

Ask HN: Your prices are too high - sschueller

What is a good answer to use at a sales meeting when the potential buyer starts complaining about price? What can I say that will stick but not make me look bad? We aren&#x27;t yet at a point where we can say take it a leave it.<p>Literally at every sales meeting I get with a potential client for our saas product they complain about the price.<p>It makes me think our prices are too high but I really don&#x27;t think they are. We are a very niche product, our costs are high and therefore the service is as well. Our competitor is more expensive yet offers a lot less.<p>I think the biggest issues is people don&#x27;t see the costs with an saas product like with a physical piece of equipment. They think we programmed it and now we don&#x27;t do anything. My clients have no problem dropping large amounts on hardware yet don&#x27;t want to spend a dime on service that in the long run saves them a ton of money.<p>Another issue is our product makes things convenient. It saves money which is a hard thing to sell.
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tudorghr
Without knowing what industry you operate in - Except if making a commodity
product/service and have a cost advantage to competition (i assume you are
not) you need to price @ and consequentially sell value not cost.

My experience in selling value: You need to: 1) Understand and quantify
opportunity cost for client in not working with you (Difference in dollar
amount profit for client between working with you and alternative options:
1)working with competitor, 2)using alternate solution for the same problem -
status quo solution if your product/service involves an operational change)-
the value of your product is that number: If positive be explicit about it.

2) Sell a relationship not a service/product ie: make the person in front of
you feel better off in working with you than not through long term benefits.
To do this understand their own KPIs other than profit (first point on that)
and issues (time spent doing stuff they or their staff hate doing) in doing
their job - make them understand that a relationship with you will make their
job easier based on how you improve KPIs and/or eliminate issues in the long
run.

Other points: \- Listen and adapt to every client - none two are the same -
first question you should ask yourself: "Who do I have in front of me" \- you
will have a few dozens types of client behaviors not more - adapt accordingly
to address points 1 and 2.

\- Don't rush sales - understand the two points above very well and go through
them with each of your clients patiently.

\- Be in a position to walk away - do not allow one client to represent more
that 30% of your business - if that happens seek to diversify client base
fast. Very difficult to negotiate pricing with a client when they are aware of
the fact that loosing their business will kill your treasury.

\- Above all else, be empathic - people do business with people they like. All
else being equal, a decider will always choose to buy from guy he feels he can
have a beer with after work.

~~~
notahacker
Quantifying the opportunity cost for the competitor cannot be stressed enough

After you've calculated that (even down to estimates of the man hours they'll
save multiplied by how much those staff members cost), it helps to point out
you're actually spending in the region of XXX per annum creating this software
that's saving them YYY in relation to the alternative. If YYY is significantly
greater than the cost of your product the buying it should be a no-brainer (if
it usually isn't then maybe you are too expensive...) but that doesn't mean
they won't try to negotiate, especially if they think they're being gouged and
understand software has [near] zero _marginal_ cost

That's where pointing out that XXX reassuringly higher than the price of the
product is useful in establishing your price point isn't merely aspirational,
and cheaper alternatives aren't likely to emerge from the woodwork any time
soon.

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carsongross
SAAS Pricing discussion that isn't around an obscene price point appears to
come down to two issues:

\- The sense that someone wants a deal

\- Perceived fairness of the pricing

If you want to hold firm on your pricing, I'd try to cut a functionality deal
(e.g. "we'll allow X more of Y at this cost") to get reciprocity and fulfill
the "get a deal" side of things, and then demonstrate the fairness in positive
terms (e.g. "We provide 24 hour support and constant monitoring of your
swizzle." rather than "This is a niche product, so we have to charge a lot or
we'll go out of business.")

Keep the conversations short and to the point ("if you are explaining, you are
losing") and don't be afraid to cut bad customers loose. If they haggle around
price too much they are not likely to be a good customer and will probably
cost a lot in support with a high probability of canceling anyway.

Good luck.

~~~
JSeymourATL
*Solid advice from carsongross: > don't be afraid to cut bad customers loose.

You develop Walk-Away Power by finding more people who want to do business
with you. It's OK to shake hands with a prospect and part ways on a friendly
basis. You can always circle back a few months later, see if their situation
has changed. Suggest reading Secrets of Power Negotiating by Roger Dawson.

