Dealing With Buyer Price Push Back
Pricing is usually set by the boss and salespeople are just there to get out and sell at that designation. The derivation of that price point can be quite varied. In some cases, there is a careful calculation involved. It determines the necessary return to cover direct and indirect costs, plus make a specified margin of profit. In other cases a moist index finger is thrust skyward and a price magically appears. The services industry, in particular, has a lot of finger skyward waggling going on. The trouble though is salespeople are not convinced by any price setting methodology.
They only believe in the reality of the market . The way they know the reality is the degree of pushback they get from clients, when they are trying to sell. It is also a function of the nerve of the organization to defend the price point, when there is the threat of no deal. If the boss tells the salespeople to “go out there and sell” at that price point and then the boss folds immediately, every time there is buyer resistance, then the salespeople’s belief in the validity of that price point is precisely zero. The boss has to hold the line.
When you have no belief in the value backing up that price point, your ability to sell at that rate is simply squashed. You default to discounting to get a small piece of something, rather than a very large piece of nothing. Now the boss is cranky because you are undervaluing the brand and the company’s market positioning. So around and around we go on the merry-go-round of price setting.
The crunch point is the sales price negotiation with the buyer. If you have gotten into the death spiral of last minute discounting, in order to move the product or service, you have now trained the buyer to extract the biggest possible discount every time. I sometimes get asked to make an unbudgeted purchase by a salesperson calling me. The discount they are offering from the normal price can be significant.
As the buyer, I then counteroffer a third to a half of their already lowest proffered price. Why am I doing that? This is called “sports negotiating”. I am testing their nerve to see how desperate they are. I want to know how low I can push them down. Is that mean spirited on my part? Well they called me, not the other way around. I also teach negotiating, so as an instructor, I want to see how good they are? Do they do anything interesting in the negotiating process? I usually do buy from them and I usually get a very good price. Good for me, bad for them.
Now, as your sales instructor, I advise that if you are the seller, then don’t accept their ridiculous number. If you feel you are now in the sports negotiating arena, give them an ultimatum on price and a very, very short fixed time to take it or leave it. In the meantime, call another potential buyer. If you have not built up pipeline for your sales, then you are always going to be vulnerable to price collapse.
If you discount once, then imagine that by telling the Japanese buyer this was a once in a lifetime opportunity, a spectacularly rare alignment of the planets, which will never happen again in their lifetime, a never to be repeated offer, you are kidding yourself. The Japanese buyer doesn't hear any of that. What they hear is, I get it for this smaller amount this time. They think “I can probably push harder next time and maybe I will get it for even less”.
Don’t miss this. In Japan, as soon as you drop the price, you are now locked into that price point with that client forever. It is not impossible to go higher but it is very, very hard to pull that one off. You have to be ready to drop the buyer entirely, to restore your price point validation.
The equation here isn’t just with the buyer, it is with the salespeople as well. By dropping the price we tell them that this is all this is worth and they believe it. They cannot push the price back up, because they don’t see it at that level either. Now we have the buyer and and our side, the seller, in furious agreement, that the price is a fiction. The company leadership has to intervene and say “burn that buyer if they won’t accept this price”. Be prepared to lose their business. If we do that, then the salespeople will get religion about the pricing validity.
When we are haggling over the price with the buyer and they say that, “this price is too high”, “that is out of our budget”, “we can’t afford it at that level, ”can’t you drop the price”, “we never pay that much”, etc., we are in a bind. We want the sale, so we immediately go into discount mode. This is a big negotiating mistake.
I heard this exact case from a Japanese sales guy recently. We happened to be seated next to each other at a business function. I started chatting with him about how he does his sales. He had been selling for his firm for 7 years and looked to be in the mid thirties age bracket. He was an experienced sales guy. When I asked him what he does when his buyers say the price is too high, he replied that he immediately drops the price by 20%. I nearly had a heart attack. If I was his sales manager, I would have had to be restrained from throttling him on the spot.
No, no, no. Don’t fold on the price pushback. What we should be doing is defending our price. We don’t do that by arguing with the buyer. We don’t do that by force of will. We do it by trying to better understand the client’s situation. Often salespeople stop asking questions at this critical juncture and instead go into high energy “tell mode”. They start telling all the good reasons why the buyer should pay the requested price. This won’t work.
Firstly, don’t start your response by arguing with the client. Instead agree with them. We can say, “You are right and I understand it is a considerable investment”. We do this to make sure the client is still listening to us. If we disagree with them, they stop listening to us and start thinking about all the reasons their “too high” statement was correct. They mentally go into hand-to-hand combat mode to fight with us. We don’t want that response from the buyer.
While we have their attention, we have to transition and question the buyer as to why they made that comment. “You just mentioned the price was too high, may I ask you why you feel that way?”. We avoid arguing and Instead of us having to justify the price, we now need to switch it. After you make that comment do not speak. Use 100% concentration to listen to the buyer. Don’t interject Don’t cut them off. Don’t add one more word. Now the buyer has to justify why that price won’t work.
In this process of further explanation by the buyer, we pick up very valuable insights into the client’s situation. Armed with more data and insight, we may be able to come up with a flexible solution that is a win-win for both of us.
We may in fact discount the price. We might give them longer payment terms or structure the payments across two quarterly budget periods. We may offer the discount on the basis of a volume purchase.
All of this sounds simple enough, but when salespeople hear “the price is too high” they go blank and forget the basics. Don’t argue with the client. Question the client and keep questioning. If they segue off on to some unrelated subject area, then bring them back. If they digress, don’t go with them, bring them back to the core discussion. If they keep hitting you with vagaries, don’t accept them. Keep digging, digging, digging.
This is the job of the salesperson, to serve the client and that means to clearly understand the client’s situation. The only way to do that is to ask questions and you cannot release the buyer from this quest. It is not to be annoying, pigheaded, stubborn or inflexible. Quite the opposite. We are here to solve the client’s problem and we have to do that in an arrangement, that is a win-win for both of us.
Action Steps
Defend the price point, even if you will lose some business Make sure that the price point/value equation is clear to both the salesperson and the buyer Understand once you discount the price, you are now locked in for that number or an even worse one Don’t argue with the client, instead ask well designed questions to understand what is driving their resistance
Engaged employees are self-motivated. The self-motivated are inspired. Inspired staff grow your business but are you inspiring them? We teach leaders and organisations how to inspire their people. Want to know how we do that? Contact me at greg.story@dalecarnegie.com
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About The Author
Dr. Greg Story: President, Dale Carnegie Training Japan
In the course of his career Dr. Greg Story has moved from the academic world, to consulting, investments, trade representation, international diplomacy, retail banking and people development. Growing up in Brisbane, Australia he never imagined he would have a Ph.D. in Japanese decision-making and become a 30 year veteran of Japan.
A committed lifelong learner, through his published articles in the American, British and European Chamber journals, his videos and podcasts “THE Leadership Japan Series”, "THE Sales Japan series", THE Presentations Japan Series", he is a thought leader in the four critical areas for business people: leadership, communication, sales and presentations. Dr. Story is a popular keynote speaker, executive coach and trainer.
Since 1971, he has been a disciple of traditional Shitoryu Karate and is currently a 6th Dan. Bunbu Ryodo (文武両道-both pen & sword) is his mantra and he applies martial art philosophies and strategies to business.
