Now let’s talk about negotiation:
Most price objections are value objections
What your client might mean when you get a price objection
The goal is to understand what your client really wants
Don’t cut your price for a proof of concept, and don’t cut your price unless you’re getting something valuable in return
Smart buyers ask about price out of instinct, out of principal, if only because they’ve been taught that the first offer isn’t real anyway.
This doesn’t mean they’re not going to buy. It also doesn’t mean they’re not going to buy at the first-quoted price. Price objection isn’t always about the price, but rather, it often means something else. That’s why a prospect objects on price, don’t become defensive or resort to discounting. Instead, ask questions and listen. Explore, with the prospect, how your product or service will impact their business economics.
People know you are in business to make money, but no one wants to feel like they are being screwed over. If your margins are reasonable and you explain your costs to potential customers, they shouldn’t have an issue.
Mentioned In This Episode:
For more information on remote selling and a complete list of links mentioned in this podcast, visit this remote selling article on our website.
Negotiating Price, Don’t Negotiate Price:
The stakes of your negotiations can feel really high. Your blood pressure may go up. You may get slightly nervous, or maybe the opposite. You feel adrenaline pumping through your veins. You are ready. What’s for sure though, is that the stakes of your negotiations are never as high as the stakes of a kidnapping. In a series of kidnappings in Haiti, people were taken repeatedly on Mondays and held for ransom. The FBI was there to negotiate, and they noticed that the level of threats escalated with each day that passed. To begin with, the kidnappers started with threats like, “Give us the money, or your aunt is going to die.” As days passed, threats gotten much more specific, suspiciously exact even. After a few kidnappings, it became clear that the kidnappings had no large ulterior motive. They were not politically motivated whatsoever. Instead, they were done to finance a bender.
That’s right, the kidnappers were just trying to raise enough money to party over the weekend. Sure they wanted money, but more than anything, they wanted to have a good time. When the FBI figured it out, they did two things. One, they started holding out for lower payments, and two, they could gauge the right time to negotiate based on how specific the threats were, and how close they were to the weekend. That true story comes from Chris Voss’s book, Never Split the Difference, and it should teach you a big lesson about negotiation.
What the other person wants isn’t necessarily what they’re asking for. The key to a successful negotiation, one where everyone gets as much of what they want as possible, is to understand the other party. Understand before you make concessions, before you cut the price, that’s what we want to do. And in today’s podcast, I’ll give you some ideas about how to negotiate on price, and here’s a spoiler, don’t negotiate on price at all.
Welcome to Modern Sales, a podcast for entrepreneurs, business owners, and salespeople looking to have more and better conversations with your perfect clients. You’ll get a healthy scoop of psychology, behavioral economics and sales studies to help you create win-win relationships. I’m your host, Liston Witherill, and I’m pleased to welcome you to Modern Sales.
Welcome once again to Modern Sales. My name is Liston Witherill. This is episode eight in the SDS, that’s Serve Don’t Sell training series of podcasts, where I’m reviewing the core topics and ideas you get in my sales training. If you’d like to start from the top, just go back to the Sales Process, You Need to Win Big Clients, scroll back, it’s seven episodes back in your feed, to hear the overview. You can also visit the Tools section of my website at servedontsell.co, where you can get to all the past SDS training episodes in the series laid out beautifully, wonderfully, by yours truly on a single page. Big news, too, I am writing a book. I’m planning to release it in January of 2020, and I’m editing the manuscript as I record this episode. The name of the book is yes, you guessed it. Serve Don’t Sell, and I’m writing it to help you sell more services.
If you sign up for updates, I’ll send you about an email a month telling you how I’m progressing on the book, inviting you in to some early releases of the draft manuscript, and giving you some special bonuses. All you have to do is visit servedontsell.co/book to sign up for emails from me. And finally, if you’d like to receive weekly sales insights sent directly to your inbox, be sure to sign up for the Serve Don’t Sell newsletter, which is painfully obvious and easy to do on that same website, www.servedontsell.co.
Now let’s talk negotiation. First things first, the number one question I hear from people when it comes to negotiation is, “How can I get people to pay the price that I want to charge?” Well, most price objections are value objections. That is, your client doesn’t see the value that you’re delivering, and that’s why they’re objecting to price. Now, there could be lots of other reasons why you get price objections and I will cover those in this episode, but if your client is not seeing the value that you deliver, you screwed up earlier in the process. Go back and listen to the episodes about price, goals, and value, if you’re regularly hearing large price objections. Those episodes that I just mentioned, are linked in the show notes. If you go to the show notes, those episodes are linked, and you can go directly there.
