How do you handle price objections and negotiations?

A common mistake sales professionals make is quoting a price without understanding the financial impact of how a problem is being solved or value is created - and communicating this in a clear, fact-based model or illustration. This requires research, listening, asking questions and building a model - but this approach is far more effective in most scenarios than other techniques in that is demonstrates the sales person's authentic interest in the financial success of the prospect which may also help in the professional success of the buyer.

Fully agree. In addition, it is very important to understand what "too expensive" or "too high" or "not competitive" means in terms of the monetization model. Is it really the price level, or maybe it is the price model (lump sum, subscription or transaction/"pay per xxx") which is not optimal from a customer perspective; maybe the customer has reserved a budget already and would like to spend it instead of paying per month or per use. In these cases a modification of the model or combining different models may help in addressing the price objection.

Active Listening: Fully understand the customer’s concerns and objections without interrupting. Clarify: Ask follow-up questions to ensure you grasp the specific issues they have with the price.

Understanding the customer's concerns and motivations for the objection can provide valuable insights into their needs and expectations.

?? Uncovering the Root Cause of Price Resistance in Sales ?? ?? Active Listening: Pay close attention to the customer's objections. Often, the real issue isn't just the price. ? Ask Probing Questions: Dig deeper. Is it budget constraints, perceived value, or competition? ?? Empathize and Understand: Show genuine concern and empathy. Build a connection beyond the transaction. ?? Analyze Trends: Look for patterns in objections. Is there a common thread among certain customer segments? ?? Tailor Your Approach: Use insights to refine your offer, emphasizing value and addressing specific concerns. Remember, every objection is an opportunity to understand and serve our customers better! ?? #pricing #negotiation #SALES

Here are a few ways to highlight value to customers: 1. Use Social Proof: Share testimonials, case studies, or success stories of other customers who have benefited from your product or service. Seeing the positive outcomes for others can reassure the customer of the value and effectiveness of your offering. 2. Offer Flexible Solutions: If the price is a significant barrier, explore flexible payment options such as installment plans, discounts on longer-term commitments, or bundled offers. This shows you are willing to work with the customer to find a mutually beneficial arrangement. This ultimately helps customers realize that the company is committed to delivering value and prioritizing the needs and satisfaction of its customers.

Clarifying the value proposition helps customers better understand the pricing. This is most effectively done through a total cost of ownership comparison, where your product and its alternatives are evaluated based on their total costs over a year or more. Such a comparison can also serve as a tool to assess whether the product truly adds value to the customer. If it does not, it may be time to reevaluate your product strategy.

Regardless of your pricing strategy and positioning, price objections will always occur because that is how people are trained to negotiate on price more than other deal factors. Being able to communicate the value proposition and how your product solves the customers' problems well should be a primary counter to price objections. Not only does this reiterate the value of your product but deflects away from price reduction to seal the deal.

In price negotiations, a value-based strategy is your anchor. It shifts the conversation from cost to value, focusing on the benefits your product or service brings to the table. Illustrating the return on investment and aligning it with the customer’s objectives can be compelling. This approach requires deep understanding of the customer's business, a clear communication of your product's unique advantages, and an unwavering belief in the value you deliver. Done right, it not only justifies your price but also solidifies your customer relationships, as they recognize the true worth of their investment.

Value-based pricing is a strategy where the price of a product or service is set primarily based on the perceived or estimated value it delivers to customers, rather than on the cost of production or historical prices. Here are the steps to implement a value-based pricing strategy: 1. Understand Your Customers 2. Determine the Value Proposition 3. Analyze Competitors 4. Set the Price Based on Value 5. Communicate the Value 6. Monitor and Adjust

Reflecting on my role as a Pricing & Revenue Manager at Aeromexico, the LAER model—Listen, Acknowledge, Explore, Respond—has profoundly influenced my approach to managing objections and negotiating prices. Initially, listening without interruption has taught me the importance of understanding the customer's perspective fully. Embracing the LAER framework has not only refined my negotiation skills but also strengthened customer relationships, fostering sustained growth and success in a dynamic market environment.

By acknowledging objections, you can steer clear of typical pitfalls like getting into arguments or disregarding concerns. It demonstrates your genuine concern for the prospect's issues and conveys your willingness to find a mutually beneficial solution.

Here is an example of how I applied LAER. Listen: I listened to the customer and understood that he wanted our service but did not have the budget. Acknowledge: I thanked him for his openness and mentioned that we cannot lower the price to match his budget. Explore: Together, we discussed who else in his company would benefit from our service. We identified two more groups of stakeholders. Respond: The customer talked to other internal stakeholders, suggesting that each covers 1/3 of our project costs. The other two stakeholders negotiated a 25% coverage for themselves and a 50% coverage for my customer. My customer agreed because he just saved 50% of his budget and we were able to continue a successful relationship.

The LAER model for handling price objections involves the following four steps:- 1. Listen: Hear the customer's objection fully without interrupting. 2. Acknowledge: Show empathy and validate their concern. 3. Explore: Ask probing questions and clarify details to understand the objection better. 4. Respond: Provide a solution that meets their needs and reinforces your value.

