So why do so many good and presumably smart salespeople fall apart during the money discussion with clients. These are people that will fight tooth and nail for their commission cheque but not for their company's invoice. So let's think about this for a moment.
If we have done our jobs right, then we have established some needs, we have drilled into the detail of these needs, established some metrics around their resolution, defined a solution that speaks to the resolution of these needs and agreed to the value of the solution. We've also set timelines, identified the resources (internal and client) and maybe even a budget. If we haven't done these things then we need to reset - and quickly - or else the pricing discussion becomes premature - not based on value and only viewed as a COST and not an INVESTMENT. There is a subtle but very big difference. We all know that costs are always viewed as something to be minimized. Investments are viewed more by the returns they generate.
Now we get to a pricing discussion. If we have established value then pricing should be moot - so long as it is reasonable compared to the benefits associated with it. Now I am not naive here - of course there are competitive pressures, we know clients are becoming more and more sophisticated in their buying behaviours and your management has been "trained", mostly by you, to accept leaner and leaner margins.
Let's run through a few possibilities in the pricing discussion:
"The price to too high" - I figured I would start with the most common objection. Rather than simply discount, discount, discount - here is how we may want to handle it. First let's figure out the answer to this question; "Too high compared to what?". This is what we really want to find out isn't it? Is our price too high compared to their budget, is it too high compared to what they perceive the benefits to be, is it too high compared to what they were simply hoping to pay? You get the point.
Let's also think critically about this. What are the drivers of cost? Generally they are:
1. People - theirs and ours - in many consulting engagements - we use a number of our people as well as a number of our client's. The allocation and distribution of these resources will drive direct and indirect project/solution costs.
2. Timing - what period of time are we delivering, are they paying, etc? Would a compressed delivery schedule reduce cost/increase cost, would shorter payment terms allow for better financial terms?
3. Scope - obviously applicable to more complex scenarios - the scope of what we are trying to solve or capitalize on will drive the cost of our solution - more scope = more cost, less scope = less cost
When we start pulling these levers we must understand one more important aspect: RISK. Pulling each of these can have either a increase or a decrease in risk for the client and for ourselves. The client must be aware of these risks before we start pulling on the levers.
There is another level - TERMS. This one is a little trickier as now we are approaching corporate territory and some of these are not movable depending on the organization you might be with. If you are an entrepreneur - it's simple - adjust your terms to the point where you KNOW you will get the business. And the best way to know this? ASK!!!So where does this leave us?
Assuming we have everything together then we can confidently and, with conviction, present the pricing for our services or product. If we have completed all the right steps then we should be ready to put contract to paper (contract negotiation will be for another posting).
Let's now be sure we understand the steps the customer/client will take at this point in order to transform a pricing proposal into a purchase order or agreement. Again, let's do something revolutionary here and ask the client what the process is and how the decisions will be made. WE can then trial close through each of these responses (i.e. so once you have approved this and it has passed through the chain of command what else do we need to do? IF we were to do "that" then are we in a position to move forward?).
This stuff isn't difficult folks - it is just executed inconsistently. It is easier to simply give in on price but where is the fun in that!
Until next time...
Steve
