I was recently copied on an email from a purchasing manager to one of his internal clients. The purchasing manager’s internal client forwarded it to the salesperson that had been calling on him. In the forwarded email, the purchasing manager suggested that she would push back on whatever pricing the salesperson proposed. In her mind, this is one of the ways that she believes that she creates value for her company (and perhaps it is).
Not too much later, the salesperson provided the pricing he’d agreed upon with the primary stakeholder with whom he was working. That pricing was forwarded to the purchasing manager. The purchasing manager emailed the salesperson asking for a steep and substantial price reduction.
Here’s what he did.
Reiterate the Value
The salesperson pushed back. He called his primary stakeholder and reiterated the value that the solution would create for the company. He made his case as to why an underinvestment wouldn’t produce the result that the company really needs. He focused like a laser beam on the value being created. That’s how you move from price to cost.
And then the salesperson politely pushed back. He said he could not agree to any price other than the price he quoted and still produce the result. He also said that he couldn’t accept the business at a lower price and fail; that would detrimental to their both companies. Why does this approach work?
Why Does This Work?
The salesperson was being honest. That’s a big part of why this works. There is also a flight to quality. That’s another reason why this approach worked, and will work more and more in the future.
But the real reason that this approach worked is twofold.
First, the salesperson was able to reiterate the value that he created to his stakeholders and the economic buyer. He didn’t offer to go back and sharpen his pencil. He didn’t ask what his competitor had quoted. He didn’t take the deal to his manager. He restated the outcomes that the solution was going to produce and what it would cost, and pointed out the risks of underinvesting in the results his client needed.
Second, he made clear that he was willing to walk away from the business rather than fail the client. He wasn’t willing to fail for his client because he knew it would lead to their failing to deliver for their client. He also wasn’t willing to have his company’s reputation damaged by failing his dream client.
Your clients can’t afford to fail their clients. But they need you to help them justify your pricing internally.
The client agreed to his price. The salesperson’s approach made it possible for them to do so. You can make it easy for your dream client to approve your pricing, but you have to be prepared to help them understand and justify the value.
What is your approach to pricing discussions?
How do you ensure that you get the pricing you need to deliver?
What happens to your results if you allow your client to underinvest in the results they need?
How do you move the conversation from pricing to value?