If you are selling to big companies, they have money. The real reason they’re objecting is not the price. It’s probably something else. You may be thinking, “What about legitimate budget objections?” Yes, those do exist and I will cover those, but chances are that’s not why you’re hearing objections. Sometimes your client just won’t pay the price you want to charge. And I want to emphasize this, if you are dealing with someone who for whatever reason is not willing to pay your price, you must be prepared to walk away. If you are not prepared to walk away, you have no leverage in the negotiation. You need boundaries to conduct a successful negotiation, and therefore you need to know what your walkaway price is.
I also want to caution you not to cut your price for a proof of concept, not to cut your price for a first project on the promise that you’ll get all sorts of other follow on projects and sales from this client. Because if you do, you’ll be teaching your client that your price is negotiable and you’ve set a new ceiling for your price. So if you are not willing to work for the price that they’re asking for, walk away. And tell them as much, “I can’t work for that.” That’s okay, right? We’re not going to come to an agreement every time, and that’s all right. If you’re not prepared to walk away, you have no leverage.
So when you hear an objection, let’s talk for a second about these price objections in particular. What might your client actually mean? Well, they may mean, “I don’t want this. The thing that you’re offering isn’t exactly what they want.” They may mean, “I want something else. I don’t understand. I don’t have the budget for this right now. I don’t see the value. I still have something else to discuss. I can’t say yes on my own, I need someone else to weigh in on this,” or, “I need to take a win back to my boss.” If there is a procurement process involved in what you sell, this is one that you will probably encounter. But all of these different options are the various things that your client might mean when they give you a price objection.
And what we really want to do, our goal is to understand what our client actually wants in. And the only way to get to that is to ask pointed questions. So if you’re asking directly for business, ‘Are you ready to get started right now,” something like that. And the client says, “I am, but the price seems a little bit high,” then you might ask them, “What would you need in order to make this work?” And if they hesitate at all, it’s probably not a price objection. No matter what they say, you’re going to follow up with a question like, ‘And what would that do for you? If you were able to cut 20% off the price,” or whatever they’re asking for, “Why is that important?” And just to pay less is not a good answer. We want a substantive reason, right? Because otherwise it’s totally arbitrary, and maybe they’re just looking for a win.
So what we want to do is understand what our client really wants. And in the last episode I gave you an isolation technique. So what we want to do is really understand, is this the real objection that’s on their mind? And the isolation technique I gave you is called the Let’s Pretend Statement. So in order to isolate, you just use a Let’s Pretend Statement to determine if their stated objection is actually the main thing on their mind, or if there’s something else that they need to discuss, too. So the way that would work with price is if someone says, “I love this, but I would like to see a lower price,” then you could say, “Let’s pretend for a second that I can deliver at exactly the price you want, would you say yes right now?” What that question will do is challenge your client to let us know, is the price really what’s going on, or is there something else? And it’s fine either way. it doesn’t matter.
We want to be unemotional during these conversations. Any objection that our client gives, any pushback, any hesitation, it’s no reflection of us. It’s simply part of the process that they need to go through in order to make a buying decision. And our job when we serve don’t sell is to be there to help facilitate that process. So if you use that, Let’s Pretend Statement, you’re more likely to uncover what the real objection is. Now, if you’d like a full template on how to address objections, go back and listen to the last episode, and that is linked in the show notes, also.
When you use your Let’s Pretend Statement, you’ll be able to understand what the true objection is. Only two things can come of this. One, someone will say, “Yes, if we could solve that price issue or whatever the issue is, then I’m ready to move forward.” Okay, cool. Or they can say, “No, I’m not ready. In fact, there’s something else we need to address,” and that’s the point of the isolation technique. We really want to know from our client what exactly is on their mind. We want to know what else they’re thinking, and we want to be able to address that directly as well.
Now let’s pretend for a second that your client’s objection is actually the price. The next thing you want to do is negotiate beyond the price completely. We don’t really want to lower the price, that’s not our goal here, right? There are lots of reasons why I would suggest you not lower the price. And there are lots of ways you can navigate this discussion without actually discussing the price directly, so without actually even approaching the price until much, much later on. So what I want you to do is understand the levers that you have. Anytime you’re in a negotiation, certain levers are there for you to pull and to try out. And you need to know what those levers are, and you should be prepared to talk about them so that you’re not talking about price first.
So first lever price, we’re going to save that one for last. We’ll come back to it. The second one is scope. So as you put together your offering, whatever it is, there are things you can do to add, remove, or bundle the scope to change the price, and the value that you deliver. So if your client asks you to cut your price by 40%, I’m to want to cut my scope by at least 40%, probably more than that, because there’s value for me in getting a higher paying client with a bigger project. So that’s the first thing is obviously you can amend the scope.
The second thing is you can keep the scope as is, but phase the project. So if you could break the project apart into two or three parts over many months that coincide with your client renewing or securing more budget, that is one thing you can do without having to alter the price whatsoever. You’re just altering how you invoice them, and how that cashflow is hitting your clients. So phasing is a big one as well.
