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Five Alternatives to Cutting Price

The subjectivity of value works both ways. Value is highly personal and subjective but it is so to all parties on both sides of the buy-sell divide. Just as two different clients considering the same offering from the same firm will assign different value to that offering, so too will two different salespeople trying to sell that offering.

One often hears neophyte salespeople, especially those who had the role thrust upon them rather than having chosen it as a vocation, say that they can sell something as long as they believe in it. I assert however that the ability to sell ideas and advice is not tied to the salesperson’s belief in the intangibles on offer but to his belief in himself.

A price premium is the ultimate economic measure of how meaningfully different the solution on offer is seen to be. The client must see it is as different enough to pay more for it. And first the salesperson must see it as different and worthy of the premium. Yes, the salesperson’s got to believe, but those who believe tend to always believe and those who don’t tend to always cut price.

Any sales manager will tell you that some salespeople are always talking about price – competing on price, losing on price, making the case to cut price. Others, the more successful, almost never talk about price. This latter group’s margins are higher and their close rates are higher, not because the products or the clients are different or because they believe in the product more, but because they believe in themselves more. Their self-esteem is higher.

I can’t do anything for you on your self-esteem other than tell you that you’re almost certainly worth more than you think you are, but I can arm you with five alternatives to cutting price when you’re in a situation thinking that cutting price is the only course of action available to you. It is not. Here are just five of many alternatives you might use.

1. Terms
Terms are so terribly under-utilized in our business. Often price negotiation, by smaller clients in particular, is driven not so much by uncertainty of the value but by affordability. When this is the case terms are the tool to rescue the deal. Can’t pay it all now or in two instalments? We’ll put together a payment plan for you. I’ve seen a client who “couldn’t afford” $50k for a website pay $3k a month for 36 months.

Properly structured terms can not only get you the deal, they can make you more money. If the issue is affordability instead of value, get creative with terms.

2. Take Out Some Value
If the client cannot or will not meet your price but continues to negotiate then consider trading a reduction in price for a reduction in value. If airlines can charge one customer 25 times more than another for a seat on the same plane by adding and subtracting ancillary value then surely you can find ways to reduce your burden and deliver less expensively but still profitably. Things that you take for granted and offer to all customers can be stripped out to do so. Examples include account management, reporting, access to senior people, responsiveness and payment terms. What can you strip out to make the price cheaper and still preserve your margins?

3. Guarantee
Many gasp at the notion that you might guarantee your offerings, but there’s far less risk in using a guarantee to secure a deal or derail a pitch than there is in doing the work for free and pitching it. If the client’s objection is risk – “That price sounds high – what if it doesn’t work?” then consider guaranteeing the first phase of the engagement to get your price. “If, when we present our findings and recommendations, you feel like you’ve made a mistake then fire us and we’ll give you your money back.” Extend your guarantee as far as creative concepts but think twice about guaranteeing further as too many variables are out of your hands.

4. Trade for Larger Commitment
Sometimes it makes sense to cut price if the client can commit to a volume of work sufficient enough to allow you to make more informed staffing and other resource allocation decisions. Be careful as there’s little true economy of scale in your business. There is however something to be said for revenue certainty.

5. Walk Away
You’ve got to always believe that you’re never worse off walking away from a tough negotiation or a price buyer. You preserve your integrity, your positioning and the right to do business with the client in the future. You also retain the right to re-engage later and resume the negotiation. People fear walking away as though it is always the end. If everything was right but the price then walking away isn’t usually the end, but a pause that can trigger the most basic animal instinct of attracting to us those from whom we retreat.

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