The Price Objection

When was the last time you made a purchase solely based on price? You haven't and I doubt you ever will. Your customers don't either. Yes, I certainly agree that price is very important, but it's usually six or seven down the list of importance. Variables within the purchasing decision that may precede price include size, color, delivery, warranties, availability, after-sales service, quantities, terms and conditions, and so on.

Price objections are the easiest and most common—they have become a very natural and predictable part of the call. Sales entrepreneurs expect them. It's as if customers have been trained or conditioned to raise the price objection during every sales call. Part of the problem is that the retail community bombards us with advertisements and promotions focusing on price. We've all heard "We won't be undersold," or "Our price is the lowest, it's the law," or "If you find it cheaper we will pay you twice the difference." Every time you pick up the newspaper, read flyers, see TV commercials, listen to the radio, or stroll through your local mall, it's PRICE PRICE PRICE. No wonder when we arrive at our customers' offices they scream, "WHAT'S YOUR BEST PRICE?" Simply respond by politely asking your customer to refrain from watching TV commercials, reading newspapers, or listening to the radio ever again. It seems to be more of a conditioned, automatic response than a legitimate concern.

"You get what you pay for." This cliché has been around for decades but the message seems to be overlooked by some customers. There will always be customers who have convinced themselves that a low price is their number one priority. However, my sense is that more and more customers are appreciating that price is only one small component of the sale. To support my point, I share with you a comment from economist John Ruskin.

It's unwise to pay too much ... but it's worse to pay too little. When you pay too much, you lose a little money . . . that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot—it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run. And if you do that, you will have enough to pay for something better. (John Ruskin 1819–1900)

What impresses me is this was written before 1900. The rationale underlying his theory hasn't changed in 100 years.

Zig Ziglar offers this explanation in support of a competitive price: "Our company made the decision to explain a higher price once rather than justify poor service and quality several times." Great line. I tell my students, "You only cry once when you pay a higher price."

What is a competitive price? Research tells us that customers will pay 8% to 12% more for perceived value. Customers will put their money where their mouth is if you deliver a value-added solution—but anything over 12% and the customer may resist. For example, if your competition is priced at $1,000 you can charge $1,120 and still be considered competitively priced ($1,000 + 12%). Anything above the 12% may be too aggressive. Hence, your objective is not to match your competition at the $1,000 price but rather to price it higher due to the value you created. As a consumer, I'm sure that on more than one occasion you paid a higher price because you appreciated the service and attention you received. Your customers are no different.

The best advice I can offer is that price should not be discussed during the Discovery or Confirming steps of your Sequential Model. Price is an issue you negotiate. Don't sell it. What I mean by "selling it" is that salespeople often try to confirm the sale by focusing the conversation on a discounted price. Sell a value-added solution during the call, not a price solution. Don't make price the focal point of the call.

Understand the difference between price objection and price resistance. Price objection is a matter of clear opposition to your price—I can't pay it, or I won't pay it because we have limited funds, and so on. Price resistance suggests your customers have the capacity to withstand or tolerate your price. They may not like it initially, but they will pay it. Salespeople often respond to price resistance by immediately offering to lower it. Wrong thing to do. Try to focus on building value instead of reducing the price. Rarely is the sale based solely on price, so don't become an order-taker, getting the sale on little more than your good looks and a cheap price. Customers buy based on their perceptions of the overall value you present. So, how do you create a high perceived value? I think William Brooks answers that question succinctly in his book, Niche Selling. He offers the following formula where V is value, PB is perceived benefits, and PP is perceived price:

V = PB/PB

This formula clearly shows that the higher the PB, the higher the value: V increases as PB increases and PP decreases. For example; if we have a PP weighting of 10 and a PB weighting of only 5, then V=0.5. However, if we inverse the numbers where PB=10 and PP=5, our V=2. The first example where V=0.5 tells us that the focus was on price (PP=10). Our second example, where V=2, the focus was on selling benefits, thus V was four times greater than in the first example.

Next time your customer says, "Yes, but what's your best price?" this is what he really means; "You did a good job here today Bernie. That was the best feature dump I've seen this week. However, you have failed to sell me anything of value so I have no option but to create value myself. The only way I can do that is by hammering you on price. If I get you down low enough, then maybe I'll see some value and buy from you." When you fail to create value, your customer tries to do it by way of a low-low price. Not a good way to sell. As one sales manager said, "The day we are the cheapest price is the day we sell this stuff by direct mail." Let's stop this order-taking stuff and focus on selling true value to our customers.

Consider this: When you pitch features, telling versus selling, the customer sets the price. When you present benefits, a value-added solution, you set the price. It's your choice.