Oscar Wilde once wrote, “A cynic is someone who knows the price of everything and the value of nothing.” Are price shoppers cynical, savvy, or both? Is there a difference
between frugal and cheap? Are price shoppers solely responsible
for the tug-of-war with salespeople? These are a few of the questions people like me ponder.
Salespeople face daily push-back on their prices. Helping salespeople deal with this reality is one reason I am in this business.
But, not all price objections are created equally. There are two
types of push-back on price: strategic price resistance and tactical
Strategic price resistance is a marketing challenge. Marketing
operates strategically while sales executes tactically. Strategic price
resistance has more to do with the
type of business that you are pursuing and your pricing model. If you
get push-back in the form of an RFP
(RFQ), bid, or online reverse auctions,
this is more procedural price resistance. Are you pursuing the right
business? Is this the size, segment,
or type of customer that you want?
Does your value proposition allow
you to make money on this type of
business? You may be chasing the
wrong stuff. The right question to ask at this point is, “Do we really want to invest any of our resources in this type of business?”
If the answer is yes, make sure your value proposition reflects this
type of business. If you try to sell a value-added solution to a price-only shopper, it is very much like trying to “teach a pig to sing. It
wastes your time and annoys the pig.” You cannot fix a strategic
mistake with a tactical solution.
Peter Drucker said “the mark of a good manager is knowing
which projects to work on; the mark of a great manager is knowing which projects not to work on.” This power of discernment
applies to sales and marketing management: The mark of a good
marketer is knowing which business to pursue, but the mark of a
great marketer is knowing which business to avoid. When salespeople encounter too much strategic price resistance, management needs to re-evaluate their marketing strategy.
Tactical price objections come from customers with whom you
want to work. You have already decided that you like their busi-
ness and want more of it. Their needs and your solution run paral-
lel. This resistance generally shows up in statements like:
• “That’s more than I wanted to pay.”
• “I don’t have the budget for this.”
• “I can buy this cheaper down the street or on the Internet.”
• “I just don’t see your value.”
• “I never pay retail for anything.”
These objections are more one-to-one. Typically, they represent
a communications breakdown, a failure to qualify the buyer, or an
attitude that reflects stubbornness of the buyer. They are not stra-
tegic objections because you really do want this business; it is good
business for your company. Your challenge is to figure out a way
to respond effectively. Salespeople generally find these objections
easier to deal with because they do not cause you to question your
reason for being there. You are fish-
ing in the right pond. With strategic
resistance, that is not always the
case. Tactical price objections are
resolved by guiding the conversation
down the path of value.
Strategic price resistance may have
a lot more to do with your pricing
strategy for the market you are pur-
suing. Pricing is a strategic discipline
and must be determined at that
level. It takes into account total cost,
market conditions, the impact of the solution on the customer, and
profit objectives. Salespeople are handed the price and challenged
to defend it at the tactical level. The more that your buyers know
about your pricing model and logic, the more they have to pick
apart. This is called value-stripping. This is why salespeople must
keep the conversation tactical, not strategic. Salespeople should
not have pricing authority because most will either offer a cheaper
price to secure the business or respond to the push-back with a
concession. Our research proves this reality.
All business is not good business for everyone. There is some
business that you want the competition to take — some of that
low-margin, high-aggravation, slow-pay, no-pay business. Then,
when they get the business, take Napoleon’s advice: “Never interrupt an enemy when he is making a mistake.”
Pricing is a strategic discipline. It takes into
account total cost, market conditions, and
the impact of the solution on the customer.
Salespeople are handed the price and chal-
lenged to defend it at the tactical level.
Tom Reilly is a professional speaker and author of Crush Price
Objections (McGraw-Hill, 2010). You may contact him through his
website www.TomReilly Training.com.