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neurotixz
I do not know who your customers are, but for lots of corporations, spending a
fortune on hardware (capex) is easier then spending anything on services
(opex). It is linked to accounting rules for those 2 different categories of
spending (I am not an accountant, I just happen to be dealing with one on a
regular basis, as well as with a feew large entreprises).

So for your product to be competitive, it needs to be very compelling to get
over that hurdle, and be much superior to anything else. Being in `magic
quadrant` in Gartner or other is also useful (yes I know, it does not mean
much, but it looks good for management).

One common way of getting over that hurdle is to find a creative way for your
service to move to the capex side of things. One example is selling an
appliance which does not do much, and relies entirely on your service, sell it
for a very high price, bundle a 3 year support contract that covers the cost
of your service, and suddenly it's capex :-)

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Perdition
> for lots of corporations, spending a fortune on hardware (capex) is easier
> then spending anything on services (opex)

Really? I have only encountered the opposite. CAPEX is normally okay when it
fits within normal budget allocations, but any large CAPEX that requires extra
budget is a hard sell. OPEX is much preferred because it makes budgeting much
more predictable ("$XXXXX per quarter" vs "We might need to spend $XXXXXX some
years from now").

That is part of the reason for the cloud craze.

~~~
neurotixz
Thanks for the reply, which business fields is this experience coming from?

I could be biased by the industries I worked in (telecom, engineering,
banking), there was a constant push to bring down opex spending, by squeezing
suppliers on maintenance fees, reducing headcount and improving efficiency
(especially in IT). The target is recurring costs.

In those businesses capex looks good in annual reports as they tend to show
investment in infrastructure, security and business support tools and software
(we invested X$ to improve our telecom infrastructure, call center or any
other field of the business). It shows a willingness to stay current, ahead of
competitors.

It just shows that knowing how your potential customer are structured is
important. Especially for large enterprise customers. Your business model
needs to follow those trends.

~~~
notahacker
I think we're probably talking different orders of magnitude and decision-
making levels here.

 _Boards_ are very happy demonstrating a desire to achieve strategic change
over the long term by making large capital investments. They have authority
over the management accountants who can create a special budget for those
exceptional items (and amortise capex over a long period of time), access to
external finance if they need it, and responsibility for deciding exactly what
their targeted return on that investment is and when its forecast to happen
(sometimes after the fact...)

Much of the operational expenditure comes out of the budget of the responsible
department which has annually or quarterly targets the Board has set for it
based on existing recurring costs and revenues, so any new items of
expenditure had best yield revenue pretty quickly or else cut costs in other
areas. Of course, if that department truly believes there will be a longer
term payoff they can always go to the Board...

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thejteam
Without knowing anything about your product, I'm going to focus on your last
line. "Another issue is our product makes things convenient. It saves money
which is a hard thing to sell."

I think you and them might be using a different definition of saving money. If
your service replaces several others that they are currently paying for then
they are saving money. If you are doing something like making things more
efficient then perhaps from an accounting standpoint it is "saving money", but
if it is just saving a few hours a week then in practice what you are doing is
giving their employees a few extra hours to surf the net. You have to quantify
real, actual dollar savings or real, actual sales increases.

You also mentioned a competitor. Are the people you pitching to using your
competitor? If not, then they probably also think your competitors are too
expensive. If you really are better and cheaper then try pitching to people
who use your competitor and see what happens.

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brudgers
If your product was free and Selma Hayek came to the customer's office and
provided a neck and shoulder massage whenever the customer logged in, some
heterosexual man would still complain because he prefers blondes.

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lmm
Don't talk about your own costs, that's not their problem. If you offer more
than your competitor but cost less, that sounds like a good argument. Other
than that, point out how much value you can bring to their business, how
they're going to save more than they're paying you. Once they realize that,
they're not going to care how much money you're making off it, one way or
another.

~~~
pif
> Don't talk about your own costs, that's not their problem.

Absolutely! They couldn't care less.

~~~
MalcolmDiggs
Not to mention, your costs are irrelevant to the price-point. Think back to
your econ101. It's a competitive market, so supply and demand will largely
determine the pricing options.

