a proposal, may I share a concern? Research shows that when people are presented with a proposal that they were not involved in, there is a strong “not invented here” reaction and there is only a 17% probability of them agreeing to the proposal. That’s because a proposal is a logical document and yet people make decisions based on emotions. If you’re excited by this initiative and want to avoid the “not invented here” reaction, can I ask that you set up a call/meeting with your boss so that he/she gets engaged and sees his/her fingerprints on the proposal and his/her words reflected in the document when you and I present it?" (Asked this way, this request will usually result in an introduction to their boss.)
This is how salespeople of my clients structure their pricing conversations.
How do you rate your salespeople’s pricing conversations in comparison?
If you or your sales team have been struggling with pricing discussions or issues for more than 30 days, it’s time to get outside help. Give me a call.
*Early on: after you have guided the customer to articulate the outcomes/impact/results they want to achieve, ideally with their estimation of the $ value of achieving those.