shutterstock_12871834 copy

How to Defend Your Price

It’s okay to lose on price. It’s okay—and it’s necessary—to walk away from business where you will lose money. Your company’s business strategy requires that you walk away from this business.

While there are still plenty of buyers that buy on price alone and refuse to admit that they buy on price, there are even more salespeople that have trouble defending their price and that don’t make the effort.

You Must Believe: If you don’t believe you are worth paying more for, neither will your clients. It is amazing how much belief matters here. Not your client’s beliefs, your beliefs. You have to believe you are worth paying more for if you are going to defend your pricing. If you don’t believe that you will create more value at your price than your lower-priced competitors, then your prospective clients won’t either.

You Must Explain: You have to be able to explain the difference between price and cost in a way that is meaningful to your prospective clients. It isn’t enough that the pricing difference makes sense to you. It must make sense to your prospective client.

If you have a higher cost structure when it comes to producing what you produce, you have to make the translation as to how your higher cost structure translates to greater benefits for your client. It’s not your client’s job to figure this out on his or her own.

If you don’t know how to talk about the difference between price and cost, you are going to have to learn. You can’t defend your price without defending the additional value that you create. You are going to have to demonstrate to your dream clients how the greater investment is going to be put to use in getting the result that they really need.

You Must Teach: If you won’t defend your pricing and teach your dream client how to help you defend your pricing, they won’t defend the decision to choose you—and it’s likely they won’t choose you.

Your contacts are going to be asked why they are spending more on whatever it is you sell. They are going to be asked to justify their decision. You have to provide them with the ability to make that defense. You need to provide them with the argument they need, as well as evidence that it is a good decision.

If you want to capture the price that you need in order to produce the value your client needs, you have to believe that your price is necessary and worth defending. You also have to be able to explain how your pricing helps your client to achieve their goals, and you have to teach them to defend your pricing and their decision to choose you.

It’s okay to lose on price when that is your prospect’s primary decision criteria. It’s not okay to lose on price because you could not—or didn’t—defend your pricing.

Questions

Are you prepared to defend your price?

Do you deeply believe your price is right and that it allows you to create differentiated value?

Do you know how to defend your price? Can you tie it directly to the value you create?

Are you prepared to prepare your clients to defend your pricing inside their organization?


Join my weekly Newsletter or apply for membership in my exclusive Inner Circle Mastermind Group.

Subscribe to my weekly podcast In the Arena.


Comments

comments

  • Marc Zazeela

    Excellent, Anthony!  The difference between cost and price can be vast. Some folks will understand when you point out the differences, others won’t. As you said, sometimes we need to walk away.

    Cheers,
    Marc

  • http://twitter.com/YSMMogul YSMMogul

    I have been reading a lot of posts on price, cost, etc… and I appreciate being educated.  I have always been brought up to be a good value, but I also need to learn, being cheapest in cost, is not always the best value to the client.  The service they receive for their money spent, that’s the best value.

    • http://www.thesalesblog.com S. Anthony Iannarino

      So true!

  • Pingback: 5 ways to optimize margins + win with CPQ sales quoting tools « Steel Brick Blog

  • http://twitter.com/rowe_bill Bill Rowe

    I agree Anthony, buyers today will attempt to commoditize every purchase they make and frankly we as sales professionals have taught them how.  We’ve done this by quarter-end/year-end deals, etc.  What we typically don’t do, is understand what their problem is quantified terms, what our impact is, again in quantified terms and demonstrate impact of our value proposition in terms the CFO understand i.e. an ROI. Granted this adds a lot of work to the process but at the same time it dramatically improves your chances to win the deal.  Believing, explaining and teaching are all important but in my experience removing the “risk” in the buyers mind through demonstrating the reward is critical.

  • Neil

    It’s very true, Anthony, I sold throught Scientific Supply Distributors for a number of years.  For stocking, selling and servicing our line, the got a 35%.  One day the VP of Sales told me that their salespeople were giving away 5% of the asking price in most instances. 

    Because they got 1/3 of the gross profit and were happy with 10% of the gross, they were giving away 5% to make it easier to get the sale.  I suggested we change the discount from 35% to 33%, plus a 3% rebate, thus reducing the automatic give-away. 

    The program worked and motivated top mgmt to put more emphasis on our line.

    • http://www.thesalesblog.com S. Anthony Iannarino

      Great story, Neil! The comp plan can–and does–drive sales behaviors!

  • Fanelli Nick

    Anthony, I love the teaching approach. I have a team that has been hooked on discounts before I arrived. I am working hard to teach them to believe. We sell a Rolex and not a Timex. Lower prices lowers our value. We need to be comfortable with our price, teach your lesson of more value and be sure that we don’t send off a price we present a valued investment. I just have been missing that lesson they need to be armed to defend our price to theor team as well. Thanks.

    • http://www.thesalesblog.com S. Anthony Iannarino

      Thanks, Nick! Hope it helps!

  • http://twitter.com/Mimiran Mimiran

    Great article. I often ask sales people to imagine going into a Ferrari dealer, gushing over the car, then complaining that it costs more than a Kia. Would the dealer sell the Ferrari for the Kia price? Yet, so many sales reps do effectively the same thing.



Download my E-Book: How to Crush It, Kill It, and Master Cold Calling Now! FREE when you subscribe to my newsletter »