During any sales process, there is always a point in time when you need to discuss price. Hopefully you have previously discussed the general price range to make sure that you and your potential customer are at least within the same general range. But at some point you need to prepare the actual price quote. It’s at this critical point that many small-business owners fail to provide the assistance that potential customers need to close the deal. It’s not about features or benefits or service terms; it’s about money, and you need to shape their thinking about the price.
Most buyers will look at your price and compare it to what other companies are quoting them. They will then use this context to choose the winner of the contract. Though you should be able to address the differences between you and your competitors, this won’t necessarily seal the deal. In my experience it’s far more valuable to calculate the return on investment and break-even point of your proposal for the client. This does close deals.
Return on investment can be measured in different ways. In the context of your client, you need to understand what tangible, monetary benefit your work will generate for the customer such as:
- New customer acquisition
- New revenues from their existing customers
- Reduction of existing costs
- Avoidance of new costs
- A combination of these factors
It’s likely that you won’t have highly detailed information about your customers’ finances, but you can set the stage for customers to use their own value calculations to calculate the ROI and break-even of your proposed price.
Show What You're Worth
Let’s assume that you are pitching a new marketing solution for a customer with a price tag of $500,000. Since the purpose of your solution is to help your customer acquire new customers, the return on investment and the break-even analysis should both answer two questions:
1. How many customers can the prospect generate by buying your solution (ROI)?
2. How many customers does your solution need to generate in order to pay for itself (break-even)?
The problem with answering both questions is that we don’t know exactly how much a new customer is worth to your potential customer. The way to address this is to provide a range of values. This is perfectly acceptable as long as you do some research first to determine a range of reasonable values for your customer’s industry. I usually present these numbers as tables:
The ROI table
Expected new customers acquired with our solution
(Value – Cost) / Cost
The Break-Even Table
Break-even number of customers
By providing this information next to your price proposal, you provide context that can limit objections to a price that your client may consider high. Even if your potential customer doesn’t agree with your assumptions, he or she will be impressed by your method of thinking. It also gives you the opportunity to have the client speak more about his or her business and perhaps give you greater insight into the actual values used. This will go a long way toward converting that prospect into a client.
Mike Periu is the founder of Proximo International, LLC a leading provider of corporate, consumer and small business training services including financial and business educational content for television, radio, print and online distribution in both English and Spanish.