by Mark Birch
One day I stopped into a gas station convenience store on the way to a client meeting. I went to the front counter, found a pack of gum, and plopped it down on the counter.
“How much?” I mumbled absently.
The man at the register just stared at me.
“Ah, how much for the pack of gum?”
We just stood there looking at each other with just the counter and a pack of gum between us.
“So, are you going to ring me up?” I said hastily.
“Can you help me understand what need you are trying to fill?” he replied.
“Well, I want some gum and what is it to you anyway?”
“I understand sir, but I have to assess your needs before I can provide a price.” There was not a flicker of emotion betrayed in his eyes.
“Look, it’s a pack of gum, I want fresh breath, and I am heading into a meeting now.”
“That is interesting. Are you sure that your choice will be able to accomplish the task you stated?”
“I just want the price, so ring me up so I can get on my way before I am late. What is the difficulty in understanding that?” At this point I could feel the veins in my neck pop.
“Before I can share the price, we need to understand the value you expect to derive from the pack of gum. Can you share your key metrics or goals that would help measure the impact of your current challenge? And perhaps you can…”
I was already in the car and racing to my meeting, with bad breath and a foul state of mind.
Does this feel like most discussions when it comes to price? Especially in the B2B world, it can feel like pulling teeth to get any numbers from a sales rep. And instead of answering with a simple price, you get grilled with questions. It is like they were protecting the crown jewels.
I was prompted to write about this topic when I was at the last Sales Development Forum in New York and the topic of pricing objections came up. Pricing is a topic that has been beaten to death, but it seems as if we have not really progressed from antagonistic sales tactics. For example, one of the role plays led to a response that the price can range “anywhere from $2 to $2 million, it all depends”. Gee, super helpful.
The problem with discussing price is that it puts the buyer and the seller on opposing sides. At least that is how we are programmed to engage in such discussions. When price gets mentioned, sellers automatically go on the defensive, build their trenches, and hunker down hoping the assault will pass if we evade the questions long enough. And buyers keep sending over pricing grenades hoping that one will explode and open up a breach in the trench.
You can forgive sales reps a little bit however given how most buyers respond once they hear the price. It usually falls into one of four categories:
- The Blowup – “That price is way too high, the highest by far of all the other vendors!”
- The Negotiator – “That is your list price, but we are special and deserve the best price.”
- The Player – No reaction at all, they just move to the next question as if nothing was said.
- The Magician – “That is helpful, thanks.“ and then they disappear forever without a trace.
Rarely does discussing price early in the sales process go well for these reasons. And that is why it is beaten into the heads of sales reps by their managers to never divulge price early on in a sale. You give away control too early and give the power all to the buyer. In a time when information is freely available, price is the only negotiating chip sales reps have at their disposal.
It is not any easier for buyers. Though many products have gone the way of eCommerce, not everything is so simple to buy. Highly complex technologies, heavily customized products, and lengthy deployment services are not as simple to buy through a website and a few mouse clicks. And often the buyer’s own complexity and policies make it difficult to simply press the easy order button. Yet we have been conditioned as buyers to expect that everything falls into one nice and neat dollar value and then become frustrated when that is not the case.
The other challenge is the hoops one must jump through to get things done in large organizations. In even a modestly sized corporation, any significant purchase must go through various approvals:
- Business and functional
- Vendor assessment
- Risk and compliance
- Information security
- Information architecture
- Credit and financials
- Contracts and legal
- Executive signoff
Some approvals may be consolidated or skipped, but the rule of thumb is that the bigger the organization and the proposed solution, the longer each step takes and the longer the time between each step. Therefore, it’s not surprising that most enterprise level agreements take many months to finalize.
The nature of pricing itself is not all that cut and dry. In certain product lines and industries, price is simple. These are businesses that sell highly commoditized products or make pricing available via the Web. Because the nature of the sale is transactional, there is little to be gained by hiding the price. Buyers compare features they need and choose a vendor based on some combination of capability, cost, ease of purchase, and quality of service.
In contrast, pricing is about the hardest thing to discuss in complex solution sales. You need to factor in sizing, features, usage, installation, customization, support, and implementation services. The long-term impact to the buyer’s organization can also be a factor. All of these bits of information are inputs into various pricing calculators and spreadsheets to help determine how these variables factor into cost. That is why even ballpark estimates can wildly fluctuate.
This still does not help buyers and sellers. From the seller perspective, cost is a consideration, but only in relation to many other factors such as urgency, need, resource availability, and organizational goals. If those are not understood, then why does pricing even matter? From the buyer perspective, they are constrained by management requests, budget considerations, policy requirements, and organizational bureaucracy. If they cannot get a price, then why go through the effort of further conversations just to find out the prices is out of range?
What is missing is an understanding of situational context. Every buyer-seller conversation is going to have a different context. Timing, environment, prioritization, empowerment, and trust all play into how we assess each interaction:
- Timing – Is it early in the buying cycle or are deep into the throes of evaluating solutions?
- Environment – How does the buyer’s current state impact the seller’s ability to convey value?
- Prioritization – Where in the queue does a solution stack up in terms of time and urgency?
- Empowerment – Who is the buyer in relation to the ability to change the current state?
- Trust – What is the level of transparency and openness between the buyer and seller?
Let take an example from the buyer responses from earlier. Sellers come across Magicians most often in two situations. First is when the seller has little empowerment because they are a proxy for someone else in the organization that is doing research. The other situation is timing when the buyer is price shopping at the end of an evaluation, using the buyer’s price as a negotiation tactic against the chosen provider.
If we have a better grasp of where in the point of engagement buyers and sellers interact, we can avoid situations that lead to low levels of trust. This is where a skilled seller can truly be an asset for buyers. That is because astute sellers can understand the situational context and provide more valuable and relevant responses to the pricing question. In comes down to the broader context of where in the process, what to change, why it matters, and who is involved.
This does not necessarily mean sellers are obligated to share pricing on all occasions. Rather, the situational context provides a framework for discussing pricing in a more constructive and transparent manner so that buyer and seller can begin to align expectations and build up trust. That also means buyers need to be more forthcoming and understand that sellers are professionals that require certain information in order to do their jobs most effectively.
“Let’s work with each other so we can work for each other instead of against each other.”
Pricing discussions do not have to be a battlefield that separates buyers and sellers. If we can live by the above adage as a guiding principle, then we can find the common ground that allows us to build trust and value into every single conversation.