Episode #184: Dealing With Price Resistance

Pricing is usually set by the boss and salespeople are just there to get out and sell at that designation. The trouble though is salespeople are not convinced by any price setting methodology. They only believe in the reality of the market. The way they know the reality is the degree of pushback they get from clients, when they are trying to sell.

When you have no belief in the value backing up that price point, your ability to sell at that rate is simply squashed. You default to discounting to get a small piece of something, rather than a very large piece of nothing.

The crunch point is the sales price negotiation with the buyer. If you have gotten into the death spiral of last minute discounting, in order to move the product or service, you have now trained the buyer to extract the biggest possible discount every time.

Instead, give them an ultimatum on price and a very, very short fixed time to take it or leave it. In the meantime, call another potential buyer. If you have not built up pipeline for your sales, then you are always going to be vulnerable to price collapse.

If you discount once and then imagine that by telling the Japanese buyer this was a once in a lifetime opportunity, a spectacularly rare alignment of the planets, which will never happen again in their lifetime, a never to be repeated offer, you are kidding yourself.

Don’t miss this. In Japan, as soon as you drop the price, you are now locked into that price point with that client forever. It is not impossible to go higher but it is very, very hard to pull that one off. You have to be ready to drop the buyer entirely, to restore your price point validation.

The equation here isn’t just with the buyer, it is with the salespeople as well. By dropping the price we tell them that this is all this is worth and they believe it. They cannot push the price back up, because they don’t see it at that level either. The company leadership has to intervene and say “burn that buyer if they won’t accept this price”. Be prepared to lose their business. If we do that, then the salespeople will get religion about the pricing validity.

When we are haggling over the price with the buyer and they say that, “this price is too high”, “that is out of our budget”, “we can’t afford it at that level, ”can’t you drop the price”, “we never pay that much”, etc., we are in a bind. We want the sale, so we immediately go into discount mode. This is a big negotiating mistake.

Don’t fold on the price pushback. What we should be doing is defending our price. We don’t do that by arguing with the buyer. We don’t do that by force of will. We do it by trying to better understand the client’s situation. Often salespeople stop asking questions at this critical juncture and instead go into high energy “tell mode”. They start telling all the good reasons why the buyer should pay the requested price. This won’t work.

Firstly, don’t start your response by arguing with the client. Instead agree with them. We can say, “You are right and I understand it is a considerable investment”. If we disagree with them, they stop listening to us and start thinking about all the reasons their “too high” statement was correct.

While we have their attention, we have to transition and question the buyer as to why they made that comment. “You just mentioned the price was too high, may I ask you why you feel that way?”. We avoid arguing and instead of us having to justify the price, we now need to switch it. After you make that comment do not speak.

In this process of further explanation by the buyer, we pick up very valuable insights into the client’s situation. Armed with more data and insight, we may be able to come up with a flexible solution that is a win-win for both of us.

We may in fact discount the price. We might give them longer payment terms or structure the payments across two quarterly budget periods. We may offer the discount on the basis of a volume purchase.

All of this sounds simple enough, but when salespeople hear “the price is too high” they go blank and forget the basics. The job of the salesperson is to serve the client and that means to clearly understand the client’s situation. The only way to do that is to ask questions. It is not to be annoying, pigheaded, stubborn or inflexible. Quite the opposite. We are here to solve the client’s problem and we have to do that in an arrangement, that is a win-win for both of us.