Defending your pricing

Have you ever found yourself in the situation of trying to close a sale with a client and just when you thought you had the work in the bag, the client starts negotiating? Unfortunately, this is a fact of life: people negotiate.

I was recently on the other end of the transaction as a buyer of services when I pulled this maneuver, and I was shocked at how well the contractor held his line. My wife and I were contracting with a landscape designer to put in a new garden. As you can imagine, the bottom line number was a pretty big number, at least by our standards. So we dutifully listened to the details about the bid and the different ways in which he was going to transform our garden, but at the end of the day, $40/hr for manual labor and $60 for design time adds up very quickly. I told the contractor that we were excited to get started and loved the vision he had for the space and even went so far as to ask what his schedule looked like before starting to negotiate the price. He thought he had the business in the bag, and judging by his face when I asked the question, he wasn’t expecting a price negotiation.

Here is where the lesson starts on how to successfully defend your pricing when clients question it. It sounds like a typical negotiation, but the lessons are in the responses from the contractor:

My first tact was the open-ended standard question: “What can we do about the price… it’s a little large?”, I said. He clearly anticipated the question and immediately replied with “We could do less plantings.” Ah, he hit me with the old: lets reduce price by reducing scope tact. I wasn’t buying that one.

I shot back with “Well, how about this rate? $40 for digging dirt seems like a lot…” Again, calmly, he came back with: “I strive to make sure my pricing is aggressive and if you want to bring in someone else to do the digging, that’s fine with me, but the overall job may take longer.” He stumped me again! Of course I don’t want to manage another contractor just to do the digging, and truth be told, that “digging” rate also included all the soil prep, material haul-away and obviously, the plant installation. He wasn’t buying my “$40 for a lot of digging” way of thinking.

Finally, I asked him if he would consider a cash discount — I pay cash and you charge me less money. Luckily, he bought into that one and I came out with a 9% discount.

So what were the lessons? First, be prepared for this question and all of it’s variations. Second, remain calm and answer the challenges rationally using you prepared statements. Third, be flexible and “have something to give”. This contractor gave me options for reducing the price (such as bringing in my own “digger” and/or paying cash) and that’s one thing that helped him win the job. One of the only times you should be prepared to lower your prices is if you know you are coming in high relative to other bids and you need the work.

(Photo courtesy of maveric2003)

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