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Dealing With Price Competition
Dear Professor Bruce:
I am passionate about my executive search business and the value I offer people, but I am not good at handling clients who want me to lower my prices. This is particularly difficult when they tell me that my competitors are charging less. How do I respond?
You are not alone. The key to maintaining your fees and still getting the business is to recognize the difference between value and cost in your buyer’s mind.
When people say, "You are too expensive" they may simply be testing you or their objection is code for, “I don’t see the value of what you are charging." If, in fact, they think you are no better than a less expensive competitor, then they will push for the lower price. It is your job to show them "value" to justify the cost in their mind.
According to Anne Miller author of "Metaphorically Selling" and Founder, Chiron Associates, Inc., there are three important rules to remember.
First, make sure you understand their situation and have presented a compelling solution to it.
Second, don't fight or become defensive! Disarm. Acknowledge their concern in a calm, steady voice. "I understand you want to get the best value for your investment." Or, "I appreciate the limits on your budget".
Then, you can choose from a number of types of responses depending on the situation.
- You can ask to what or to whom you are being compared. Often, the comparison is not apples and apples and you can then explain the qualitative advantages of your service/product.
- You can ask their budget and then re-configure your fees, so that you are getting your price, but for a lesser package. "We can work within your budget. If you are willing to do ..., give up ..., we can do this for $X."
- Finally, you can choose not take the bait and re-state the long-term savings and benefits of your offering. “Mr. Client, at the end of the day, you will decide, but here is why firms like yours choose our ..." Then, rattle off your benefits and relate each to something the client needs. Demonstrate that in the long run, your package is, indeed, more value and more cost-effective.
Most important, anticipate price problems and rehearse your calm calculated response. Let them know by your manner, that you are not intimidated and that you stand behind the value you offer. You can’t fault clients for trying to get a lower price. But you can arm yourself against that pressure to protect your business.
For further information, you can contact Anne Miller at www.annemiller.com.
It is your job to show them "value" to justify the cost in their mind.