How to counter price-demand tactics
from clients claiming budgetary constraints
Marcia Gauger
For SBT
Question: I pride myself in being able to offset price objections by stressing the overall quality and production that we offer. Lately, I feel like some of my customers are using the economy as an excuse to work me on my price by stressing budgetary constraints. Do you have any suggestions for countering those pricing tactics?
Answer: Price concerns are often difficult for salespeople to handle because what is expressed by customers is not always what it means. For instance, if someone says, "Your price is too high," what does the person mean? Do the customer have a better price from someone else? Can’t the customer afford what you are offering? Or, does its representative just not see the value of paying more for a product that you are selling? If you know what you are working with, you can handle it.
Pricing tactics are different from true price objections. If paying more than expected is a true concern, you should be able to justify price to show that your product or service will outperform the price expectations or competition the customer is considering.
If the customer likes what you have to offer and agrees to use your services but has budget or price issues, the firm may or may not be using a pricing tactic.
Following are the most common budgetary tactics and how to employ and deploy them from a sales standpoint.
Tactic #1: The Bogey – You quote a price of $10,000. The buyer comes back with, "What you have is exactly what we want, but I’ve only got $8,000 in my budget. I’ll sign a purchase order for that amount." We’ve had a good relationship, but I don’t have the budget now. You are going to do this for me, aren’t you?"
The bogey works because:
Whenever you raise the ego of the other person you expect something in return. You have subtly asked for help, and you generally get it.
The seller fears losing the sale and therefore takes what is offered.
The seller may lower his/her price, offer alternatives, at the very least, the buyer has gotten a better deal.
Sometimes sellers aren’t prepared for the bogey and have no other alternatives than to accept what is offered.
How to handle a bogey:
Have alternative product options, delivery and price packages before you come to the negotiation.
Test it by asking when the budget is up and, perhaps, offer to defer payment until then.
Accept the amount offered to close the sale. Negotiate on the difference between your offered price and the price offered by the buyer only. For instance, in the example you would negotiate on $2,000 only. Don’t bring the entire $10,000 into the picture.
Attempt to justify the difference by reducing the amount to the ridiculous before you begin negotiations.
If you need to agree to the buyer’s terms, make sure that you set other requirements, such as agreeing to a service package, commitment to buy an accessory or upgrade options, etc.
Tactic #2: The Crunch – The buyer says to the salesperson, "You’ve got to do better than that." Generally they do.
The crunch works because:
The salesperson believes that the price is too high, and that there is some slack.
The salesperson believes that the buyer must have a better price.
The salesperson believes that the buyer must know something that he or she doesn’t.
The salesperson thinks that the buyer likes him or her and is letting the salesperson in on a secret that will help him or her.
To handle the crunch:
Find out what the problem is by asking, "Better than what?"
Ask the buyer what price he or she needs to close.
Defend your price. Stress your total package.
Stress your quality and benefits.
Tactic #3: Nibbling – After a commitment, the buyer says, "You will throw this in, won’t you?"
The nibble works because:
The seller has a strong desire to close.
99% of the work is done. Why waste it?
The bite isn’t much compared to the whole deal.
The salesperson thinks the long-term relationship may be enhanced by giving just a bit more.
Invisible nibbles:
Buyers pay bills late, take discounts not earned, request special delivery or service work.
How to handle the nibble
Ask yourself if the nibble will make or break the sale.
Make the request seem foolish, "You’ve got to be kidding, right?"
Stand by your price and then let the buyer know the price of what he or she is requesting.
Have a published price list of ala carte items (service, delivery, etc.)
Resist the tendency to give in. If you have patience the nibbler will give in.
If you know this is an ongoing occurrence, include the nibble in your price.
Tactic #4: What if – "What if I order two?"
Why it works:
The salesperson believes that if he or she gives a quantity discount, the buyer will order more.
How to handle the "What if":
Tell the buyer that in order to reflect a true price, you need to understand exactly what his/her expectations are.
Have published price lists with quantity discounts firmly labeled.
Justify your discounts and quantities required for discounts.
Marcia Gauger is the president of Impact Sales, a performance improvement and training company with offices in Wisconsin, Florida and Arkansas. You can contact her at 262-642-9610 or marciag@makinganimpact.com. Her column appears in every other issue of SBT.
March 29, 2002 Small Business Times, Milwaukee
