5.1. How to Justify Premium Pricing and Terms in a B2B Sale

Actually, you cannot justify it for the prospect. You must facilitate your prospects justifying it to themselves. And no, we are not splitting hairs here.

Listed below are tactics you can employ to aid you accomplish this:

1. Appeal to precedent

Worked with the prospect prior? Appeal to precedent, in such a case. So, say something like, “As we have in past cases, the terms we’re discussing would stay unchanged this time too.”

Truth be told, in situations where you’ve already worked with the prospect prior, objections to premium pricing and terms will rarely surface. Precedent helps.

However, in those rare cases when they do, and in cases where you might be talking to the prospect for the first time, use the tactics listed below.

 2. Start With ‘Why’ (and it must be about value)

Prospects need to see the reason behind the premium; they need to know how exactly purchasing the premium solution will help. They need to see how purchasing this will best impact the outcomes that they are trying to impact through the purchase.

And the preceding statement is the key. Price should always be relative to value obtained, and never to your input costs. This also means that you must, in the first place, have had those strategic discussions around the business impact that the prospect is trying to meet in and through the product or service being purchased.

Your focus then, at all times, should revolve around this value that you add to your prospects.

You will have to bolster your argument with strong case studies of past successes and testimonials from prospects talking about how your services are far superior to those provided by rival firms.

A clear articulation of the value – the business impact – the prospect can obtain from your services, combined with a strong proof of concept (case studies, testimonials) best helps justify premium pricing.

Of course, your prospect will still try to obtain far more favourable terms for themselves. However, if you have done the following effectively, it will be far easier for you to obtain premium pricing and terms from your prospect:

• [During the First Interaction] Positioned yourself as a highly professional, capable and premium player in the market using an effective FCV message
• [During the Needs Identification Stage] Clearly understood the business impact sought by the prospect
• [During the Pitch Stage] Articulated your value proposition clearly
• [During the Objection Management Discussions] Clarified the doubts the prospect has and reiterated the value – in RoI terms – they will obtain and have strongly communicated a proof of concept

As you will note then, obtaining a premium pricing requires you to nail the interactions preceding the negotiation discussion, in addition to communicating a strong RoI and a proof of concept.

 3. Display Calibre

Your prospect needs to see how your services are far superior to those provided by your rivals.

Now, this will only work if you have first communicated the value proposition effectively. Show them why you are best placed to provide that value to the prospect; how your processes, systems are designed to ensure this. Talk about the superiority of your personnel relative to your rivals.

Again, proof of concept helps. A testimonial attesting to this fact from an existing customer is key.

4. Help them see the full value of having an issue they can’t resolve by themselves, taken away by you.

Facilitate a dialogue around the consequences of you doing away with premium features or solutions, or of taking away some privilege. Show them the full impact of these premium features being eliminated.

Next, facilitate a dialogue around how your prospect can experience these outcomes or privileges at a price that is a small fraction of the value being provided. Essentially, this means you are offering them a large return (that full perceived value) for a small investment (your price).

Put in monetary terms. What you are, once again, showing is the relative -and significant –  RoI that they will have.

 5. Appeal to market standard

This one is tricky because market standards are rarely uniform. You will almost always have smaller, boutique firms providing services at far lower prices and with no premium features. Appealing to market standard can sometimes backfire

However, you could point to the standards held by firms relative to yours (relative in terms of size/ brand/ type/ niche) to justify your pricing.

Actually, you cannot justify it for the prospect. You must facilitate your prospects justifying it to themselves. And no, we are not splitting hairs here.

Listed below are tactics you can employ to aid you accomplish this:

Appeal to precedent

Worked with the prospect prior? Appeal to precedent, in such a case. So, say something like, “As we have in past cases, the terms we’re discussing would stay unchanged this time too.”

Truth be told, in situations where you’ve already worked with the prospect prior, objections to premium pricing and terms will rarely surface. Precedent helps.

However, in those rare cases when they do, and in cases where you might be talking to the prospect for the first time, use the tactics listed below.

Start With ‘Why’ (and it must be about value)

Prospects need to see the reason behind the premium; they need to know how exactly purchasing the premium solution will help. They need to see how purchasing this will best impact the outcomes that they are trying to impact through the purchase.

