“Everything else being equal, a customer buys where he can buy cheapest. Everything is not equal.”
– James Samuel Knox, Salesmanship and Business Efficiency, 1915
We’ve all been there before. We’re working on an opportunity, get it down near the goal line, and the customer says, “We’ve found a less expensive alternative, so we need the price reduced in order to justify this purchase and move forward.” In some cases, the language is coarser than that. “We’ve found an alternative that is half the price.”
What do you do?
On a Wednesday night in New York, five of us went out to dinner at one of the famous Au Cheval locations – not an easy reservation to get. Four of us ordered a cheeseburger. The cheeseburgers, depending on what you add, are between $34 and $38 each. Yes, cheeseburgers!
Why didn’t we say to the waiter, “Hey, we found a less expensive alternative cheeseburger. They quoted us $8.50, which includes fries and a drink. It’s called McDonald’s. Can you match their price, as it’s difficult to justify this level of investment?”
We don’t even think for a second of negotiating. Why? Because the price was laid out in front of us from the beginning. The expectation was set. The restaurant was packed. There was people-proof.
You have customers, right? Customers paying a price. If a restaurant with an inferior cheeseburger tried to charge that price, it wouldn’t survive.
The B2B selling world has created a confidence problem in how we deliver and defend our pricing. We timidly present it to the buyer and, through our words and actions, invite them to chip away at it.
When You’re the Higher-Priced Solution
Assuming you have a solution that isn’t always the least expensive, there are two ways to ensure you are not hearing this request at the goal line. One is proactive. One is reactive.
Proactive
The term “sticker shock” has never been associated with anything good in the history of humankind. The old adage, “Never share the price until the customer thinks it’s more,” no longer applies in an economy where customers connect and share more easily than ever before, and AI is exposing pricing models.
When making decisions, our brain is trying to predict. We’re in a constant state of assessing whether the “juice will be worth the squeeze.” If we don’t understand the “squeeze,” our assessment of the value of the juice is filtered.
And, when we wait to share the price, we lose slowly, with customers often sharing this message to us right at the goal line. The greatest thing in the world is winning. Second place? You’ve quickly lost.
If you are consistently losing to less-expensive, ankle-biting competitors, lead with your price! Proactively disarm the potential challenge by delivering an expectation range early in your sales cycles.
“Based on our initial understanding of your environment and desired outcomes, your investment is likely to be between $X and $Y. We may be off, and we’ll get much more specific as we go through this process. However, if that’s way off your expectations, can we discuss that now versus later?”
By setting an expectation and embracing the idea that you may be higher priced early, you set the investment from the beginning. This will speed your sales cycles because your customers can properly assess your solution. You also lose the deals you’re going to lose anyway, just faster. In other words, if you’re talking about a seven-figure solution to a five-figure buyer (or vice versa), one of you is in the wrong conversation. Wouldn’t you like to know that earlier rather than later?
Reactive
It’s possible you didn’t set the pricing expectation early. It’s possible you did set the expectation, but the customer busts this line out about a competitor’s price anyway. It’s possible you’re negotiating with someone other than the one with whom you set the expectation. What do you do?
Step One: Be human. When you hear this request, or any concession request, you’re not a robot. Aren’t you curious? Inquire a bit as to what’s going on. “Tell me more.” If this never comes up, you can add, “We typically don’t see this come up. Who is it with? What is the solution?” You want to first make sure they’re comparing apples to apples, and that you’re talking about the right solution for their desired outcomes.
Step Two: Review the pricing model with them again, cards face up. If you had set the expectation early, it could start with, “As we had discussed earlier, our solution isn’t the least expensive. The pricing you have before you is based on four elements: (1) Volume, or how much of the solution (product, services, etc.) you’re committing to; (2) The timing of cash, or how fast you’re paying for it; (3) The length of commitment to the product/services; and (4) The timing of the deal (mutual alignment).
Step Three: Address the request, but know this: As discussed above, if you have customers, you have a market value for your solution. Don’t forget that. It’s OK to walk away. “We can walk through each of these elements to our pricing again and see if we can get you a little closer. However, unfortunately, we won’t be able to get anywhere near that price, so if that’s the requirement, we wish you the best of luck. It’s been a pleasure working with you.”
Takeaways
Handling customers’ request to meet a less-expensive competitor’s price, whether you choose the proactive or reactive solution, means that you:
- Deliver your pricing with confidence.
- Understand that you have customers paying an amount for your solution.
- Realize that it’s no longer sustainable to have every client paying a different amount based on how well or poorly it was negotiated.
- Understand that the customers who get the best deals can’t simply be the ones who ask for the most, and that your pricing is consistently based on how much they buy, how fast they pay, how long they commit, and when they sign.
- Have the pragmatism to walk away from bad deals quickly.
There’s a reason we don’t negotiate at restaurants, gas stations, grocery stores or on Uber rides. The price should be the price, and flexibility only correlates to the levers.
