What should you do when a customer says “I like you / your product, but can you make it a bit cheaper?”
They might even add “I’ve got another quote that’s a bit cheaper”.
What should you say?
It’s tempting to come down a bit in order to secure the sale, but there are four snags with this
- Sets a precedent for next time, in fact for EVER
- Encourages them to ask for even more since it’s so weak
- Makes your first price seem a bit dishonest, since it was more than it had to be
- If you’re making 10% profit then just a 5% drop will halve your profit, so you have to well TWICE as much to get back to where you were, and that’s not going to be easy.
My answer is as follows
DON’T REDUCE YOUR PRICE!
Just politely say “No, I really can’t I’m afraid, we’re hardly making any margin on it as it is” and see what they say.
The chances are they’ll say “Oh well, just thought I’d ask” in which case it’s job done, thank goodness you didn’t cave straight away!
If they say “Well in that case we’ll have to go to the other people” then it’s game on. You’ve got options, which I think of in three phases
- Sell the benefits – “Remember that we are the only local firm / we always do yours specially / we have an amazing track record with you / we have flexibility that nobody else has /we are the only ones using hand-made materials
- Ask who the person is that’s cheaper (and it might even be a lie on their part) and then, whether or not they tell you who it is, speculate on WHY they can be doing it cheaper – are they using cheaper staff, cheaper materials, cutting corners, putting fewer hours in to the job, or what? If they are cheap AND available then their quality can’t be any good!
If they don’t waver:
- Offer to trade, e.g. “Well, if you could order for next year as well then I could give you a good deal?” or “If you can put us on your website / take it without the special packaging / order it today then I could reduce the price a little…?”. So the trade saves face, makes it harder for them to ask for even more, and the value of the trade could even outweigh the amount you’re losing on the price.
If they won’t trade then it’s on to….
- Cave in (“Let me check with the boss…” and then come back and say “OK then”)
OR (depending on your margins)
- Walk away (“I’m sorry but I just can’t reduce the price”) and either they’ll cave, or they won’t, and you’ll have only lost a greedy and annoying and probably loss-making customer. Remember you WANT to be losing half of your possible jobs on price, otherwise you’re not charging enough. More on that on other blog posts!
onwards and upwards!
PS more information on negotiating here