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zomg
if a prospect is balking at your product due to price, you're not doing a good
job at framing the problem, or pain point, your product solves for the
customer (whatever that value is, productivity or cash for example).

to specifically answer your question, because no one else seems to have,
here's how i respond to the "price" question (without knowing anything about
your business/product or what it does):

1\. agree with the prospect (yes, agree)

> "mr x, i agree, wicked widgets isn't a cheap solution..."

2\. and then ask them how much it costs/how long it takes to (whatever the
problem is) now, on a quarterly/annual/whatever basis. if you've done your
prospecting right, you'll be on the saving side of things...

> "but may i ask you how much you spend/how long it takes on/to (whatever)
> today?" (they answer) "and how is that affecting your business today"

3a. (if you DO save them money) - walk them through (BRIEFLY AT A HIGH LEVEL
because every customer is different) the cost savings on a
monthly/quarterly/yearly basis, if they go with your product. then stick that
it their face.

> "mr x, how would saving $blah dollars per quarter improve the cost and
> productivity of your business? how would that affect your business?"

3b. (if you DONT save them money) - position the product as an investment in
productivity (translate that to cost savings) and make the case as to how your
solution is better than a more expensive competitor (there are metric shit
tons of other ways to travel down this path, i am providing one).

> "wow mr. x, sounds like it does cost you a lot to (whatever). i'd be looking
> to address (whatever) too. wicked widgets is the only product that does
> (blah) and can improve your (whatever factor) by (blah) %. in fact, here's a
> recent whitepaper we published, that compares the cost savings of wicked
> widget versus other, more expensive competitors in the market. (point out
> the highlights of the paper versus your competitor, you should have a slide
> on this as well). mr x, any idea how much (blah) hours of productivity
> improvement could save your business a quarter? how would that affect your
> business?"

4\. if by this point they still beat you up on price, you may have the wrong
customer. but i trust that you should know that you have the RIGHT customer
before going into this kind of meeting...

the point is, you need to know what the pain/motivation was for seeking out a
solution to (blah). once you know the pain point (it may vary per customer),
you can tailor your pitches accordingly.

best of luck,

justin

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iamwithnail
We have that problem. We just straight out list why we're better for the
money, using the table just above the pricing:
[http://granttree.co.uk/#pricing](http://granttree.co.uk/#pricing)

There's a differentiation to be made between PRICE and VALUE.

"It saves money which is a hard thing to sell." Really? Being brutal, it might
be sales technique. If someone can come to me, show me they understand the
business and show me that they can save us money, they're pushing on an open
door. We had a local authority tax specialist contact us for that, saying
"We'll save you this much every month, or you don't pay." Sold - maybe back it
up with a guarantee? If we don't save you money, we'll refund it after 3/6/9
months or whatever.

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benzesandbetter
There are a few factors worth exploring here.

1) qualify the lead 2) quantify value 3) reduce risk

First, are you confident that the folks raising these price objections are
qualified customers?

Assuming they are qualified customers, usually price objections come from
either not building and quantifying value earlier in the sales process, or
from the clients perception of risk.

Talk with them to discover the relevant numbers. E.g. how much time do
employees or consultants spend on this task now? What is the average fully
loaded salary or hourly rate? Or, how much are they spending on other products
which will no longer be needed with your offering? Do the math for them, show
them the savings.

The other factor to focus on is reducing risk. You could be showing them
significant gains/savings, but they are discounting those based on their
perceived risk premium, because they may not be confident in your ability to
deliver those results. Think about ways you can attack that perceived risk.
Can you offer a guarantee or warranty? Include interviews or case studies with
other customers which illustrate their savings?

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rkangel
> We aren't yet at a point where we can say take it a leave it. This might be
> part of the problem. If the potential buyer is aware that selling to him is
> important, then that gives them leverage.

As other people have said, every time they push on cost, you push back on
_value_. People will buy expensive things if it's worth it to them.

