What Can You Do When a Customer Asks You to Lower Your Price?
What can you do when an important customer asks you to lower your price? Here are some options to address this important issue.
Documenting your performance is great prevention.
Great suppliers are typically doing more for their customers than they need to do. Here’s an example: Your work includes providing web marketing support for your client. You anticipate his needs and point out components you could offer that would increase his sales. While it costs you some additional time to add the components, you absorb the cost because you are serving this client with other products.
The next step is critical. Document the savings and present it to your customer. Do this at least annually. It does not count in your favor if you do the work and your customer is unaware of it. You then can show your customer that what he pays is a lot less money than the value of what he is receiving.
Some will simply ask you to lower your price.
There are some customers who believe that they have nothing to lose by asking their suppliers to lower their prices. Why wouldn’t they? If the supplier lowers his price, the customer gains. If the supplier doesn’t, there’s nothing really lost because most suppliers won’t tell the customer to find another supplier and that they don’t want to work with him anymore.
What makes customers who simply ask for a lower price so difficult to work with is that they often compare you to less productive suppliers. They assume that you’re equal. They say that they can buy your services or products for X dollars lower than your price.
You know your service isn’t equal to the competitors, but you can’t simply let the request go -- and it becomes a difficult situation.
You risk calling attention to your customer’s poor decision-making when you show him that you are different — and better — than who he is comparing you to. And it becomes a losing situation when you show your customer he’s wrong.
Have a plan to avoid the perception that others can match your performance.
The best strategy is to prevent a customer from asking for a lower price because he thinks he can get one. Have an annual value-planning meeting with your key customers. Discuss the goals you want to achieve for their business when you meet. You can set goals for dollars saved by increasing productivity and reducing costs. You can also set dollar goals for increased sales from your work.
You are setting customer expectations that you will deliver that value. They then have to agree that what you will be working on is worth it. Some customers may not be a good fit for your business if they don't agree on the value of the work that you’ll do; they might be the ones who are only looking to pay a lower price.
It’s a different conversation, however, if a customer asks you to lower your price when you've demonstrated your value. You can respond, “Which part of my value offering do you want me to remove so I can lower my price?” You’ll often get, “Well, I guess I want it all.” And that’s the end of the price lowering discussion.
