It was a pleasant fall Vegas afternoon as I emerged from the cab in front of the Bellagio Hotel, the sun was still bright and blinding in the November sky. I was exuberant. Professionally, I felt like I had finally arrived. I had been chosen to deliver an all-day session for a Fortune 500 company at a 5-star hotel. It would be an event to remember. Not only were the seminars a success and the audience engaging, I was treated like royalty complete with lavish dinners, a show and a great room overlooking the famous lake and fountains.
Just one bubbly but honest comment from the organizer gave me pause: “We were delighted to learn your price was only X, in truth we would have paid double!” I am so glad that I enjoyed all the extras, because the truth was, in a very real sense, I had paid for them!
If you have your own business, sell a product or service on the side, or recently asked for a raise or interviewed for a new job, you may be able to relate to capitulating on your price or salary in the face of hard bargainers or sad stories of budget woes and personal finances. The good news is, I am confident that applying some of principles and strategies below can put hundreds, even thousands more in your pocket and add to the financial security of your family.
Underpriced is undervalued
When I was just starting out, in an effort to break into the consulting business, I deliberately priced my services at the lower end of my profession. Upon being informed that the potential client had decided to choose someone else, I was shocked to hear them say; “We interviewed several firms for our project. It came down to you and another group who charges considerably more. Since we had to choose, we figured they had to be more experienced to command and get their fees, so unfortunately, we have decided to go with them.” Wow! What an instant, albeit painful, education!
What can we learn from these stories?
1. “Low ball” pricing often raises “red flags” in the mind of potential buyers about your experience (how competent are you) and savvy (how much you know and believe in your market worth.)
2. As a general rule, people do not value products or services that cost them too little.
Bottom line: Your attempts to generate quick sales can turn out to be a lose-lose. People may be reluctant to buy from you and when they do, they may exhibit limited follow-through and respect.
A Better Way: Set or (reset) the selling “frame.”
Oren Klaff observes in his masterful book, Pitch Anything, that wise sellers must be ever mindful of the “frame” or mindset that each party brings to the sales interaction.
Here is a common scenario: Kyle, a potential customer, reaches out to you by phone. First peppering you with questions about your product or service, he then begins grilling you about your experience, competency and prices. A negotiator like Kyle will often drop into the conversation: “I am currently talking to several others (his thinly-veiled invitation to a bidding war)” as an attempt to further weaken your bargaining position and make you doubt your prices. Doing your best to answer his questions, you are now on the defensive, finding yourself trying to prove that you can, in fact, do the job better than the “rest,” or that your product is of high quality and fairly priced.
Kyle has successful imposed his “frame of power” on the sales conversation. You will need to take it back. If you don’t, even if you get the sale, when it comes time to deliver you may feel resentful having given away valuable price or other concessions.
What to do: Politely stop Kyle, mid-interrogation, and say, “I do want to answer all your questions but it is important before we go further to ask YOU a few questions to make sure you are good fit for the customers/clients I serve. Not everyone is a match for the work I do/products I sell/my skills, etc.” What does this do? It rebalances the power frame. You not just one of 10 potential vendors or job candidates like an awkward teenager lined up against the wall of the gym at the spring formal hoping someone will ask you to dance, you are letting your buyer know you are in demand and you too get to choose.
Try it. The “energy change” in the conversation will be palpable.
“Closing the sale” or “cutting your losses”
Over time, you will develop a keen sense of when to “go for the goal” and when to “punt.” For example, I know that if I have more than X number of back-and-forth communications or perform X number of unpaid activities without a sale, it’s time to immediately ask for sale and walk away quietly if the buyer doesn’t make a purchase. I know information and experience the “right buyer” needs to decide and if I exceed that by a significant margin, the prospect, however exciting, is not a fit, at least not at the moment.
How to easily offer something for everyone (while maintaining the perceived value of your product or services)
Are you losing sales because you do not offer products that appeal to a wide range of buyers?
A simple technique is to offer three-tiers of products. The first level is for the least committed and is easily affordable for anyone who is interested in taking a small step to learn more, solve just one problem, or get just a quick taste what you offer.
The second tier is where most buyers will focus. It offers a more comprehensive solution but is not the Cadillac suite of all you offer. You should expect and plan that this tier will generate the most number of sales.
The third tier is your complete suite of services and add-ons. A smaller number of buyers will make this purchase but they will be your most motivated, enthusiastic customers. Treat them very well. They are your VIPs.
