Why discounting can cost you the professional services sale

| September 4, 2012 | 5 Comments

Chris was working on a huge opportunity that spanned more than six months. She had demonstrated her understanding of the client’s issues, illustrated her firm’s extraordinary experience, and positioned herself strongly against a well-established competitor.

It seemed that the client was leaning toward Chris and her company to help with a mission-critical project. The client said that they would be getting back to Chris last week, but she had not heard back.

What did she do?

Chris knew that her firm’s rates were the same as her competitor. This was a big opportunity, and Chris really wanted to land this account as it was a big project. Having not heard anything from the client, Chris started to get worried (does that sound familiar to you?).

Chris sent an email to the client explaining that she was looking forward to moving forward with this project. If the client could get the agreement signed this week, she would discount their rates by 15%. Chris figured that this would do the trick to push them over the edge… but did it?

How did it play out?

Chris did not win the deal. Her client said that they decided to go with the other firm.  Chris asked “Was their rate lower than our discounted rate?”  The client said “I don’t want to get into the details, but no, they were not less. We just felt more comfortable with them.” So, what might have happened? What could you do to avoid this type of situation?

It seemed like playing the discount card was the right move

When retailers want to sell product quickly, they discount items. They know that they sell commodities (the same product as others), so discounting the price is one of the few ways they can differentiate themselves (they also might offer free delivery, financing, etc.). So, it is natural for people selling professional services to businesses to think “Hey, that should work for us!”

Let’s say you had a serious medical condition (I hope not, but go along with me).  You meet with the surgeon, and he explains the procedure and his background. What if as you were leaving his office he said “Oh.  If you  decide by tomorrow, I’ll knock off 15%.”  Would that make you comfortable or nervous?

How can you focus on value and not price?

When business people are making decisions about purchasing services, the greatest single factor in their decision is how comfortable they are with you.  Specifically, they gauge how well you understand their specific situation, whether or not you have relevant experience that suggests you will succeed, and whether or not they can see themselves happily working with you (be sure to read my friend Rohit Bhargava’s book, Likeonomics, to better understand this concept).

Remember these three keys to improve your chance of success.

  1. It’s all about them: This is one of those things that everyone understands conceptually, but most do poorly in practice. The easiest thing for you to do is talk about your capabilities and services. If you want to stand out from the competition, it’s the last thing you should do.Rather, develop the skills to ask probing questions to help understand the client’s situation. The better they feel you understand their situation, the more comfortable they’ll be with you (and the fewer questions, ironically, they’ll ask about your qualifications;
  2. Know the competition: Realize that you need to understand how you stack up compared to others in the customer’s eyes. It is so important that I dedicate an entire section in my Upside-Down Selling Immersion program in October to dealing with incumbent vendors and competition. In most cases, you are not selling into a vacuum. Rather, the client may already have a relationship with another vendor or is at least considering alternatives;
  3. It’s rarely about price: When a client is making a decision to hire a professional (consultant, attorney, accountant, etc.) they recognize that people are not a commodity.  Your own beliefs are often the root of the problem. If you are convinced that you provide the identical skills as another party, then you will likely believe it is about price. If you believe that you are a commodity and all that matters is price, then your nonverbal communication sends that same message to the client.When Chris decided to discount her price in the example above, it signaled to the client that she lacked confidence in what she brought to the table. If you bring up price on your own, you might be negotiating against yourself… and undermining your client’s perception of your worth. If price is important, clients are rarely shy about that topic. Dealing with that situation is a topic for another day.

Please share circumstances when you were turned off by someone discounting their price. Do you have stories where you won deals by standing firm on price?  I look forward to you sharing your experiences.

 As seen in the
WBJ BizBeat

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Category: Blog, Consultative selling, Grow Revenue, Pricing, Professional Services, Sales Eduction, Upside-Down Selling

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  1. Selling on Price is for Wimps | GrowMyRevenue | September 16, 2013
  1. Sound advice for all of us, Ian. Well done.

  2. Great, concise post. Those three factors pretty much say it all. I would only add that if we, as sellers, are dealing with a client that IS truly focused on price, then need to move on. That type of client isn’t profitable or fulfilling to serve in the long run.

    • growmyrevenue says:

      Stephen – Thank you for sharing. There are plenty of companies who succeed being the low bidder. If you are a true commodity, that might be a good approach. You don’t always need to walk away when it is all about price… But you better find out early in the process. You can have price or value… Pick one.

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