They follow it with, “Will you match the lowest price I find?” or “What kinds of discounts can you offer?”
If your blood pressure is rising just from reading those first few sentences, stick around for a minute.
Few things frustrate salespeople more than this interaction, especially when it’s a long time client that brings it up. What about the last 10 years, you say? How about all the times you helped them out of a jam, helped them find a new team member, or ways to become more profitable?
Then the frustration, slowly turns to anger and resentment. It’s possible (I’ve witnessed it) some of you even start stomping your feet. How dare they? This is ridiculous. You’ve bent over backwards for this client, been practically on call for years and now they are leaving to save a few percentage points.
(Quick Note: your past performance in no way guarantees future business. In sales, you have to earn it over and over again)
Full of all these unproductive emotions, you start to justify, defend, question their motives, their judgement, their decision making. Not exactly the most productive ways to move a relationship forward, especially at a critical time like this. In fact, by acting like this, you could be providing your client with the proverbial “last straw”, the very motivation they need to make a change.
So let’s rewrite how you’re going to react the next time this happens.
What’s Really Going On?
A few weeks ago I had the chance to meet with a procurement consultant. You know, someone who coaches and teaches purchasers (the customer) how to “achieve greater value from the supply chain.” One way they help clients increase value, is by buying things at a lower price.
So naturally, as a sales guy myself, I was curious. “How come there is such a focus on price in the market? One of the first questions from prospective clients is usually how much. How come they don’t ask about the potential increase in production, efficiency, or profitability first?”
“It’s simple,” he said. “You have to understand, that even in the best case scenarios, over 50% of what a business brings in in revenue, goes right out the door in expenses. And for most businesses, it’s substantially higher than that. When that’s the case, as a purchaser, you can’t help but think about costs and price up front.”
Cue the Light Bulb
This was definitely an aha moment for me. In my last sales role, my product line accounted for roughly 6-7% of a client’s total overhead. Compared to payroll and other major expenses, I was a small piece of the pie, making it nearly impossible for me to understand why so many wanted to talk about price so much. There wasn’t much to really save.
What I had failed to do was see myself in the scope of the bigger picture. Sure, my slice of the pie is small, but it’s a big pie, and now I am faulting my customer for trying to….effectively manage their business? Wait, isn’t that exactly what I’ve been telling them they should be doing?
Yes. Yes it is.
What They’re Really Saying
As is the case frequently in sales, it’s time to stop talking and start listening. It’s time to stop trying to convince and defend and start to begin to understand.
When your client asks for a lower price, they’re usually not saying they don’t like you, don’t want to do business, or don’t appreciate what you’ve done in the past.
They could be saying, “I’m trying to do a better job managing my business, and I’m wondering if you can be part of the solution?”
Or maybe it’s, “I know I pay a premium to do business with you, and while our relationship in the past has been good for my business, I’m not sure I’m seeing the same value anymore. I’d like to give you a chance to do better.”
Regardless of the words they use, what they are essentially saying is, “I’m not sure this business relationship still makes sense for me or my business.”
How You Should Act
So instead of getting frustrated or angry. And rather than justifying and defending. Just do what your client is asking you to do…. Listen! Try to understand what their motivation is.
And doing so only requires you to ask a few simple questions.
“Dave, we haven’t talked about price or expenses in a long time. What’s changed in your business that’s making this a priority?”
“Dave, is your focus at this time just on expenses in my category, or is this part of a bigger cost cutting initiative?”
“Dave, thanks for being candid. Usually when a client approaches me about this topic, it’s because we’ve built a good business relationship. It also tells me you would like to continue working together if we can find a solution. Am I hearing you correctly?”
“Dave, if this process was a success, what would the outcome be?”
The last question is critical. If they say something like, “I’m going to buy from whomever is cheapest.” Me personally, I’m inclined to shake hands, thank them for the past business, and go on my way. I’m not interested in winning a race to the bottom.
If their answer is any version of, “I just want to make sure we are buying correctly and managing our expenses the best we can.” I’m rolling my sleeves up and getting to work.
Price issues, objections, and challenges are tricky. The only way to handle them effectively is to start by understanding what’s driving them. It is the one place where it is critical to peel back the layers of the onion.