Three Basic Foundational Elements to Support Your Pricing

When it comes to price negotiation techniques, the number one question I get asked most often is: “Why do I hear I’m too expensive so often?”.

More often than not, when I dig deeper, I find that the buyer is pushing back because the seller has failed to put in place three basic foundational elements to support their pricing. Price negotiation techniques are about more than simply pushing back when the buyer says “too expensive”. They’re about establishing a basic framework and rationale for your pricing well before you ever quote an actual number to your potential buyer.

In order to set yourself up for success, there are three basic things you need to do prior to ever uttering a number and/or provide a sales quote.

Price Negotiation Techniques: Don’t Fall In The “Too Expensive” Trap.


1. Establish value.


Unless you clearly establish the value of what you’re selling in both rational and emotional terms, your buyer will invariably see their investment as “too expensive”. Simply put, unless your buyer sees exactly why they need what you’re selling and why it matters to them, any price you quote will be seen as too high. Because, if you think about it, how much would you really pay for something you don’t need?

2. Highlight the cost of “doing nothing”.


In most of the sales training or seminars that I deliver, I have to reiterate a basic, yet unmistakable fact: our biggest competitor is not the competition – it’s doing nothing.

But doing nothing isn’t free, it comes at a cost. when it comes to price negotiation techniques, your job is to help your buyer calculate that cost.

Whether it’s continuing to run subpar processes, failure to improve performance against competitors, or even risking losing their best people, the closer you can come in terms of quantifying and helping your buyer see how much doing nothing would really cost them, the better off you will be.

Highlighting the “cost of doing nothing” is a crucial step in establishing a firm foundation for any investment you’re asking your client to make.

3. Ensure you are positioned properly.


In any business, industry or country, there are several alternatives that coexist within the marketplace and compete with you for business.

Some are cheap, low-cost local providers who excel in providing cost-effective, but often short-term solutions to address a problem or challenge. Others – perhaps like yourself – are positioned at the higher end of the spectrum but offer higher quality, performance and/or impact. And some are a mix of both.

To a buyer, telling the difference may be difficult at best. They have to rely on extremely limited information, a couple of phone calls and their gut feeling in order to make a choice and pick the right firm.

If you are a higher quality provider that’s positioned against a low-cost alternative, you’re in deep trouble. Unless you can get your client to see how exactly your higher prices are warranted, it’s like running uphill with a backpack full of stones. No easy job.

Your responsibility is not only to help explain the difference in price between you and the low cost provider, but to explain clearly and in no uncertain terms why picking the low-cost option will in the long-term hurt your buyer and run counter to their best interests.

When it comes to price negotiation techniques, if you want to find yourself in the winner’s circle more often, you’ll need to establish value first, clearly calculate the cost of “doing nothing” and help your buyer see why the low-cost option may, in the long-term, be the most expensive of all.