A while ago we looked at a simple “trick” for doubling your company’s sales, one whose effectiveness I have tested myself. This time, especially for service providers, there is a common-sense technique so that when we quote a price to a prospective client, we neither throw out a price so high that the client runs away, nor one so low that it ends up putting our profit margin at risk.
As we always say, sales are won more by listening than by talking, and you gain much more by asking questions than by answering client questionnaires. It isn’t true that a good salesperson is the typical smooth talker with the gift of the gab. So how do we quote a price for our services that is neither too high nor too low, and move as much money as possible from the client’s pocket into ours? Simple: the client will tell us.
The solution is to ask about the budget before talking about price, a simple sales discipline that Geoffrey James has been using for years and that, he says, has earned him more than $250,000 extra.
We start the conversation by talking about the client’s specific needs, what they want, what they need to cover… completely as normal. Then, when the moment comes, we ask: “What budget do you have to invest in this?” or “How much did you have in mind to spend?”
The client can only give you three answers:
- We don’t have a budget yet.
- How much would it cost?
- The budget is around €XXX.
Obviously, the answer we’re looking for is number 3, because it means money in the bank. But let’s look at how to handle the other two answers before moving on to that one.
Answer 1: “We don’t have a budget yet”
This prospective client isn’t really much of a prospect. Their company probably isn’t ready to buy, so talking about price just hands them information so they can keep comparing prices and going round in circles.
You need to find out how these decisions are made and who makes them, and whether they have paid for similar services before. Ideally, someone at that company should tell us how much money they were thinking of spending, or how much they have available for this, before we put a price on the table. As soon as we have a figure, we handle it as if it were answer number 3.
Answer 2: “How much would it cost?”
In this case, the client has a figure in mind (a budget) but doesn’t want to be the first to say it. They want to know whether the price you give fits the figure they were thinking of. Because they have asked us a very specific question, we shouldn’t be evasive; we have to answer.
What we’ll do, of course, is give a price range, explaining that the final price depends on other factors, which we will name, and on the amount of work involved. In this case, we do get ready to negotiate.
Answer 3: “The budget is around €XXX”
This tends to be the most common answer, coming up 60% of the time, especially when the client is the one who came looking for us. Either way, when they give a more or less exact figure or a price range, the client is already putting a value on our service.
And that is a very good thing, because if we offer an excellent service, we deserve the best price a client is willing to pay. That said, we might not like the figure they give us, so we also need to handle the answer:
1. If the number is ridiculously low, we explain clearly that the service isn’t in that price range (and why), and suggest alternatives.
2. If the number is reasonable, your answer should be: “We can work within that budget.”
As a rule, when you ask this question, you’ll find that clients tend to give a higher number than the one you were going to quote. Sometimes much higher.
Geoffrey James tells how a magazine once contacted him to write a series of Christmas features. He was planning to charge them $10,000 for the job, but then he asked them the magic question, “What budget do you have for this job?”, and the magazine said $20,000, which is exactly what he ended up charging.
Basically, before saying how much we want to charge, we should try to get the other side to tell us how much they want to pay us. A good deal of the time, you’ll find they pay you more than you wanted to charge.
Further reading
- 14 secrets and truths about selling
- 11 tricks shops use to make more money that you can use in your business
Featured image: russellstreet, CC BY-SA 2.0, via Flickr.
