Negotiating The Value Of The Service, Not The Price

For some people – doctors, automotive technicians, and dry cleaners, to name a few – the price is never haggled over. This is because the people behind those industries have created, over the course of many decades, a culture of unquestioned price acceptance in consumers’ minds.

How awkward would it be to tell your dentist “I’d like to offer you $500 to perform my root canal,” with the going rate for the procedure being around $900? Chirp, chirp – it’s rather hopeless, right?

Why shouldn’t you demand the same respect your dentist receives? After all, there is an investment of time, money, and effort on your part, just as the dentist. What on earth makes people more willing to pay for a root canal than what you have to offer? Everyone deserves reasonable compensation for the work they do, right?

The answer is that while both are ultimately services, the average person is imminently aware of the benefit of a root canal, as well as the high level of skill inherent to medical dentistry. Most consumer- and professional-level service providers do not get to enjoy the same level of public acceptance of pricing because the services they provide are not immediately quantifiable, measurable, or (in many cases) tangible.

So how do you handle the situation when the company you have submitted a proposal to responds that they like your plan, but not your price? The challenge becomes changing the conversation from a price negotiation to a discussion of the value of your services.

Let’s take a closer look at the top five tips for negotiating service, not price.

Tip One: Let your customer initiate the conversation

Ideally, you have submitted a proposal that accurately reflects the price you would like to receive as compensation. Even when the objection to pricing comes, you can stand behind the price you have already stated, and only initiate price negotiations if your prospective customer has a question about the matter. Since discussing price is usually about as pleasant as a root canal, you can avoid the dialogue altogether if they never pick the pricing battle. Essentially, we want you to anticipate client objections, but don’t jump the gun and put words in their mouth, giving them more to object about.

Unfortunately, in a large number of cases, your customer will want to work toward a lower price, so a discussion of the topic is inevitable most of the time. Nevertheless, always let them start the conversation, because it will seem like your set pricing standards are false and/or too high, and you will seem like you are unconfident in your ability to deliver what you put in the initial proposal if you start second-guessing your own pricing structure after the proposal has been deployed. Let the concerned customer be the one to open that can of worms!

Tip Two: Change the conversation, right away

Your customer will most likely mention pricing by framing it in the context of their budgetary concerns. But your business has its own plans and goals to think about – not to mention real-world operating costs. So you can quickly change the conversation from the unsavory topic of budgets and margins, to something more appealing to you and your customer – quality of service.

It is better to respond with reinforcing statements as to why your service is a great fit for your customer, than to respond to pricing concerns with more numbers. Once you have been approached with a counteroffer, and you offer another incremental price in turn, you have entered into a game of haggling and it’s hard to get out of such situations. It’s better to avoid the haggle, right out of the gate. Switch gears to drive the discussion toward selling the customer on the benefits outlined in your proposal.

Tip Three: Break it on down for them

When you are faced with the prospect of price negotiations, the best way to ensure that you will actually receive the price you have asked for is to break down the services you have described and try to align them with your customers concerns.

As you recount each feature and/or benefit of your service outlined in your proposal, your customer will begin to connect those aspects of the service to a perceptible value for them. Remember to make it clear that, especially with your tried and true expertise, your time costs money.

Never be afraid to make it clear how much work and effort will go into executing the actions called for in your proposal. Breaking down key points of the value of the services you provide is a great way to address price concerns by gently reminding your customers that they will benefit from accepting your price as-is.

Tip Four: Talk long-term advantages

Often, undercut pricing is a bubble that will ultimately burst, as it can compromise quality and/or efficiency. For this reason, you can frame your response to a price inquiry around the nature of short-term goals versus long-term goals. Your customer may save money today by negotiating a lower price, but the effect of lost quality may negate any perceived gains.

Never succumb to the temptation to offer break-neck, bargain-bin pricing “just this once.” You want to earn and retain new customers that are profitable to your business, thus keeping you in business for the long run. Since it’s easier to lower pricing then to raise it, it is better to start a business relationship earning the amount of money you need, than to put yourself in the position of working toward that figure down the road. Never hesitate to remind your customers that they too will benefit in the long run by receiving the quality you have laid out in your proposal.

Remember, it’s easy to lower a price, but nearly impossible to raise it again. Once you’ve lowered your bar, that’s usually where it will be.

Tip Five: Stand by your plan

You are most likely offering consistent pricing to your entire customer base, and your proposals reflect the prices you expect of all customers. You also need to receive those rates to stay afloat as a business. Even if the prospective customer has initiated a price negotiation, and you have deftly turned the conversation toward service and value, and your customer is still hung up about price, you cannot afford to rest on your laurels.

But by no means should you be inflexible – pricing can be changed. If you can still realize a return while lowering your price to take on a prospective client, then by all means, consider it. The thing you want to avoid is allowing your business to enter into an agreement that is damaging to its profitability. You know what the service you provide is worth to you and you likewise know that your services are beneficial to your customers – do not let a cheapskate client ruin your good business with stiff price haggling. Stand by your plan!

By all means, try to avoid lowering your price by offering packages or throwing in something extra at the current price. Also remember that a clients are more likely to cough up dough when risk is minimized, so, instead of dropping your number, offer a guarantee of service, like their money back or the next one’s on you, if you don’t successfully meet the goals. Your confidence will give them more confidence in you.

It’s all about service, baby!

The real value you have to offer your customer stems from the quality of service and expertise that you are able to provide. You undoubtedly work hard to be the best at what you do – don’t be sold short when it comes to what you are worth. Respond to pricing concerns with compelling explanations of the real value of your service, and skirt the pricing issue as often as you can. Just remember to be flexible, open, and honest, and never let your business suffer at the hands of a low-balling customer. Win them over again and again by sticking to your plan and delivering on what you promised in your original proposal.