And the preceding statement is the key. Price should always be relative to value obtained, and never to your input costs. This also means that you must, in the first place, have had those strategic discussions around the business impact that the prospect is trying to meet in and through the product or service being purchased.

Your focus then, at all times, should revolve around this value that you add to your prospects.

You will have to bolster your argument with strong case studies of past successes and testimonials from prospects talking about how your services are far superior to those provided by rival firms.

A clear articulation of the value – the business impact – the prospect can obtain from your services, combined with a strong proof of concept (case studies, testimonials) best helps justify premium pricing.

Of course, your prospect will still try to obtain far more favourable terms for themselves. However, if you have done the following effectively, it will be far easier for you to obtain premium pricing and terms from your prospect:

• [During the First Interaction] Positioned yourself as a highly professional, capable and premium player in the market using an effective FCV message
• [During the Needs Identification Stage] Clearly understood the business impact sought by the prospect
• [During the Pitch Stage] Articulated your value proposition clearly
• [During the Objection Management Discussions] Clarified the doubts the prospect has and reiterated the value – in RoI terms – they will obtain and have strongly communicated a proof of concept

As you will note then, obtaining a premium pricing requires you to nail the interactions preceding the negotiation discussion, in addition to communicating a strong RoI and a proof of concept.

Display Calibre

Your prospect needs to see how your services are far superior to those provided by your rivals.

Now, this will only work if you have first communicated the value proposition effectively. Show them why you are best placed to provide that value to the prospect; how your processes, systems are designed to ensure this. Talk about the superiority of your personnel relative to your rivals.

Again, proof of concept helps. A testimonial attesting to this fact from an existing customer is key.

Help them see the full value of having an issue they can’t resolve by themselves, taken away by you.

Facilitate a dialogue around the consequences of you doing away with premium features or solutions, or of taking away some privilege. Show them the full impact of these premium features being eliminated.

Next, facilitate a dialogue around how your prospect can experience these outcomes or privileges at a price that is a small fraction of the value being provided. Essentially, this means you are offering them a large return (that full perceived value) for a small investment (your price).

Put in monetary terms. What you are, once again, showing is the relative -and significant –  RoI that they will have.

Appeal to market standard

This one is tricky because market standards are rarely uniform. You will almost always have smaller, boutique firms providing services at far lower prices and with no premium features. Appealing to market standard can sometimes backfire

However, you could point to the standards held by firms relative to yours (relative in terms of size/ brand/ type/ niche) to justify your pricing.

Justifying Premium Services: An Exercise

Please click on the link below, to download your file for the excercise.

    
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Take charge of the negotiation before it begins

An imposing array of books and articles offer advice that can help deal makers avoid faux pass at the bargaining table. But some of the costliest mistakes take place before negotiators even sit down to discuss the substance of the deal.

It has been observed that run-of-the mill sales people are notoriously bad planners. They go into most sales interactions unprepared, thinking they can “wing it” and negotiate “off the cuff”. Top negotiators know differently. Top performers know that in order to successfully negotiate with clients they must plan carefully or risk being left vulnerable.

Without proper strategy, our prospects use our lack of preparedness to their advantage and here’s what happens;

• We accept a bad deal from a customer then realize that we could have gotten a better deal from that customer or from another,
• We reject a deal that we should have as no better deal exists – we let our ego/ poor judgment cloud our decision making,
• We get bullied by our customer into accepting poor terms and conditions, which can harm our organization, or at least reduce the margins we earn, and consequently, be rated poorly by our superiors
• Or, even if we do not get bullied by them, we cannot close the sale on terms that our organization mandates (retainer, advance, credit period, etc.,)
• We often take it for granted that if we bring a lot of value to the table and have sufficient leverage, we will be able to strike a great deal. While those things are certainly important, many other factors influence where each party ends up.
• Yet another pitfall is the fear lurking in the back of our minds. What will happen if we do not reach an agreement with our client? We get too committed to gaining an agreement and get pessimistic about what would happen if the negotiation fails. This is a one of the biggest dangers of negotiation and it stems out of being unprepared at the negotiation table.