(Active) listening skills is the key to success here. It is where understanding of the pain points begins and designing value proposition.

On the other hand, if adding value, up- or cross-selling is not an option, price reductions should always be accompanied by reductions in content/features/service/T&C etc. Therefore, it makes sense to parallelly plan both price and offer strategy in advance and be clear on what concessions you would be willing to take and/or what alternatives you would be willing to offer in exchange for a lower price

Discounting is bribing people to buy your product! Discounting might look like an easy fix to sell more, but it's often more harmful than helpful. When you cut prices, you're also cutting into your profits. It can also make your brand look cheap and attract customers who only care about low prices. Plus, once you start giving discounts, customers will always expect them. But people do love a good deal. Small discounts, like less than 10%, can work without hurting your business too much. It's about using them wisely, not all the time. Instead of just slashing prices, try adding value to what you sell. Bundle products, offer upgrades, or add freebies like extended warranties.

Don't think of discounts as just discounts. Rather, treat discounts as a 'give-get' exchange of value between you and your prospect. If you are giving a discount, you should expect something in return. For example, if a prospect asks for a 5% discount, don't just say yes. If you do, they'll just ask for more. Instead, propose a trade, “I can offer a 5% discount if you agree to [a 2-year deal, more seats, an add-on purchase, or a signed deal by the end of the week].”

If a discount is unavoidable it should still only be given in exchange for a concession on the customer’s part: Are they willing to commit more by signing up for longer? Is there some intended section in the legal paperwork that we could not have, for example the one speaking about penalties or limiting future price increases? Is a customer willing to speak at your next marketing event? It depends on the context and industry of course. Key is that no discount is given without extra commitment on the part of the customer.

While discounts may attract new customers in the short term, they often fail to create lasting customer loyalty. Instead, consider offering off-invoice rebates to foster long-term customer relationships and build brand loyalty.

Cannot agree more with this point. In order to protect your positioning, sometimes you will have to walk away. Customers price understanding might not encompass every attribute of your positioning strategy and accepting to leave this customer away will be beneficial to protect the other customers who fully adhere to your positioning.

Sometimes, despite your best efforts, overcoming a price objection or reaching a mutually beneficial agreement may be impossible. Knowing when to walk away is crucial; it can be a strategic move that demonstrates confidence and professionalism, creates a sense of scarcity, and opens doors for future opportunities. However, it's important to walk away gracefully and respectfully, preserving the relationship and leaving a positive impression.

Price negotiations take time and a lot of human energy. One should always think in terms of alternative cost - where this time and energy would be better used. It would be great to actively manage the ealk away thresholds to adjust it to the market conditions and local market strategy.

Sometime it's best to respectfully decline the business if it doesn't make financial sense for your company. Once somebody taught me never sell anything what's not in your bag.

More important than making a sale is knowing the sales you should avoid to safeguard your business. There are many stories of massive sales celebrated by the sales team that, however, jeopardized the entire company's strategy. For every business, it's crucial to establish what constitutes a healthy sales conversion percentage. Very high sales conversion percentages, for example, above 70%, may indicate that the company is sacrificing its margin too much.

It might sound counter intuitive but losing a number of deals is healthy. Said differently: If your win rates are too high your prices are too low. Also, sometimes the customer will already have their mind made up on who to choose. In that case the worst thing one can do is to offer further discounts to an “already lost” deal - as those offers might reach competitors and will further trigger a price war without any potential upside since the business is already lost. Even better, sometimes the customer has no real intention of buying and just wants to get a quotation to negotiate with their current supplier. Customer relationship in these cases is key to asses when you are being benchmarked without real chances of the customer switching.

Value-based pricing, focusing on customer value rather than cost, helps prevent price objections. Implement by identifying the target market, segmenting customers, quantifying value drivers, and communicating value proposition clearly. Handle objections with the LAER model: Listen, Acknowledge, Explore, Respond. Avoid discounting; offer value-added options instead. Know when to walk away gracefully, preserving relationships and potential future opportunities.

Negotiating pricing involves understanding both parties' needs, finding common ground, and being flexible. Start by knowing your value proposition, setting clear pricing boundaries, listening to the other party's concerns, and offering solutions that meet both your needs and theirs. And if you ask me what’s the most important skill to learn in pricing negotiation is “asking good questions” and “listening”.

When faced with price objections and negotiations, begin by listening attentively to the customer's concerns and showing empathy toward their perspective. Then, reaffirm the value your product or service brings and explore flexible options that cater to their needs. Back up your pricing with convincing ROI evidence and negotiate smartly by offering value-added benefits. Create excitement with limited-time offers and confidently seal the deal by confirming terms and expressing appreciation. Also, make sure your frontline staff is ready to walk away in case the deal is not accretive in the medium term. Finally, ensure their satisfaction on value and ROI through thoughtful follow-up, strengthening your relationship for future business.