Q: Here’s an objection that all sales reps have to deal with at some point in their careers: your price is too high and I want a discount!
Most of us are pretty good at answering that one, but occasionally a client comes along who seems to feel that getting a discount is a cornerstone of their job description. So how do you handle the dreaded price objection when the client just won’t give up?
Speaker, trainer, consultant, and the Founder and President of Engage Selling Solutions, Colleen Francis, has made it a practice to study the best ways of handling almost every client objection, and she’s here to share what she’s learned with us. Colleen, thanks for taking the time to speak with us.
Colleen Francis: My pleasure. Thanks for having me.
Q: Okay, Colleen, this topic actually came to us as a question from Laura, a sales rep in the Boston area. Laura feels she is lacking the skills needed to deal with the price objection, especially when her customers push back and insist on getting that discount. She wants to know what successful negotiators do to get the price they want, yet still make their customers feel like they’re getting a good deal.
Colleen: That’s a really great question, especially these days, when it seems that more and more sales reps are often forced to negotiate at the end of a sale. To assist our clients in dealing with this, we’ve developed a simple five-step process to help them improve their negotiation skills.
As a sales professional myself, I found that negotiating was often a frightening prospect. It’s actually quite horrific for a lot of sales reps, until they learn the process that they need to follow. Once they understand what those five steps are, they have a great deal more success and their fear of negotiating usually goes away.
The first and perhaps most important step is to make sure you’re in the right frame of mind. Most sales reps fail in their negotiations simply because they don’t really believe that their product or service is worth the price they’re charging. When this happens, they tend to sympathize too much with the customer, so they go into the negotiation with the attitude that the customer probably should try to get it cheaper somewhere else.
In order to be a successful negotiator, you have to truly believe that your product or service is worth every penny you’re selling it for, and that your customers would be getting a great deal even if they buy it at full price. One tip we give our sales clients is to think back to the last time they sold their product at full price, then write that customer’s name down on a piece of paper and put it up somewhere in their office where they will see it every day. By reminding yourself that “XYZ Company bought at full price,” you can ramp up your confidence and trick your brain into helping you sell at full price again.
The biggest mistake a sales rep can make is to offer a discount up front when the customer may not even be looking for one. There are always customers who are willing to pay full value without negotiating. So step number one is to get – and stay – in the right frame of mind.
Step two is to simply hold firm. This is the most difficult part of any negotiation process. However, it is also the most effective.
When a customer asks for a discount, we encourage our clients to respond by saying: “Hey, I can understand that price is an issue. It’s great that you’re looking for the best price for your company, and you need to know that we’re giving you the best deal possible. There is no way I can give you a discount.”
We’ve found that about 40 per cent of the time our clients say this, their customers tell them that they “just had to ask” and then agree to pay full price.
Q: What about the other 60 per cent?
Colleen: Unfortunately, there are those other 60 per cent who are going to keep pushing for a discount. This brings us to step number three. This is the point where many sales people start to panic, so it’s important to stay calm and push back at least one more time.
What I recommend is for sales reps to take their clients back through the whole process that brought them to this point. Remind them of all the blood, sweat and tears that went into putting the sale together, and make them feel that sweat for themselves.
The idea is to try to make the customer realize, “wow, I’d hate to see this deal fall apart just because we can’t come to terms on price.” You want them to understand that you knew they’d be a tough negotiator, and that’s why you gave them your best price right up front. Then you can ask them: “If I can’t give you a better price, does that mean there is never a chance we are going to do business together?”
In general, another 40 per cent of customers will give in at this point. That translates into around 80 per cent of all those customers who asked for a discount agreeing to pay full price, just because you stood firm and pushed back twice. It’s a very, very difficult thing to do. I recognize that. It’s easy to start to panic and convince yourself that you need to do anything to bring in some revenue or meet that end-of-quarter quota.
