Doubt in your promises masquerades as price sensitivity. I’ve written about this before, but I continue to see this sales and pricing pitfall. Sometimes a customer price objection isn’t a price objection at all. They say, “your price is too high” or “this is too expensive” (which sure feel like price objections!), but I invite you to consider there is a second part of the sentence they aren’t saying out loud:
- Your price is too high if you don’t deliver on time.
- This is too expensive if the quality isn’t there.
- Your price is too high if you don’t meet your brand promise.
- This is too expensive if you end up over budget on the project at the end.
- Your price is too high if you don’t meet spec.
- This is too expensive if you aren’t better than the other guy in the ways you claim.
Here’s an example from my own business: I teach pricing workshops which help increase pricing and profits. Let’s imagine a CEO of a $100M annual revenue company asks me for a proposal for a workshop. I give him a proposal, communicating ROI and payback based on a very conservative estimate of benefit from our work together: a 1% price lift. When I give him the proposal, he tells me the workshop is too expensive. Now, 1% of $100M is a million bucks. My workshop doesn’t cost anywhere near a million bucks. So of course any rational CEO would trade me the smaller check for my workshop in return for the larger return of a million dollars of price lift. So I think he’s not saying the workshop is too expensive. I think he’s saying It’s too expensive if he doesn’t get his million dollars of price lift.
I tell him about my guarantee. If you aren’t satisfied in any way qualitatively or quantitatively with the results of our work together now or ever, I’ll refund your money. And I’ve never had a customer ask for their money back. When I make this guarantee, I communicate my complete confidence I can deliver on my end of the bargain. The customer’s risk goes down, and what goes down with it? Their price sensitivity, because it was never about pricing in the first place!
Please consider that at least some of the time that a customer says “your price is too high” that there is another fear behind it about your quality or service. Anything you can do to uncover and then address that fear will reduce price sensitivity. That can be done with guarantees or warrantees as I’ve done, but it doesn’t have to be that. It depends on what the fear is about: speed, quality, service, brand, efficiency, etc… what are they worried they WON’T get from you? How can you invest in making them confident they WILL get that from you? Discounting doesn’t solve that core issue and costs you enormous profit.
Proof of this? Who is more price sensitive: existing customers or prospects? Generally prospects are, and the reason is that they don’t know you yet, they don’t trust you yet, and they don’t know your promises are true. Existing customers know you are who you say you are and will deliver on your brand promise. Invest in reducing doubt in your promises, and customers’ price sensitivity will drop, too. Because doubt in your promises is masquerading as price sensitivity.