If you’ve been in sales for any length of time, you’ve had a prospect (or a few) insist that your price is too high. But what does that statement really mean? Is the price objection due to budget, a lack of knowledge regarding the market, or is your product missing standard features and falling short of the competition? The first step to responding to these grievances is finding out why price is a barrier to closing the sale.
Once your sales representatives discover the root of the prospect’s price objection, they can begin to remedy the situation. However, it’s not always easy to get people to explain their reasoning. A powerful tactic to getting to the core of your prospect’s objection is to remain silent. This can cause them to reexamine their statement and begin explaining themselves. Let’s review four standard price-related complaints and how sales reps can steer the prospect to a ‘yes.’
4 Common Price Objections and Potential Reactions
- Budget – Are they lacking the budget for this period only, or is the price too high to ever be an option? Sometimes the initial investment is too significant, but if you can offer a payment plan, it’s instantly made feasible. Another issue that can arise with budget is that the prospect doesn’t see the value of the product.
If a payment plan isn’t enough to remedy budget problems and elicit a sale, ask if the budget will become available and circle back at that time. The representative can also offer to repackage a new deal to meet their budget. This will reveal what features they can go without and which they must have.
Explain how the solution you’re selling is an investment in the company’s future. It’s not an expense like an office chair or a lamp, it will have an actual ROI. If you can create a realistic formula to estimate the ROI – even better. Providing a dollar amount makes it more tangible, and the prospect can weigh out the value.
Going back to the worth of your product/service, invite the prospect to look at the cost of doing nothing or the cost of going to a cheaper competitor. What will they be missing out on?
- Too expensive – Compared to what? Expensive is a relative term, and the rep will need to find out how expensive they believe your product is. This can open the doors for negotiation.
If the buyer believes you’re overpriced compared to competitors, ensure that they’re comparing apples to apples. If possible, get a copy of the competing proposal to make a comparison and review the included features line by line. Doing so will reveal any major differences in the two offers and hopefully explain a portion of the price disparity.
Reassure them of the added value that comes with a higher price tag. Perhaps it’s not a product detail or feature, but something related to the warranty or support they’ll receive from going with your brand. Maybe your product has higher ratings than the competing product. Whatever your competitive advantages are, they should be presented to the buyer.
- Lacking features – Are there features that the purchaser has seen in similar products that yours is missing? If so, the rep should work to find out if these are deal breakers or a negotiation tactic on behalf of the buyer.
Play up features your brand is offering that others don’t. Explain to the prospect that although we don’t have ‘x,’ we have ‘y’ that will provide more value to you in the long run.
If the feature in question is brought up by several prospects, the brand should consider a partnership with a stand-alone service that fills the gap or figure out how to get it on your product roadmap. With a technology product or service, future plans to add the missing feature, and have it included later at no cost, could help to close the deal.
- Time – This factor can arise in several forms. The prospect may not have the ability to be down when transitioning to new software, they may require an immediate return on investment, or they may not want to put in the time and effort to train employees on something new. Time equals money, and these are reasonable objections. Sellers just need to know how to respond.
Here are a few responses based on the time objections noted above. Assure the buyer that the downtime will be minimal. Point out that they can continue with business as usual until it’s time to make the switch. If possible, offer the option to finalize any transitions after hours.
Depending on your product, an immediate return may or may not be possible. Calculate what the return will be after one month, three months, six months, one year, etc. Seeing these numbers laid out helps demonstrate value.
If your product will require training, explain how the time invested is worth it. What is the cost of doing nothing? Does it make sense to skip the purchase because a few hours will be spent on training? Probably not. If you’re selling a solution, it will likely save time in the future and have significant value.
When to Accept a ‘No’
Sometimes there’s no way around a price objection. In these cases, the lead was likely wrongly qualified. Improperly qualified leads can clog up your pipeline and waste your sales team’s valuable time. When qualifying leads at your organization, the budget should be one of the first factors considered. Even though many sales teams are moving away from the age-old BANT mantra from IBM, which begins with Budget, they are still keeping Budget in their qualification process.
As a manager, you must ensure that your sales team understands when to accept defeat and quit wasting any more time. Management should acknowledge to their representative that there was nothing more they could have done, and avoid pinning guilt on their inability to close the deal. Sometimes matters of price objection are truly out of their control, and no explanations or negotiation tactics will sway the prospect’s decision. Encourage your rep to stay positive and look forward to the next opportunity.