Conveying why the price is the price
This scenario plays out all too often in SaaS sales. You sell the vision, you give an effective product demo, and you make sure you’re on the same page with the prospect. But then the prospect asks for a pricing proposal and almost immediately there’s pushback, confusion, and requests for aggressive discounts.
The pushback can’t be erased from the sales process, but how you handle the pricing discussion before and after sending a formal quote can impact the degree in which the prospect values that proposal. Effectively explaining why the price is the price helps you frame the negotiation parameters while arming your prospect to champion value-driven concepts internally.
But how does one go about initiating an effective discussion around why the price is the price? Here are a few phrasing suggestions that can help you tell the story around what’s behind the price when prospects push back.
“Beyond the technology itself you should also consider what we invest in as part of the overall customer experience.”
Often prospects will focus solely on the price as it relates to the technology they are looking to purchase. But there’s so much investment that goes beyond just the technology itself when it comes to providing value to your customers. Verbalizing this upfront and showcasing the experience your prospect will have as a customer, can up level your pricing stance. Here’s an example of how this phrasing can play out:
Beyond the technology itself you should also consider what we invest in as part of the overall customer experience. Not only are you receiving top notch initial implementation assistance, but you’ll be introduced to a customer success manager who will help us execute the use cases we’ve discussed. I’ll also be involved so you’re getting end-to-end support from a team that is invested in your success.
“We find that our customers place a premium on…”
Just because the initial reaction to pricing is that it’s high, it doesn’t mean the prospect won’t agree to the price, especially if there’s something uniquely special about the technology you are selling. And when there’s a premium feature or angle to your product it’s likely that your existing customers have validated a certain price point. When this is the case it’s important to make sure the prospect understands their ask for a discount is atypical. Here’s how that might be delivered:
We find that our customers place a premium on reliability and that’s one of the cornerstones of our platform. This focus on reliability is baked into the price and is why that level of discount will be tough to get approved
We find that our customers place a premium on ease of use and we’ve invested a lot of company resources on that pillar of our platform. This is baked into the price and has been validated by our 3,000 existing customers, most of whom have signed-up at list price.
“We don’t engage in pricing wars with our competitors…”
Another negotiation tactic used by prospects involves anchoring pricing expectations against that of your lower-priced competitors. When this happens it’s important to bring the conversation back to value-driven evaluation criteria vs. price comparisons. Otherwise it’s a quick race to the bottom with the prospect having the upper hand. Here’s how phrasing for this might play out:
I understand that’s what [insert competitor name] has quoted you but we don’t engage in pricing wars with our competitors. We’d rather focus on the value you’re receiving based off of the elements of our platform we’ve discussed. Our competitors also cannot provide key aspects of our platform you’ve already validated.
“That all being said, did you have a magic number in mind and can you give us a sense for how you think about pricing?”
Effective modern day negotiations are collaborative. Explaining why the price is the price does not mean you won’t negotiate. Therefore it’s important to ask the prospect to provide their side of the story, as well. Doing so shows that you are understanding of their circumstances even if you don’t have a counter proposal ready on the spot. Asking point blank about their “magic number” can also give you valuable information around where you might need to land to ultimately get the deal done. Again, asking this question is not an immediate concession but is helpful when drawing-up the counter proposal after the call. Speaking of counter proposals, that’s a whole topic on its own but for now, at least start framing why the price is the price to set yourself up for negotiation success.
