Article: When the Price Isn’t
Right: Responding to Bargain Shoppers
RainToday.com, June 2008
By Vickie K. Sullivan
When the market tightens, bargain shoppers come out strong.
It seems that every prospect wants a discount; it’s
tempting to relent, just to get the deal done. How to respond
when someone doesn’t want to pay your price? Your reaction
depends on three things: your motivation, your ego and your
brand.
Reacting to their reaction
The conversation is going well – you want to work with
this prospect and they are excited about you, too. And then
comes the “money question.” They ask how much
and you tell them. And they go into shock. What happens next
depends on the motivation behind your pricing strategy.
Worried about leaving too much money on the table? Then
you assume that you’ve over-reached and start scrambling
back. Concerned about your sales pipeline? Then you’ll
discount as if your business depended on it. Neither of these
scenarios have anything to do with the client – it’s
all about confidence in our pricing strategy.
Instead of offering an immediate discount, interpret their
reaction as a springboard to learn more. My favorite approach:
the “I’m just curious” response. It goes
something like this: “Gee, it sounds like this range
was more than you were expecting. That happens to me too –
I usually have a figure in my head when I’m looking
for solutions. I’m just curious: what were you thinking
it would take to get (enter result you just discussed here)?”
If the fee is too low, then you have an opportunity to educate.
If their fee is in range with another option, explore that.
If they say, “I don’t know” then I suggest
they think about getting a budget. Ignore any histrionics;
either the prospect isn’t ready or it’s a negotiation
ploy.
If you are secure about your prices, then feedback from prospects
won’t throw you. And you don’t worry about leaving
money on the table. If that happens, you’ve learned
a valuable lesson (and made a mistake you won’t make
again). The “right” price is one both parties
agree to.
Winning the battle, losing the
war
Personal growth gurus say perception is reality. And for
many prospects, perception on price is based on comparisons.
Therefore, sticker shock can occur when shoppers have visited
the bargain basement firms first. Most folks will justify
their reaction by telling you what others are charging. When
they do, it’s tempting to meet or beat that price to
“take” the client from a competitor. Sometimes
we estimate to win instead of pricing for profit. Our ego
becomes bigger than our bank account.
Competition is a healthy thing - until we decide to beat
our competitors at all costs. Conventional wisdom is to low-ball
the entry price to gain customer loyalty. The reality: These
clients will bolt at the first hint of price increase, making
the marketing costs to get them profit-prohibitive. So why
do we do it? Because in the heat of battle, it feels so good
to win. Ask any auctioneer or e-bay power seller.
Instead of launching a price war, take the comparisons one
step further to point out the differences. An effective approach
is the “who you use depends on what you want”
conversation. When someone brings up another name, I’ll
say something like “That company is so great at (enter
what I don’t want to be good at.) If you are looking
for that, they are your best bet. If you want (enter what
I’m better at), then it’s worth the extra investment
to get what you really need. You deserve that. And otherwise,
why take a bigger risk than you
have to?” If they need what you have and can’t
afford the high-ticket solutions, then go for a lower-cost
option. Again, you are educating folks without diminishing
your brand.
TWhile it’s good to know what others are charging,
don’t give bargain firms too much power. Keep your ear
to the ground so you’re not surprised by the lower price
points, but plot your defense ahead of time with comparisons
and a variety of options. Your reaction will come off as calm,
confident, and ready to walk away.
Negotiating for fun and profit
The recent RainToday report on consulting fees gave statistics
on what we already surmised: well-branded firms can charge
premium prices and discount less often. Yet, there are always
those negotiators that just have to ask. Your brand determines
how much they will push for and how little you have to give
up.
There are two kinds of negotiators: the “Hey, it doesn’t
hurt to ask” folks who don’t want to miss an opportunity
to pay less, and the “discount or die” prospects
who don’t believe in paying full price for anything,
period. The former will buy anyway if they want you bad enough,
and the latter will walk away regardless of their desire if
you don’t give up something.
Well-branded firms can afford to be magnanimous without giving
away the store. When a negotiator asks for a discount, ask
for something immediately. My favorite question: “If
we can agree to a discount, will you decide right now and
pay me in full, in advance?” If not, they are either
not ready to buy or want something for nothing. Stick to your
price and prepare to walk away or offer another option. If
they agree, then negotiate a discount. It’s a win-win.
Again, it’s all about perception. People do what they
think they can get away with. And even if the chances are
slim, it doesn’t hurt to ask. A strong brand puts you
in the power position. If prospects believe you are worth
your premium price, they won’t expect a bargain-priced
discount. They’ll be happy with a smaller discount and
will see what you ask for as a fair trade.
Conclusion
Everybody discounts. Yep, we gripe about it and do it anyway.
When we keep our motivation clear, our ego in check, and our
brand strong, we don’t backpedal when bargain shoppers
approach us. Our response doesn’t depend on theirs.
We can negotiate confidently. And when that happens, everybody
wins.
Since 1987, Vickie K. Sullivan, President of Sullivan Speaker
Services, has generated millions of dollars in speaking fees,
book advances and ancilliary income for her clients. Sign
up for her free market intelligence at http://www.SullivanSpeaker.com
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