This article was originally published on November 29, 2023, in Qualified Remodeler . Written by Dave Yoho.
This is a deep subject and, for most companies, it’s an ongoing issue. When salespeople are responding to surveys as to why they didn’t get the order, or when they are asked, “What are the most common reasons prospects give for not buying?” they frequently state, “Your price is too high.”
Often, this statement is misunderstood. It is seldom about the price. It is more frequently a statement about perceived quality.
From our analytic data, we perceive that many sales reps return a lead they deem difficult by saying, “It couldn’t be sold; the people were price-buyers,” or, “They have a price 20 percent less than ours.” These statements lack reality. If your price is 20 percent higher than someone else’s, another company’s price is probably 20 percent higher than another lower-priced competitor.
This explanation of a failure to sell is all too common. The truth is usually that value was not established. Although you might believe that the product is worth the price asked, what has not been established is its worth in the eyes of the prospect.
We often find that price objections lead salespeople to take actions that are not in their own best interest. The value of any product or service must be established after a thorough assessment of the prospect’s needs. The product should then be presented to fulfill those needs better than other (similar) products.
The “price-buyer” label or that of someone having a better price is all too convenient for salespeople who have not lived up to their obligation. When the components of a product are presented in comparison to similar products (without naming or demeaning the competition), the true measure is: Did the salesperson justify the quality and price quoted in relation to the needs of the prospect?
Unlike many products sold, such as a car, house, clothing and furniture, where the customer sees a finished product, what you sell is a promise to deliver, connect and install an improvement project that fulfills their needs/desires. This is accomplished by first establishing need or want. Then present in an upbeat manner using sales aids that enable them to envision your product or service on/in their home.
A method we do not advocate involves the salesperson reverting to a quick price drop to make the product more palatable in the eyes of the prospect (it does not). If there is an incentive or discount involved with your current marketing plan, it has value only when the price quoted is justified and confirmed.
Otherwise, the discounted price is what the prospect evaluates for the product being offered. Frequently, when the reluctance to “buy now” is stated, the salesperson goes for another discount or price drop, which simply repeats the earlier process.
A product presented to fulfill desire and needs that meets the prospect’s value system reduces price objections, which are typically the most misunderstood type of objection causing the salesperson to take a plan of action that is not in their own best interest.
The Big Drop Is a Big Flop
We preface the following by stating that we are not condemning those within the industry who use a price break or discount as an incentive to close a deal. Prospects do respond positively to time-sensitive sales or special offers to “buy now.” Instead, the issue we have is with the big drop.
Historically, this practice dates back to the late 1940s and 1950s when, in an effort to sell roofing, siding or windows, companies would offer a discount (i.e., 10 percent of the quoted retail price). Back then, the average roof sold for $350 to $500, and siding ranged from $1,200 to $2,000.
Accordingly, the discounts used were believable and represented a reasonable incentive. A siding job quoted at $1,600 with a $160 (10 percent) discount was equal to what most homeowners were paid weekly.
Today, with kitchen remodeling, sunrooms, pergolas and basement refinishing costing $40,000 or more, siding jobs priced out at $15,000 to $25,000, and window replacements at well over $15,000, discounts that range from $4,000 to $10,000 (or more) start to resemble the way automobiles are traditionally sold—with little or no sustainable credibility to the quoted price.
If you are a proponent of a sales methodology with large discounts, review (rehash when possible) and examine the amount of rescission (cancellations) that occur. Our research shows that many customers cite price as the driving factor for rescinding their order.
If the customer believes your net price is too high, they certainly did not believe the list price was reliable. Take a moment to consider the number of people you do not close because the discounts that are offered don’t seem credible.
When the list price is validated, and the customer sees value in the product versus the price, the incentive offered has reliability. Salespeople are overly reliant on the “big drop” to get the sale because value was not sold in the eyes of the prospect.
In short, if you want to sell a $10,000, $20,000 or $30,000 job (or more) your presentation must provide a value perception in excess of the price you quote.As an option to the “big drop,” offer a bonus or discount as an incentive in your advertising, and the price reduction will be validated after you quote the list price.
Similarly, a “buy tonight discount,” which typically ranges anywhere from 3 percent to 5 percent, will make sense. Often, this is coupled with some “as advertised” discount of 5 percent to 10 percent (or similar).
Review the way that your in-home presentations are made and how the value of the product is being established in the mind of the prospect. This will lead to the “big drop” being replaced with an “initial presentation incentive,” which increases your close rate and diminishes your rescission rate. Answer objections with sensitive questions and don’t respond to negative thinking when you receive objections.
In the middle of a challenging sales presentation, have you ever asked yourself, Why do we have to handle and overcome objections? or, Why doesn’t the prospect just come out and tell us what we have to do to get the order? What you need to recognize is that the prospect is going through a natural buying process that leads to excuses, procrastination, fear of making the wrong decision, and an aversion to being sold.
It’s like a customer entering a retail establishment who is interested in buying something and being approached by a salesperson who says, “May I help you?” Ninety percent of the time, people respond by saying something like, “Thanks, I’m just looking!” Why don’t they tell the salesperson that they want to buy something?
Being in sales requires that you anticipate excuses and objections, and you don’t let them discourage you—instead embrace them. Remind yourself that it is normal for prospects to procrastinate or state excuses before buying.
So, what is the difference between an excuse and an objection? Statements such as “think about,” “shop around,” or “get other prices” are excuses. Statements such as “too much money” and “can’t afford now” are objections.
Sales are made when objections are overcome, so your job is to convert procrastination and excuses into objections, so that you have an opportunity to overcome them and close the sale. In this ever-changing economy—coupled with the ever-increasing negative press—price continues to be an issue that needs to be addressed.
Each week we receive comments on the issue of price and price objections. Our more seasoned clients follow our methods effectively. Newer clients are often concerned because they have a seasoned salesforce (whatever the title) who believes what they hear or read about inflation and a pending recession.
Certainly, there is much more to be said, absorbed, taught and trained so as to be effective; however, it all begins with the owner/leader of the company. Listen, learn and reflect on a new attitude. Then, leading and teaching that “closing the sale” is the natural conclusion to a complete, well-designed (and taught ongoing) step-selling methodology that is delivered by a well-trained enthusiastic salesperson who believes. QR
Dave Yoho is the president of the oldest (since 1962), largest, and the most successful small business consulting company specializing in the home improvement industry. His company, Dave Yoho Associates, employs a staff of consulting experts who specialize in advising companies on how to become more profitable in their business. For more information, visit daveyoho.com.