We were doing a deal review. It was a big deal with a prestigious customer. Procurement was involved. As we discussed the deal, the sales person said:
“Procurement thinks this is a good solution, but they aren’t willing to pay more than $X and we are a whole lot more at Y.”
“Have you presented the business case to the procurement folks?” I asked.
“We’ve talked about how much this improves productivity and reduces costs, we’ve provided some industry data….” replied the sales person.
“But have you provided a specific business case to them?” I asked.
“No, they’re stuck on the huge price difference…..the deal is stalled!” the frustrated sales person replied.
Sound familiar? I hear the same thing in too many deal reviews. In this case it was procurement, but any customer will raise the price objection–and they should.
And it becomes the showstopper for the deal. Sales people come back pleading for a discount to match the customer expectations.
We will seldom win if we compete on price! (I know I sound like a broken record, but you can’t imagine the number of deals I review where this is the only basis of competing.
But what really matters is the business case…..
Back to the original example. We chatted about the customer’s situation, “Does the customer understand how this solution will increase reduce costs and increase productivity?”
“They understand the concepts and they’ve read the case studies,” replies the sales person, “They think they should achieve savings in the same range as our case studies.”
“Have you developed a specific business case for them? Are you using their numbers to show how much it will increase productivity and reduce costs?” I asked.
“Well, no, they understand the principles, but we still have the pricing problem,” the sales person replies, “beside, they should be able to look at the business case themselves.”
“Clearly, they haven’t, otherwise they wouldn’t be arguing about price!” I reply.
After doing a back of the envelope calculation, we found the net savings to be several million, productivity improvements would add another couple of million.
The sales person says, “I get this, but they don’t like our price!”
“Can they get these savings from any other solution?” I ask.
“No, we are in a good position, we are the only solution that can give them these savings….” replies the sales person.
“So you are telling me this customer will walk away from millions in savings and productivity improvement, just because they don’t like our price?” I reply, getting a little impatient.
At this point, the sales person lapsed into silence.
We talked further, he defended himself, saying the customer understood the value proposition and what they would achieve. But he and they never translated this into a specific business case for the customer.
The customer doesn’t have to like our price! They can scream and shout about how unreasonable it is. As long as we have a business case that shows a superior return for them, price is absolutely irrelevant.
The customer would be insane not to select a solution that provides millions in improvement, regardless of the price of the solution.
I wish I made this up, but it is too common. We sell on price, we lose on price. We sell on business value, we sell on the fact the customer can’t get these outcomes unless the pay what we are charging, we focus on their business return, not the price of our products.
Thanks for indulging me, I’m off my soapbox, but can’t help getting impatient with the number of opportunities I see where the focus is on defending our price, rather than focusing on business outcomes!