Overcoming Price Resistance
By Gerry Foster

Copyright 2003 by Gerry Foster

Somewhere between 1819-1900, a fellow by the name John Ruskin wrote a narrative entitled The Lowest Bidder. He said:

"It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you lose a little money ... that is all. When you pay too little, you sometimes lose everything, because what you bought was incapable of doing what it was bought to do. The common law of business balance prohibits paying a little and getting a lot … it can't be done. If you deal with the lowest bidder it is well to add something for the risk you run. And if you do that, you will have enough to pay for the something better."

Bottom line: You have to get paid enough for the services you provide. If not, you will soon have to find some other way to make a living. To make money in any kind of business, you either find a way to increase sales, reduce expenses, or raise prices (or fees). Or, of course, you can put more hours into a project, provided you do billable work.

The simple truth of the matter is that there is no way you can get the number of clients you want at the rates you want to charge unless you know how to set your prices correctly. Contractors, for instance, with years of success behind them continuously lose projects to low-ball competitors even though their services are superior.

One of the most common challenges just about every service provider deals with is having to quote projects, give estimates, or discuss fees during preliminary discussions with a prospect. Sure, you might like the idea of quoting a price upfront. But most of us are deathly afraid of not landing a client if the price quote is perceived as being too high.

Well, I've learned that after you qualify someone to see if he (or she) is a viable candidate for your services, you really only want to do two things: determine their ability and desire to pay.

This is true regardless of the selling situation you find yourself in. Let's be real here! You simply cannot afford to waste your precious time (and the prospect's time) if your services cost more than he can handle. You need to know what range he expects your prices to fall within.

If the prospect whines that your prices seem too high and doesn't want to pay, there is no need to slash what you charge. Simply walk away. Or, if you prefer, refer him to a less expensive, reputable service provider. You can also try to work out a pricing arrangement (a deal) that is mutually satisfactory to you both.

Now, if you're like me, and you hate walking away from a potential client, then stick to your guns. Let the prospect know that while your prices may not be the lowest, they are fair. Then, justify your rates by conveying the unique value of your work, and show why he should use your services now.

Take A Stand On Your Value

See, you never want to badger a prospect, or hang over the table like the grim reaper, pressuring him for a "close." Or worse yet, lather up his face, stroke a straight razor on your honing strap, put the razor to his throat, and as you're about to start shaving ask the prospect, "Are you ready to say yes now," like some sort of psycho barber.

Instead, simply, calmly, and confidently give him a sense of the unique value he can expect to receive - the solution, end result, incredible contribution or emotional benefit you provide - and how that meets his level of urgency.

Say to him, "We can talk about in quantitative terms how you will be much better off financially because the unique value I provide is many times greater than what my fee is."

Period. It's just that basic.

Look, you do not have to follow a sophisticated sales model or methodology to overcome price resistance. If you are looking for some sort of sales technique to follow, forget it.

Mastery Selling (a course I created and teach) has a curiously inspirational quality, which is extremely simple. That is, all other things being equal, the greater the value expected, the greater the urgency. And the greater the urgency, the more the prospect will be willing to pay.

Now, of course, if none of this works, then punt.

I mean, see if you can redefine the scope of the work you are to perform. Then quote another price that still earns a tidy profit for you.

Here's an example to illustrate exactly what I'm talking about:

One time a prospect wanted me to develop a marketing plan for his company. The fellow wanted $7,000 worth of my professional services for half the fee (you know the type - champagne taste on a beer budget). When I told him I couldn't do that, he said he wasn't interested in using my services.

"What would happen to your company if you could gain a substantial competitive edge over any and all of your competitors?" I asked.

I then proceeded to tell him a true story about a company that did not learn the fine art of getting their buyers to think in terms of unique value rather than price, only to have the competition drops its prices and steal some of their best accounts. The company went belly-up.

At that point, I had my prospect's attention. I then recommended that he participate in a 5-week training program, along with several other entrepreneurs, I had at the time for only $1,495. I told him that during the program he could develop a marketing plan for his business; receive some practical ideas on what to do when a buyer objects to his prices and how to sell his service for more profit.

He enrolled in the course, developed his marketing plan, and, one week after the course ended, hired me for ongoing consulting and assistance with implementing the plan. All this was for a higher fee than if I had initially sold my professional services.

See, in the skeptical and tight-money 2000's, most folks won't hire you unless they think they're getting a good deal.

Agree? Here are some Mastery Marketing® pricing tips for you to follow:

1. To bid or not to bid. Only quote a project if you have a good chance of getting the business. Ask yourself: Does the prospect have the money and desire to have his (or her) wants fulfilled NOW? If so, what is his budget? Will this work be profitable and move your company in the direction you want it to go? If the prospect insists on saying upfront, "First, tell me how much your services will cost and then I'll let you know if we can afford you," focus on finding out exactly what unique value they want to receive.

2. You are not just another kid on the block. Not too long ago, I was shopping for some new tires for my car. I looked in the paper, decided on exactly what brand (Firestone) I wanted to buy, and immediately made a few phone calls to several tire shops to see who had the lowest price. This was because, after all, they were all selling the exact same tire I was looking for. Now try that same logic the next time you want your carpets cleaned, or to refinance the mortgage on your house. Or some house painting; better have a can of paint and a paint brush handy, because you will quickly discover one fundamental truth: all painting contractors are NOT going to paint your home exactly the same way.