How should you price your tiers? Your second and third tiers should be a bit closer in price than tier one and two.
For example: Tier 1— $1000— Starter package,
Tier 2— $3000— Comprehensive package,
Tier 3— $4500— Premium
Bonus Tip: Shane and Jocelyn Sams, hosts of The Flipped Lifestyle Podcast, say that when it comes to pricing, “97” is the new “99.” They suggest you price your products so as to end in “97” cents or dollars not “99.” For example price your products, $7, $97, $297, etc. Try it.
You determine your prices (with the help of the market.)
Dr. Alan Weiss, well-known management consultant, says that if you can’t look into the mirror and say, “My [fee] is X” without feeling self-conscious, you are certainly not ready to charge it. I remember the first time I asked for 5-figures to complete a project. I knew I was fairly priced based on what my colleagues who performed similar work charged, but I had never asked for that much before. There was a psychological barrier to be crossed and a fear that others would simply say, “that’s too high” that needed to be overcome.
If this is you, you are certainly not alone. The world is full of highly skilled, extraordinary entrepreneurs and seasoned salaried professionals who ask for far less than they are worth—throughout their entire careers!
Missing negotiation skills or how I almost paid a client $1000 a word!
Years ago, I interviewed to head a consulting project at a well-known university. To my delight I was offered the position. Next came the negotiation of compensation. Fortunately, knowing how green I was in such matters, I decided to speed read a classic book on the topic, The Art of Closing the Sale by Zig over the weekend before the final negotiation meeting on Monday. Armed with new knowledge and negotiation skills, I entered the final interview feeling ready.
Everything went smoothly in the meeting until we finally got down to my fee. I was immediately nervous; as the offer was $10,000 lower than what I believed I needed to execute the duties outlined in the project. But, unlike the past, this time, because of my reading session, I said nothing. Truly it was “the pause that refreshes.” I felt awkward, my interviewer felt awkward, then finally she broke the silence by saying, “That’s a little high. I am not sure we can do that.” I paused again, and smiled.
In the past I would have filled the empty air and said something to the effect of “Maybe we can split the difference?” Instead, this time I replied, “Why don’t you see what you can do and get back with me.” She agreed. A day or two later, she said, “I double-checked what we have available, we can offer you what you asked for.” It worked!
If I had used the phrase, “Could we split the difference,” I would have been paid $5,000 less. In fact, every word of that 5-word sentence would have cost me $1000! What about you? Can you hold off on any salary discussion until the other person brings it up? Can you allow for awkward pauses and silences? It may be the best negotiating technique you can possible use.
Never offer a “perceived value” discount!
There is a huge difference between someone who thinks your product isn’t worth what you are charging and someone who can’t afford it.
If you have taken the time to carefully price your product based on your skills, materials and market need, you should never lower your price because a client disagrees.
Many wealthy buyers are well skilled in negotiation and will alwaysask for a discount just because often it works. Others will attempt to discredit your abilities, experience or services in an attempt to do the same. You certainly do not want to give a discount to someone who doesn’t need it or someone who insults you to get what they want. Either sale will lead to resentment and will likely poison your partnership in some way going forward. For each of these cases, politely but firmly refuse. In the latter instance, you may wish to walk away altogether.
Years ago, a family seeking counseling pleaded they needed a discount due to financial hardship. I quickly agreed only to learn about the exciting progress of their inground pool installation each session from their child. Other past discount recipients have shared their latest adventures in Hawaii, how much they drank and gambled that weekend, and their recent spa trip.
People pay for what they believe is important to them. In the minds of some negotiators, lavish vacations, pools, booze-filled weekends escapes, vacation homes, and more are viewed as essential and sacred, while your services are secured at bargain basement pricing with a well-oiled tale of financial woe. Don’t let this happen to you.
What about the more subtle inquiry: “Is your price negotiable?”
John Patrick Dolan, storied negotiation coach and attorney, has the perfect response for the query, “Is your price negotiable?” He simply says either: “Of course, what would you like me to take out of the deal so we can lower the price?” Or, “What will you do for me in exchange?” His point is simple and direct: “Negotiation” is defined as both parties giving up something in order to fairly modify the deal; not unilaterally lowering one’s compensation because someone asked you, especially if they can afford your prices.
Negotiation is a skill and, like any other competency, it can be learned. It will serve you in every aspect of life—romance, relationships and in your career. Make a point to read and watch the best in the business, and you will put thousands more in your own pocket and enrich the lives of those around you at the same time.