We are culturally conditioned to avoid talking about money in our personal lives and as a result, in our roles as business development people, we tend to put off financial discussions until the last possible moment. In the last two issues of the Win Without Pitching Newsletter we discussed the commoditization trend in the agency industry and some approaches you can take to battle back and reclaim higher margin. In this issue we explore methods to overcome price objections in an effort to increase closing ratios and further improve margins.
‘Those who can’t talk about money, don’t make it.’
-The Win Without Pitching Rule of Money
A salesperson that cannot have frank money conversations with prospects early in the relationship is someone that will create unnecessary work for the agency as business development resources are applied to prospects that do not have the budget required for the agency to do the job at a profit. Follow these simple rules to help you get the deal, at your price.
SET A MINIMUM ENGAGEMENT LEVEL
Every agency should have a financial parameter it applies to its prospects to help determine whether or not that company belongs in the agency’s target list – the list of companies the agency covets and pursues as eventual clients. Your minimum engagement level may be a measure of agency gross income (AGI) in the form of fees, mark-ups, and commissions, or it may be a minimum total marketing or project expenditure, from which you can extrapolate likely AGI. Knowing what your minimum financial requirement is will help you move your money questions to the top of your list of qualification questions.
‘Thanks for your interest. You should know that we have a minimum engagement level of $50,000 in fees.’ This will separate the wheat from the chaff before the application of agency resources. Additionally, this approach can aid you by prompting those prospects on the cusp of your financial requirement to commit to further projects or longer-term work to be able to make your threshold. A few people are put off by this forthrightness about finances but those are the few that you do not want as clients.
OVERCOME PRICE OBJECTIONS BEFORE PRESENTING YOUR PROPOSAL
While you might hate hearing objections, you will do well to remember this little rule concerning them: The more objections you hear, the greater your chance of closing. There is one caveat, however: you need to hear them early. Early objections are your friends. Late objections will kill you. Have you ever been in a presentation to a client or prospect only to look up and see that everyone on the other side of the table has flipped to the last page to see the price? Does it drive you nuts? It drives everybody nuts, yet few people actually stop to think that this problem is easily solved. The prospect will not flip to the last page if he already knows what the price is.
Overcoming the price objection before presenting the proposal is one of my Five Cardinal Rules of Presenting Proposals. You should never present a proposal without the prospect knowing, and at least implying approval of, the price range of the solutions you will present. The presentation of the proposal should be a high-percentage closing opportunity – 80% or higher. Why would you undertake all the work of preparing and presenting a proposal if you have serious unanswered questions about the prospect’s ability to meet the price in your proposal?
This rule should apply to estimates for existing clients as well. The client should never see a price in writing before he hears it from you first. That means that any time you fax or email an estimate to a client you precede it with a phone call. ‘Your estimate is almost ready. It’s $10,000.’ This gives you an opportunity to handle the objections in person, rather than hiding behind the fax or email and guessing at what the reaction is on the other end.
I often hear from agency personnel of their frustration in dealing with prospects who refuse to disclose a budget. They see it as a negotiating ploy. When you ask the question, ‘What kind of funds do you have allocated for this project?’, the answer may very well be, ‘We don’t have anything budgeted. We have no idea what this will cost. We were hoping you would tell us.’
Applying resources such as a budget is often the very last significant action the prospect takes before hiring an agency. If you find yourself in this situation, your job is clear: help the prospect set a budget before you deliver your proposal. Find out what the range of possible solutions may be, give him that range, and use his feedback to narrow the range as much as possible.
‘You’re looking at an investment of between $50,000 and $200,000.’ Now that’s a big spread, isn't it?
‘$200,000! I can’t afford $200,000.’
When someone says, ‘I can’t afford that,’ The next question is, ‘What can you afford?’
If he responds with, ‘There’s no way I can go over $100,000,’ then your price bandwidth is $50,000 to $100,000.
PRICE IS NOT A VALID OBJECTION
Price is not a reason not to buy. People buy things they ‘can’t afford’ all the time. Price objections are really value objections, and the formula for value is quality divided by price. When you hear a price objection, re-phrase it to reflect the value objection that it really is, and overcome the objection by discussing the quality, or the return on investment, instead of the expense. The objection ‘that’s too much money’ should signify to you that you have not helped the prospect to see the value of the investment you are asking him to make. Go back and review the quality of the service, and wherever possible, the return the prospect can reasonably expect in the form of brand equity, client retention, lower sales costs, or other applicable metrics. Do not attempt to justify the price by explaining how much work is required. The only acceptable means for justifying price is through expected return on investment, in whatever form it can and should be measured.