Imagine you’re doing a cold call and pretty early on in the sales conversation the prospect asks you, “What’s the price?”
You probably already know better than to just give them the price. But what if they insist on it, “Just tell me the price already. There’s no reason for you or me to waste our time going through this whole conversation only to find out at the end that your price isn’t a good fit for our budget. So how much are we talking?”
Sounds reasonable. So what do you do? Give them the price range?
Let’s assume for a moment you give them a price range: “The price range is around $10,000 to $20,000 annually.”
Congratulations, you’ve just put the final nail in your coffin!
At this point, you have given away all your power in the sales conversation. You know nothing about the prospect.
By putting out your price like this, you’ve positioned your solution as a commodity. The prospect now looks at your offer as a cost center. It’s very hard to establish the value of your product or service from here on out.
Unless you actually are selling a commodity, you simply don’t have the insights you need to quote a prospect a price. For most SaaS companies, you need to know a couple of things about your buyer, for example:
- How much value is your solution able to create for this prospect?
- How will that value be evaluated and quantified, which KPIs?
- Is this a small, medium, or enterprise-sized prospect?
- How much support does this prospect need?
- What are their overall wants and needs?
- Will the prospect require consulting?
- What’s their budget?
- How much usage will they create on your platform?
There are all kinds of ways that quoting them a price too early can backfire.
Most people think that quoting a price that is too high is the potential deal-breaker, and for many prospects this is true. But sometimes the opposite is true!
What if your price was too low?
Some buyers have gigantic budgets and want to know that you’re a serious vendor.
If you quote them $10–20,000 a year for something that they usually would spend $2 million a year on, they won’t take you seriously.
You lost the deal because you didn’t know who you were dealing with. You threw darts in the dark and gave them a price way too low.
So what should you do instead?
“What’s your budget?”
If the prospect tells you they don’t want to waste time talking about an offer that might not match their budget, just ask them: “Well, what’s your budget? We have many ways to structure deals, so if you tell me your budget, I can tell you if and how we can make it work.”
Many prospects will share insights about their budget with you. But some won’t …
“I’m not going to tell you the budget”
Many people will freak out when they get a no from a prospect. “Oh no! I pushed too hard and now they’re upset!”
No. That’s the completely wrong way of looking at this. You’ve elicited a strong response from the prospect. A moment ago the temperature in the room was cool, they were slightly interested. You’ve just turned the temperature up.
Now the prospect is much more emotionally engaged.
Take that energy and turn it into interest. That’s how you turn a disengaged prospect into a hot lead in a sales call.
Establish value first
Gather relevant insights about your prospects first. Then when it comes to price, you can make it about the value your solution provides. Rather than being a cost center, the prospect views it as an investment.
The question shouldn’t be: How much does this cost?
The question should be: How much will the ROI of this investment be?
Pricing is positioning
Hopefully, you’re not in the business of being the cheapest on the market. But if you want to position yourself as a premium solution, you can’t do it with wholesale pricing. It’s not a sustainable business, and people draw conclusions about the value they get based on the price you charge.
Price can be empowering
Never, ever give away price without understanding your prospect.
Never, ever give away your price before establishing value in a sales conversation.
If you talk about price before you know what value you create, you’re talking cost, commodity, you’re losing control.
When you talk price once you truly understand the prospect and customer, price is now an investment, it’s branding, it’s positioning. See how it turns from something negative and out of your control to something positive and empowering, something that strengthens your negotiations in the sales process.