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tixocloud
It sounds like your potential clients aren't convinced of the value that you
deliver or they are trying to get a deal out of you. You may want to proceed
with caution for some of these clients. Some clients are always going to look
for the lowest price as much as possible - they might not be a good fit for
your company. It's hard but sometimes it does come down to take it or leave
it. If you're not able to meet the lower price while still covering your
costs, it doesn't seem practical, in my opinion.

You'll have to think about all the added value that comes with your company.
i.e. documentation, one-to-one support, expertise. Try to find things that you
can carve out with minimal added cost but provide a ton of value.

------
dagw
Are your customers large companies? If so you have to try to understand how
accounting is done large companies and how to restructure your prices to
accommodate your customers without actually lowering your prices.

Back when I was working on similar stuff (expensive niche software) we charged
a one off fixed cost for a license plus an annual maintenance fee, which
included upgrades and free support (people love free) plus by the hour
consulting fees for all configuration and company specific changes.

By splitting the costs up like this it was easier to negotiate price, since we
had three moving parts to tweak, plus it was easier for the customers since
they could park the different costs on different budgets.

------
walterbell
See Splunk (competing with free software) case studies,
[http://www.splunk.com/view/customer-profiles/SP-
CAAABB2](http://www.splunk.com/view/customer-profiles/SP-CAAABB2)

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toumhi
It’s hard to say without seeing and hearing about your customers. But:

customers just want lower prices so they try to see if you’re going to cave in
with a little bit of pressure. Don’t.

You need to anchor your price to value you’re providing. How do your customers
think about the value your product provide? What do they compare it to? Maybe
they see you as providing less value than your competitor, if they complain
much about it? Can you change their points of reference when they compare your
product?

Listen to them, but take what your customer tell you with a bit of salt. They
are biased to get lower prices.

~~~
brudgers
The people saying "the price is too high" are not customers. They are
prospects.

Pricing is one tool for qualifying prospects. If the product does not really
solve the customer's problems then the price is almost always too high because
the product is not intended for them.

Unfortunately, finding and qualifying leads is hard work and lowering the
price and wishfully thinking that this will lead to a satisfied customer is
easier, at least psychologically and in the moment.

The serious fisher keeps some fish and throw others back. Indeed they don't
try to set the hook for the wrong nibble.

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tudorghr
One other point. Compare your product/service price to daily current
expenditure of client " my product will cost less per day than what you spend
on Coke (or other)for your team" \- puts things into perspective.

~~~
johnward
I thought developers moved on to adderall and modifinal?

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Peroni
What you're fundamentally asking is 'why do our potential buyers think our
price is too high?" and the most effective way to find out and regain control
of the negotiation is to simply ask them.

As them why they think the price is too high. Most likely they are basing
their opinion on comparative product value or alternative solutions or they
are simply playing hard ball. The only other possibility is that they simply
don't place as much value in your product as what you do which means you need
to work harder at selling the long term benefits as well as the immediate
gains.

~~~
sschueller
It is mostly them playing hard ball (very common in that industry). In the end
price is never the deciding factor but it is just frustrating to have to
defend my self on price all the time.

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garrickvanburen
Sounds like you're talking to the wrong prospects.

There are a number of strategies to explore: 1) You've already stated you have
a very niche product. If that's actually the case you solve a huge problem for
a very small market. Own the exclusivity: double your price.

2) Find a way to quantify the method for solving this problem without your
product. Somewhere in there is substantial value not represented in your
product. Respond to it.

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smackfu
To be honest, every buyer should push you on cost, otherwise they aren't doing
a good job of representing their company. I push you on cost, you give me a
break, my company makes more money. No harm in trying either, since most
sellers aren't going to walk away from a deal just because you said it was too
expensive.

It doesn't necessarily mean anything about whether your pricing is correct.

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pif
> Our competitor is more expensive yet offers a lot less.

Have you tried telling this to your potential customers? How did they react?

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Dwolb
Are you delivering value to them? Can the customers see this? If not, take the
value off the floor and put it on the table.

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Jayd2014
Does anyone know how I can save a thread like this without commenting on it?

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hkarthik
Upvote it

~~~
genieyclo
That way it'll show up in
[https://news.ycombinator.com/saved?id=Jayd2014](https://news.ycombinator.com/saved?id=Jayd2014)