It is, however, much easier to stay tough if you’ve done your prospecting and your pipeline is full of potential business. If you have five or six other deals in the works, or if you’ve already hit your numbers for the quarter and this sale would just be gravy, it’s a whole lot easier for you to push back and say: “I’ve done everything I can. You understand the value of the product. There is simply no more room to move.”
The fact of the matter is, a very large percentage of customers just try to make it difficult for us in order to make certain that they’re getting the best possible deal. That’s why it’s so important to remain calm and stand firm.
Q: If they’re still pushing back, do you have some way to continue the sale anyway, and make the customer feel like they’re getting a good deal without having to give them a discount?
Colleen: Even with 80 per cent of customers now willing to pay full price, you’re right; there will always be those few who say: “I don’t care about all of that nice stuff up front, I just want my discount.” So in step four, I encourage sales reps to try to give the customer something other than a reduction in price.
For example, instead of giving them 10 per cent off the price, offer to throw in an extra three training manuals, provide free online training or send a consultant to work onsite to help them get up and running. The key is to find something of real value to the customer that doesn’t actually reduce the price.
Now, I know some people will say: “You’re giving away free stuff anyway, so what’s the difference?” The difference is that you are still maintaining the price integrity of your product.
What you want to do is sit down at a time when you’re not in the middle of a heated negotiation and decide what you are willing to give to customers who insist on getting a discount. I use a negotiation checklist that I’m happy to share with your listeners or anyone who wants to e-mail me and ask for it. It’s a simple Word document that helps a sales team sit down and brainstorm ideas for what they can give to customers who keep pushing for a discount they’re not willing to give.
Q: Just to let everyone know, if you’d like a copy of that checklist, Colleen’s e-mail address is sales@engageselling.com. Okay, say we’ve followed all the steps you’ve outlined here and our customer still won’t budge from wanting that discount. What do we do then?
Colleen: That’s going to happen around 10 per cent of the time. In some industries in today’s economy, we’re even seeing that happen as often as 20 per cent of the time. If that’s the case and you find yourself forced to give in and give them the discount, then the key to step number five is to try to get something from them in return.
For instance, you might offer to give them the discount in exchange for a testimonial or letter of reference. Or you might be willing to give them a discount in exchange for paying cash up front. Or maybe you can offer them that 10 per cent discount if they’ll place the order today, or buy two items instead of one, or agree to pay the full amount for the project before the work begins. The main thing is to never give away a discount without getting something in return, because when you do that, you’re setting a precedent that will lead your clients to believe they can always get something from you for free.
Again, this isn’t something you want to have to come up with in the middle of a negotiation. That’s where the checklist comes in handy, because it lets you decide what you’re willing to give away and what you want in return without being under pressure to come up with an answer right this second.
The answers will vary from company to company and even rep to rep, depending on the situation you’re in. If you’re dealing with a large Fortune 100 company, maybe what you’d like most is an introduction to their VP of Marketing or the head of another department within the company. Every time you negotiate, the list is going to be slightly different. The key is to ask for things that are valuable to you, whatever that may be.
Of course, the very last step is to get the customer’s commitment. Tell them point blank: “I don’t know if I can get you that discount. I understand it’s important to you, so let me go back to my management. If I can get it for you, then is it fair to say that you will place the order today?” Or you might say: “I don’t know if I can get you that discount. What might make it easier for me to sell it to our management is if you could have a testimonial letter to us by a certain date?”
This is what some sales trainers like to call a “trial close.” What you’re doing here is saying that, if I can do this for you, will you do that for me? And you’re getting them to verbally commit to making the deal.
Q: Colleen, you’ve given us a great process here. Now it’s up to us to put it into practice and get comfortable with it!
Colleen: Yes, as with any sales process, the key is to get thoroughly comfortable with it.
The first step we talked about is something you need to work on constantly throughout your sales day, sales week and sales career. The other four steps take place during the negotiations, and they can be very easy and very effective provided you are committed to them and work on them in an objective, measurable way.