The next one is timing. When is this project going to start? And if your client needs you to start in a really fast amount of time, that may be something that you look to use as leverage, right? so if your client has a big emergency, and they’re looking to start next week, then you know you have more leverage in that negotiation, and you’re going to want to stick to your original price. So timing is a big one.
The next one is team. Who was on the project? And any service to sale who actually delivers the work is quite important. Now this is a tricky one, because you don’t want to give away the B team. You don’t want to say, “Okay, you want to pay less, I’ll give you our lackeys,” is what your client is going to hear if you can deliver the same project with a group of lower paid people. I wouldn’t recommend doing that, but if you have a superstar, or a high demand person on your team, who’s well known and is asked for by name, then that might be someone you charge more for, or you use to sweeten the deal for some clients.
The next one is delivery method. How you actually deliver your work should have an impact on the price. And so if you have multiple ways of delivering, that could be one way that you can alter the price. So for instance, if you wanted sales training from me, I could come on site and do it in a couple days, or I could do it online remotely, which also gives you recordings. It also phases it over many weeks, which is good from a learning perspective. I also give you feedback through the process. So there’s lots of advantages in doing it remotely, but there are advantages in doing it in-person, and the price is different for the two. And so the delivery method would impact both the price and the learner’s abilities to actually absorb the material.
The next thing you can leverage is access. How accessible are you through the process? How much support do you give? How much one-to-one attention, how many meetings, how many business reviews, how many fill in the blank? There’s lots of different things you can do in terms of access. How much access does your client get? One that I like to look at is payment terms, so is this a net 30, or a net 60, or an upfront payment kind of contract? Do you get all of it up front, or do you get half up front, or do you get a third up front, or on, and on, and on, right? There’s all kinds of ways you can alter the payment terms in order to make the deal work for both parties.
The next one, and I don’t really like using this one very much, but that’s logos and case studies. So if you’re lacking social proof, then you might want to throw in some sort of discount for logos and case studies. Again, personally, I don’t like it because it really cheapens you and your value to the client. I have seen people do this successfully. I think it really depends on your business. It depends on your market position, and it depends on the level of authority you’re trying to build in the marketplace. It also depends on what impact logos and case studies have on your next set of clients. If the impact is marginal or mediocre, obviously, this isn’t going to be something that you think about doing.
Next up is duration and contractual obligations. So if you have risk mitigating features of your contract, a satisfaction guarantee, a level of support, kind of a warranty attached to what you’re doing, and how long exactly that is, that should affect the price as well. And so that might be something that you add on, or play with, or subtract if it makes sense given your negotiation. So lots of different things you can do to pull levers during those price negotiations. And what I really want you to do is be clear about what your levers are going in, so you know what you can pull, and what would be most likely attractive to your clients.
So the key takeaways for negotiating beyond price is that number one, most price objections are about something else entirely. Find out it is. Use your Let’s Pretend Statement to isolate the price objection, to see what the real problem is. One way that I phrase this is if someone says, “Hey, we really need to know what the price is,” or, “Boy, that price is way out of our league,” then I respond by saying something like, “Price matters. It’s important. I don’t want to minimize it, but it is just a detail, and the key thing I want to make sure is that you’re getting value. Is it okay if we continue the conversation?” 100% of the time, people are going to say yes to that, and so we would move forward by isolating the other objections.
The next takeaway is to understand the possible objections you can get, and to try to get to the real issue as fast as possible, and then focus on addressing that real issue. Your goal is to understand what your client wants, and remain as unemotional as possible. If you get emotional talking about money, head over to servedontsell.co/tools to download the Money Feelings exercise, to help you identify what’s causing your reactions.
Next, know your levers going into every price negotiation. If you’re an individual seller or contributor, know what you can offer during a negotiation. If you’re a manager, prepare your team with the objections they’re likely to get, and the levers they can use during negotiation. And finally do a postmortem self evaluation each time you go through a negotiation. Ask yourself, “What went well? What did I miss? How emotional was I, and what can I do differently next time?”
Next up on the podcast is episode number nine of the SDS training series, where we’ll talk about how to practice the training you’ve learned here, and how to make sure it sticks with your colleagues or the members of your team. If you aren’t already subscribed, please do so by clicking the Subscribe button. It helps me get the word out if you share this podcast with your colleagues or friends, and I’d love it if you did that over email, or if you posted on LinkedIn your favorite Modern Sales podcast episode, and what you like about it.
And finally, if you’re looking for help training your team of client services professionals to sell more to big companies, I can help with remote and onsite training options. Just head over to servedontsell.co, click the Contact button, and you can fill out a quick form to begin the conversation. Thanks so much for listening. I’m Liston Witherill of Serve Don’t Sell, and I hope you have a fantastic day.