How to Handle Objections to Pricing

February 16, 2010
By Steven Batts, Contributing Writer

In this tough economic climate, it pays to be a good shopper when purchasing goods for your business. As such, your goal should be to find the best-possible price for these goods. Unfortunately, as business owners, our customers want to do the same thing, so the rising costs of doing business is something we have to confront. What can you do when your clients ask for a better price, or tell you your prices are too high?

First, pricing should be based on a good foundation. If you set your pricing by sticking a wet finger in the air and guessing which way the price wind was blowing, you are going to have a harder time standing firm on that price when customers ask for a discount. On the other hand, if you have done your homework and determined your cost of doing business, broken that down over time and now use that as a basis for your price, then you will have a more confident response to your customer.

Two Out of Three Ain't Bad
Have you ever heard the old saying, “Quality, service and price; pick two?” As humorous as that sounds, it contains a lot of truth. It is very difficult to have the best quality, service and price, no matter what kind of product or service you offer. Take an objective look at your business and see which of these three you do the best. Use that to defend your price. Also, figure out which one is your weakest area and take steps to improve that part of your business.

If you have the best quality, the cost may be higher, causing your price to go up or your service may be perceived as slow. Maybe you have the fastest service in your area, a trait commonly associated with costs, which would cause price increases. However, if these are, indeed, your strengths, point them out to your customers. Conversely, if a competitor has a lower price, it may mean they had to skimp on quality materials or service. Also point this out to your customers.

When discussing objections to pricing, I often turn the conversation around on the potential client. If they state that they can get the work done for less somewhere else, I ask them “Why aren’t you getting them to do the work?” One of the other two aforementioned issues (quality and service) will undoubtedly come up. Then, I remind them that we typically deliver within two weeks or less. If quality is an issue, I show them examples of my work. It should be of better quality of less-expensive work.

I have had cases where I lost the deal. Occasionally, prospective clients will find a competitor doing equally good work in a timely manner for less money — and that's fine. In those situations, I've usually found one of two things: The competitor's equipment can handle a larger capacity than mine, or they aren't in business very long.

I recently had a customer return for my firm's services after going elsewhere because the person that was doing their work went out of business. The competitor had been charging half of what I typically charge per thousand stitches. Once this client started dealing with me again, he also found that my work also offered better quality.
   
The Flip Side
If you never get any complaints about your price, you probably aren’t charging enough. Worse, if you get “tips,” you might think about upping your prices. I got tips in my first few years of operation, as clients would say, "Oh, that's not enough, take this" upon hearing my price quotes. Such is a good indication that your pricing is too low.

I have heard several people tell me they kept raising their prices until people complained, and then they readjusted to a price point slightly below the "breaking point." I am not sure I agree with that philosophy, but it is better than other strategies some people have. It works really well when you have an idea of the amount of profit you need to sustain your business.

Steven Batts, a consultant with 17 years experience in the embroidery industry, owns Righteous Threads, Greensboro, N.C., which offers digitizing, embroidery and machine maintenance services. Steven regularly leads seminars at ISS shows and is an industry speaker and consultant. For more information or to comment on this article, e-mail Steven at righteousthreads@gmail.com.



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