Last week, I was tabling at an event for entrepreneurs and organizations that serve entrepreneurs in our community. At these events, people drop by our table and we start a conversation with them about their business or idea, and answer their questions about our programs – what we cover, how the programs work, how much they cost, and how to apply. Then, the person normally goes away with the information and decides if they want to take action on it.
But at this particular event, I had a couple of people who came out and said, “Your programs are too expensive!” Initially, I was a bit shocked and offended. I thought to myself they don’t know how much it costs to run these programs. And then a little part of me was second guessing our fee structure. What if our programs are too expensive? I started to feel an emotional spiral around pricing.
Luckily, a colleague dropped by our table and we chatted about this experience. She reminded me that we are offering a very fair price considering the successful outcomes of our programs, experience level of the instructors and mentors they would be working with, and all the costs that are required to run them. Not to mention, we have received a significant amount of feedback from graduates letting us know they received far more value from the programs than they paid us in program fees.
It’s important, especially for service providers, to stand in that value and find ways to authentically navigate conversations around price sensitivity. So this week, we’re sharing a few thoughts on what to do when a potential client says “you’re too expensive.”
Listen to Where They Are Coming From
Use this as opportunity to listen and learn more about your market. Ask what are they comparing your business to. They may be comparing your business to a do-it-yourself solution that may not be as efficient and effective, or to other businesses that are offering lower prices because they have less experience or are providing lower quality. Also, find out what they are looking for in the products or services they are comparing to your business. You want to understand what they value – price, quality, a specific type of experience, or other factors. If you understand their needs, you can better explain how your business offers the value they are looking for, or you can decide they aren’t an ideal fit as a customer.
Find Out Their Needs and Budget
The potential client may already have an expectation around what they need and their budget and may be using that as an anchor when talking to you about prices. In this case, ask them questions about their needs and their timeline. Also, don’t be afraid to ask them about their budget. If they’re hesitant to provide their budget, assure them that you are using that information to present them with options that are realistic given their needs. With this information, you can come back to them and let them know what you can do for them that is within their budget without having to bend on your prices.
Educate Them on Your Costs
Oftentimes, the person who is questioning your pricing doesn’t know how much time and other resources it takes to deliver the product or service. If it’s appropriate for the conversation, take some time to educate them on what you need to pay for in order to provide the product or service. You may even want to give them the exact dollar breakdown of the costs. Preparing this information in response to a potential client also helps you better understand your own pricing and why it is different from other businesses in your industry.
Assess Their Readiness
When I mentioned my experience to my partner, he said people sometimes respond like that because they are looking for an easy way out of doing the work they know needs to be done. Their objection to your price is a way to justify something they don’t want to do anymore. If it feels like they aren’t ready to work with your business, don’t try to force it. It’s possible your product or service may be a better fit for them in the future. Suggest they keep in touch and contact you if their needs change.
You Don’t Have to Respond
You don’t have to defend your prices if you don’t want to. If you have enough business coming in or you have other priorities in your business, it can be distracting to spend time trying to justify your prices to potential clients. And, it may be a better use of your time to just move on.