   Services vary from one service provider to the next. Some are excellent, some are good, some are average, and some are downright horrible. Prospects may call you by the same name, but you do not offer the same service. Don't let anyone say you do, and that your prices should match.

3. Establish your worth. Think about the service you provide to your clients. Remind yourself of the difference you make and the unique value your services provide: the solution, end result, contribution or benefits you offer. Get that value at the forefront of your mind. Then, with every prospect you interact with ask, "Wouldn't you agree that the worth of the value is far greater than the price I'm charging?" Next, provide a preponderance of proof or evidence that you can indeed do what you say you can do

4. Provide added value. If a prospect still whines and complains about your prices being too high, try adding value to increase your perceived value (i.e. in retail, the "2 for 1" racks always move more merchandise than the "50% off" racks although the cost to the retailer is the same). Say like they say in the Ginsu knife TV commercial, "And that's not all you get. You'll receive extra things" that cost the prospect very little and mean a lot such as:

1. More support. Say, "You'll never be alone out there. As our client, we're always here for you … anytime you need help … 24-7 … to answer any questions, solve any problems that might arise, and offer advice at no extra charge. Or, if you just want someone to talk to, that's okay too. You have my word that your phone call will be returned within a certain period of time. And if you send me an email, I promise to read it personally." The folks who need help not only will be comforted by the personal attention they receive, they'll value it quite a bit.
   
   
2. More convenience. Perform some aspect of your service at the client's site if that's more convenient for them. Extend your hours of operation by offering evening and weekend hours if you can; deliver when, where and how the client wants it; find a way to always fit a client into your schedule; accept rush orders.
   
   
3. More reliability. Do what you say you will do to and for the client. Make promises that meet or exceed their expectations: "I'll get right back to you with that information," or "You will have that report by the end of the week," or "I clearly understand the problem you are having with X, this Y will solve it by Z date."
   
   
4. More speed. Beat all deadlines and deliver faster service than expected. "Fast" in the fast-food business means five minutes or less. Expectations vary with the type of business, time of day, or season of year. Fast quotes. Fast repair. Fast turnaround. Speed enrolls.
   
   
5. More stuff. Training, peripherals, accessories, newsletters, reports, bulletins, bonuses, gifts - throw something in. If you own a computer repair service, offer to clean their printer for free. If you own a public storage service, get a moving company to offer discounts to your customers. A relocation service for moving senior citizens into new homes, could unpack their things, stock their refrigerators, and leave fresh flowers. If you're a corporate trainer, offer one month of free consultation before and after the learning program. Got it?
   
   
6. More affordability. Accept credit cards if you haven't. Offer buy-now-pay-later programs. Give early bird or pre-payment discounts, or frequency volume and quantity incentives (four for the price of three, or buy three and get one free) to buy more.
   
   
7. More follow-up. Offer timely free follow-ups after work is performed to make sure client is satisfied: next day for dentists, next week for automobile mechanics, next month for physical therapists, one year site inspection for architects. You decide what fits your business.
   
   
8. More Add-ons. Add on to a purchase support products or services for free that will help your clients receive your unique value more swiftly, more conveniently and completely. For instance, why not throw in free software installation and training (computer reseller), free touch-ups every six months for one year (painting contractor), free loan fees (mortgage broker), free setup/assembly (home theatre dealer), free full panel blood test with annual physical exam (physician), free massages (health club), etc.? Use your imagination. It works.
   
   
9. More combinations. To stimulate purchases without reducing your profit per sale and devaluing your services, bundle some items together as a complete package and let clients buy them in one purchase decision. Just look at fast food restaurants for a great example. They promote full, tasty meals with "deal meals." Car washes do the same thing with tiered "good, better, best" pricing options that give customers a convenience advantage (wash only, or wash plus wax, or wash plus wax plus interior cleaned). Your objective is to look for services and/or products you can provide that clients will appreciate and gladly pay for as they receive superior value in each option you add.
   
   
10. More assurance. Guarantees work. Overcome buyer hesitation by lifting risk from the buyer's shoulders, and you carry it. By letting prospects know that you are willing to be held accountable for your work - meaning, if they are ever dissatisfied, you will give them their money back, re-do the job at no charge, keep working at your expense, or whatever - you can nudge them over the decision line. In other words, guarantee performance or the quality of your work. Here's how:

    Offer clear, strong, well-detailed Accountability Guarantees

• A computer repair firm I advised now guarantees a desired result by saying, "If we can't fix it, you don't have to pay us."

• An industrial design and engineering firm now guarantees product development within budget   or they pay for any cost overruns.

• A bulk mailing service guarantees the lowest possible postage to each customer, or they pay the postage.

• Another former carpet cleaner client of mine agreed to now tell his customers, in writing, that, "If the spots reappear within 30 days, so do I!"

• And here's one of my favorites. I once got a dentist to put up a sign in his waiting room that said, "If you have to wait longer than 10 minutes from your scheduled appointment, your next   teeth cleaning and full set of x-rays are free."

If you are dealing with prospects that fight you on price, or if you are losing business to lower-priced competitors, contact me directly by phone at 949.499.1174 or by email at gerry@masterymarketing.com if you wish to discuss this further. We can "kick around" some ways to lead a herd of prospects to use your services at the prices you want to charge.