CHAPTER 31

Qualifying on Price and Value

The second step in your bulletproof qualification process is price qualification.

Salespeople are often too busy chasing a buck to really listen to the customer. They desperately cling to “sales opportunities” because they are loathe to kick any potential buyer to the curb. But, as a consequence, they skip what should be an essential early step in their sales process: qualifying the prospect on price. The purpose of qualifying your sales opportunities is to identify high-potential customers with requirements, if not appetites, for the exact product or service you are selling at the price for which you are offering it.

I once read an article in which the writer advised salespeople to avoid talking about price until they have “demonstrated the value” of their product or service. Unfortunately, there is a fundamental problem with that advice: You can’t demonstrate the value of your product without talking about your price. And you shouldn’t try. Value doesn’t exist in the absence of pricing information.

Price qualification is simple and straightforward: You reach a preliminary agreement with the customer about the value that she will receive from your product in exchange for the price she is going to pay you. In other words, to qualify a sales opportunity on price, you have to reach a tentative agreement with the prospect that your price is proportional to her assessment of your product’s value.

When you are talking to a prospect about the value of your product, what is the measure of that value? Value is not an abstract concept. It has to be quantifiable to have meaning for prospects.

Dictionary.com defines value as “the worth of something in terms of the amount of other things for which it can be exchanged.” This means that you can express the value of your product or service, for example, in cost savings, improved productivity, or reduced customer churn, but for the full effect your customers must be able to measure the worth of that value in terms of the money they must pay to receive it. Customers have to be able to envision the return on that investment in terms that are meaningful to them.

You can tell your prospects, “Our customers have experienced an average of 19 percent growth in annual sales in the first three years of using our product.” But the first thing they’d do is calculate what a 19 percent improvement in sales would be worth to them in terms of the investment they must make to realize that value. How can they make that necessary calculation if you are withholding pricing information? They can’t.

Qualification on price and value doesn’t mean that your prospects will be 100 percent in love with your price. But it does mean they agree that you’re in the ballpark and that any further discussions about price will be a negotiation about deliverables, not a price objection.

As you have learned, your job as a salesperson is first and foremost to provide your customers with the information they need to make informed purchase decisions. The number one piece of information that your prospects want when they talk to you is pricing. After your prospects have spent time online researching your company and what it sells, they want to understand the value your products and services will provide them. This understanding cannot be reached without talking about price.

Price qualification’s rightful place is early in the sales process, no later than during the discovery phase. Working with a sales opportunity beyond the discovery phase without qualifying it on price puts you on the fast track to a vicious sales cycle. In fact, price is a valid reason for you to disqualify a prospect. First, ask the right questions of prospects to fully understand their requirements and make sure these are aligned with your value proposition (aka product qualification.) Then clearly lay out the value, price, and the ROI they can expect from your solution, based on the prospect’s stated requirements. If you can’t reach a preliminary agreement on your value-for-price equation at this stage, then you probably need to walk away.

This begs the question: Can you get a price objection from a truly qualified prospect? The answer is no. You can’t qualify a customer on price without disclosing your price. If you reach the preliminary qualifying agreement with the customer on the value-received-for-price-paid equation, then the customer is extremely unlikely to raise future objections to your pricing (barring an unexpected change in scope or circumstances).

A true price objection surfaced by your prospect at the end stages of the sales cycle usually means one of two things: (1) You misplaced your backbone at the moment of truth and didn’t disqualify the prospect when you had the opportunity, or (2) you didn’t fully disclose your price during qualification. If it is reason 1, then the prospect was never a true prospect for your product or service, and you wasted your valuable sales time on someone who was never going to buy from you. If the answer is reason 2, then you misled the prospect about your value proposition, and it will be difficult to rebuild your credibility and win the order.

Over the course of many years, I have successfully taught clients and salespeople four rules of thumb about price qualification:

1. Be direct with the prospect about your pricing. Salespeople have developed an unhealthy fear of the price question. They want to stuff it away in a closet and forget about it. They fear that any discussion of price will frighten off the customer. But that is exactly the point. There is no mystery to qualifying on price. Do what you do best. Ask the right questions to fully understand the customer’s requirements and make sure there’s alignment with your value, features, and specs. And then talk price and value based on the customer’s requirements.

2. Price qualification means that you reach a preliminary agreement that your price is proportional to the customer’s assessment of your product’s or service’s value. Qualification on price and value doesn’t mean that you’ll never have another discussion about price with the customer. But it does mean that conversation will more likely be centered on scope and deliverables as the means to adjust the pricing to align with the customer’s requirements.

3. A price objection is a valid reason to disqualify a prospect. Disqualification on price must take place early in your sales process. A true price objection from a prospect late in the sales cycle means that you weren’t transparent in providing your pricing and didn’t disqualify the prospect when you had the opportunity. Consequently, the customer was never a true sales opportunity, and you wasted your selling time on someone who was never going to buy from you.

4. Beware of the price-qualified customer who keeps pushing back on price. If you do a good job of qualifying the prospect on price, but he keeps pushing back on price while ostensibly still moving forward with his buying process, then you should proceed with caution. It’s possible the buyer has a hidden agenda and is using you in order to advance it. In one very large deal early in my career, the price-qualified prospect kept raising price objections. Unfortunately, I made the mistake of responding to these objections because I didn’t have the experience to understand that the prospect was using me as a leverage point to negotiate a better deal with the competition. It was a painful lesson learned.

Product qualification and price qualification are simple and practical tools that will help you maintain your focus on those sales opportunities that have a higher probability of providing a great return on your investment of selling time.