Chris had been working on a large potential client opportunity for six months. She had demonstrated a solid understanding of the client’s issues, established her firm’s stellar qualifications, and capably competed against a well-established competitor. Chris could tell that the client was leaning toward her company to help with this huge project. The client indicated they would be getting back to Chris last week, but she had not heard back. Chris knew that her firm’s rates were the same as the competition. This was a big opportunity, and Chris really wanted to land this account as it was a big project.
So what did Chris do?
Having not heard anything from the client, Chris started to get worried (does that sound familiar?). Chris sent an email to the client explaining that she was looking forward to moving forward with this project. If the client could get the agreement signed this week, she would discount their rates by 15%. Chris figured that this would do the trick to push them over the edge… but did it?
Chris did not win the deal. Her client said that they decided to go with the other firm. Chris asked “Was their rate lower than our discounted rate?” The client said “I don’t want to get into the details, but no, they were not less. We just felt more comfortable with them.” So, what might have happened? What could you do to avoid this type of situation?
Why did it seem like the right move?
This is a common situation – one I see all too often. When retailers want to sell product quickly, they discount items. They know that they sell commodities (the same product as others), so discounting the price is one of the ways they can differentiate themselves (they also might offer free delivery, creative financing, etc.). So, it is natural for people selling professional services to businesses to think “Hey, that should work for us!”
Let’s say you had a serious medical condition (I hope not, but go along with me). You meet with the surgeon, and he explains the procedure and his background. What if as you were leaving his office he said “Oh. If you decide by tomorrow, I’ll knock of another 20%.” Would that make you comfortable or nervous? We don’t want our surgeon to be the low bidder, or someone who needs to discount to get our business.
Why did it backfire?
When business people are making decisions about purchasing services, the greatest single factor in their decision is how comfortable they are with you. Specifically, they gauge how well you understand their specific situation, whether or not you have relevant experience that suggests you will succeed, and whether or not they can see themselves happily working with you (be sure to read my friend Rohit Bhargava’s book, Likeonomics, to better understand this concept).
Remember these three keys to improve your chance of success
- It’s all about them: This is one of those things that everyone understands conceptually, but most do poorly in practice. The easiest thing for you to do is talk about your capabilities and services. If you want to stand out from the competition, it’s the last thing you should do. Rather, develop the skills to ask probing questions to help understand the client’s situation. The better they feel you understand their situation, the more comfortable they’ll be with you (and the fewer questions, ironically, they’ll ask about your qualifications;
- Know the competition: Realize that you need to understand how you stack up compared to others in the customer’s eyes. It is so important that I dedicate an entire section in my Upside-Down Selling Immersion programs to address incumbent vendors and competition. In most cases, you are not selling into a vacuum. Rather, the client may already have a relationship with another vendor or is at least considering alternatives;
- It’s rarely about price: When a client is making a decision to hire a professional (consultant, attorney, accountant, etc.) they recognize that people are not a commodity. Your own beliefs are often the root of the problem. If you are convinced that you provide the identical skills as another party, then you will likely believe it is about price. If you believe that you are a commodity and all that matters is price, then your nonverbal communication sends that same message to the client. When Chris decided to discount her price in the example above, it signaled to the client that she lacked confidence in what she brought to the table. If you bring up price on your own, you might be negotiating against yourself… and undermining your client’s perception of your worth. If price is important, clients are rarely shy about that topic. Dealing with that situation is a topic for another day.
Please share circumstances when you were turned off by someone discounting their price. Do you have stories where you won deals by standing firm on price? I look forward to you sharing your experiences.