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Today I want to talk about one of the most common objections salespeople face – when the prospect says: “That's too expensive!” In a perfect situation, your prospect would see that the value they would gain from using your product is much higher than its price. Unfortunately, that doesn't always happen. You'll find yourself defending your price often.
In this blog, I'll show you the best way to overcome the price objection.
According to a recent study, 35% of salespeople said that overcoming the price objection is the biggest challenge they face. And even though this is one of the most common objections, many sales professionals are caught unaware and don't have a response ready, or else they have one that does them more harm than good.
When someone objects to your price, there are actually four things that could be the real objection:
- You haven't shown that your product is valuable.
- There's cheaper substitutes or alternatives to your product.
- They're afraid to spend this much money on a product or solution that could be so risky.
- They really just don't have the money for your product.
How to Overcome the Real Objection
The first thing is they don't think the product is valuable enough to justify the price, and this is one of the most common ones. This means you just haven't done a good enough job showing the true value of the product. They don't see the ROI yet! So to overcome this, you have to verify that you understand the customer’s problem. Show them how your product solves their problem, then quantify what solving the problem is worth to them. By using their use case and numbers, you can convince the customer that your product is worth more than it costs.
Here's an example of how I do this when I'm overcoming the price objection at Badger Maps:
As many of you know, in my day job (when I'm not making videos about how to be a better salesperson) I'm the CEO of Badger Maps, a company that helps field salespeople build routes and does their busy work for them automatically.
Learn how you can maximize your sales routes and make the most out of your day with Badger Maps:
So first I would say: Mrs. Prospect, we've talked about how your sales reps would get 2 more meetings a day and drive fewer miles if they had Badger. 2 meetings a day works out to about 50 meetings a month. You mentioned your reps get about 200 meetings a month, so that's a 25% increase to go from 200 to 250. Is it fair to say that there would also be a 25% increase in sales if their activity was up 25%?
Hopefully she says: Yes, actually the activities are directly related, so that's right.
Then I would say: Okay, well each rep is bringing in $400,000 a year. We talked about that and so a 25% increase on top of that is $100,000 a year. If I recall, you had 30 field sales reps on your team is that right?
She agrees: Yes, that's right.
I close with: So $100,000 a rep, with 30 reps is 3 million dollars a year. So you're losing $250,000 per month!
See what we did there? We used our prospect’s numbers that we gathered in a pre-call or earlier in the sales call, and we showed how much she would lose if she doesn’t buy our product. This is much more powerful than talking about how much a prospect will gain if they buy the product. Remember: People hate losing things, so it's good to focus on what they would lose!
Beating cheaper substitutes for your product
The second thing a price objection could mean is that there might be a cheaper substitute for your product. The key to overcoming this objection is to really know your industry and your competitors. This is when you have to know why your product will create more business value or be less risky to use than the other product.
So first, I need to be an expert in my competitors’ products. I need to know where they're weak. I can show the prospect how they're able to do something in Badger and describe how it works or doesn't work over here in this competing product.
Also I know that there are risks to some of my competitors products. When a customer switches from our competitors to us, I keep track of the problems they experience with the competitor so that I know where their pitfalls are, and that way I can bring those up.
Curing their fear of money
The third thing that a price objection could mean is that the prospect is just afraid to spend that much money on a product or solution because it feels risky.
Think about things from your buyer’s perspective. If they spend all this money on something and it doesn't work, they can get egg on their face, they could get demoted, or they could even get fired if it's expensive enough!
You know the solution that you're selling is great, but they don't. So it's your job to make them feel secure and safe. Make them feel like your solution will work for them as it is advertised. You can introduce them to people that are similar to them who have had great experiences with your solution. You could introduce them to someone who's in the same industry or the same town.
Case studies are another great way for your prospects to see a bunch of real people having real results and that can also reduce this risk.
The fourth thing that people could mean when they say, “Your product is too expensive,” is also one of the most difficult objections to overcome. It's when they really don't have the money. This is hard because sometimes people will tell you that they don't have the money when they really do, and you as the salesperson have to use your judgment on that.
If someone really doesn't have the money for your service, you need to know what your options are. So if you know your service will pay for itself in the first two months, you can give it to them for the first two months for free. Financing options might be another way to overcome this. When I used to work at IBM, we would bring in partners who had really flexible financing terms like monthly payments, balloon payments, etc.
And finally, if they really just don't have the money now and you really need to do the deal, what can you do? Well, you can give a discount.
As a rule, I never give discounts, I make price adjustments. Now, what's the difference between a discount and an adjustment? A discount is just me lowering the price. This says that I was charging too much in the first place since I have room to give a discount.
But an adjustment is where I lower the price in exchange for you doing something for me – it's a give to get, just like anything in a negotiation.
So when is an adjustment appropriate? This really depends on your business. What do you want? What are you looking for? Maybe you want a three-year or some other long term commitment; maybe you want them to commit to a minimum quantity over a given period of time; or maybe you can work out some other kind of win-win situation. But remember: A price adjustment should always be a win-win for both parties.
And there you go! You now know how to handle the price objection confidently and pocket those deals that you worked so hard on getting. But remember: the best sales reps prepare and practice. So get together with your teammates and practice overcoming the different types of price objections that we discussed today with your product.
Plan out more than just price objections! Learn how to optimize your planned sales routes and crush your quota!
Thanks for reading and happy selling!