The Pricing Game

The Lead - The Pricing Game

I had a great back and forth with Todd Ortscheid this week on LinkedIn about pricing, and how sales people navigate the question of price in their conversations with prospects. Regardless of your product/service, I think it’s an important discussion to have.

The general thesis was that if you find yourself playing the pricing game, you’re ultimately going to lose. A person who is just looking for the cheapest solution to a problem, is happy to run the race to the bottom and ignores the value provided (at their own peril). Here’s a link to the post and comments.

I want to expand on that conversation here in long form. I’ll start by saying, I think Todd raises a valid point. When someone asks about pricing, they deserve an answer. Trying to hide your pricing can come across as deceptive and dishonest. We’re trying to build trust here. At the same time, I think there’s a tactful way to guide the conversation.

Now let’s be clear: some things are more commodotized than others. If I want to buy a pair of shoes, sure I’m going to look at a number of different websites to find the best deal. The product is the product. The marketing and brand reputation, my personal taste, are driving my decision making. It’s fairly cut and dry.

But in the world of property management, we’re talking about a significant asset representing hundreds of thousands of dollars. On top of that, the variance in terms of approach and quality of service can be wide. We’re not talking about shoes here.

So if you agree with me that approach and quality of service can vary widely in most cases, then we as sales people need to be able to navigate these conversations in a way that provides value and builds trust.

This isn’t to say that you can win every time. Or that every prospect will be the right fit for you, and you for them. But if what we were selling was simple and straightforward enough, we would make it so that a prospect could just “Add to Cart” on our website and never talk to anyone.

A few things I think about when it comes to pricing:

• Most people don’t actually want the cheapest. Pricing is a factor, and while someone may convey that it is the most important one, you can pretty quickly break that frame. Do you want the cheapest heart surgeon? The cheapest tattoo artist? Hopefully not.
• If we can agree that price isn’t the ONLY factor - what else is important? There’s a basic premise that we are willing to pay more for things that we actually value, and it’s potentially different for everyone. If for some reason price is the only factor, then I’d argue that may not be a client you want to work with.
• If your primary strategy for engaging in a pricing conversation is to offer discounts, you de-value your service. Is it appropriate to negotiate sometimes? Of course. What I’m talking about is choosing to engage in the race to the bottom, to do whatever it takes just to get a deal done. Your prospect doesn’t value what you provide, and will quickly leave you for a cheaper option.

Let’s get practical - you are talking to a prospect (like actually talking, not emails back and forth). The approach is genuine curiousity, true discovery. Asking questions about their situation, the problem they are trying to solve, how it impacts their day to day. Most sales people don’t do this. They go straight to pitching.

I’ll make the argument that doing discovery the right way, from the beginning will set you on a path where price is a footnote and not the headline. Not always, of course. But asking the right questions shows that you actually understand, and care about the outcomes for your prospect.

That sounds easy enough - but “the best laid plans” etc.

You’re talking to your prospect, and making an earnest effort to get to know them, their business, their situation. But you are met with resistance. They aren’t interested in engaging, they just want to know what you charge. Give me your pricing.

This was the type of prospect I was getting at in my LinkedIn post. This type of prospect may have done their research already. They may think they’ve equipped themselves with the requisite information, the only missing piece is your pricing. They don’t want to understand your service, they just want to know what you charge.

To Todd’s point - in most cases your pricing is just listed on your website. It should be. Unless your service is pretty custom, you should have a range out there at a minimum. For a property management company, there’s no reason to hide it.

Obviously, there’s an argument to be had that the person who only cares about price is likely not your ideal target. As soon as a better price comes around they’ll move on. Again, I don’t think most people are actually like this.

So when your prospect is set on grilling you about price - what do you do? The argument I’d make is that your job is to not dodge the question, but seek to understand what actually matters to them.

The first thing I would do is acknowledge that pricing matters. Empathize that it’s a legitimate concern and you can understand that it’s important. Why it’s important though is a different question.

An 8% management fee vs. a 10% fee is relatively small, especially when you consider more costly effects of receiving poor service. Long vacancy, lack of property awareness during the lease, or placing a bad tenant. Those things are really pricey.

These are the questions your prospect may not know to ask. They don’t necessarily fit easily into a spreadsheet calculation on property performance. But that’s what we’re actually talking about, it’s not just the price that you charge but how does this investment perform over time. Are you able to present a case that your approach to property management creates a better financial outcome?

The other thing to consider is that prospects very well might have a legitimate fear of hidden cost. This isn’t uncommon in property management. Pricing can be complex, and they don’t want to sign up only to get burned later on. Again, to Todd’s point you need to be clear and ideally list this on your website. But you also need to be aware that past experience can lead to fear and uncertainty of getting burned.

As you engage with your prospect on this, you ultimately need to get to a place of understanding decision-making criteria. I’d make the argument that as sales people, we can get caught up trying to play the pricing game, when really there are factors in the decision-making process that haven’t been revealed to us yet. Don’t try to compare apples to apples. Avoid jumping straight to offering discounts. Seek to understand what’s important to them, and the problems they are trying to solve.

Final thought for you - an order taker is happy to receive inputs and spit out the price, even if it’s to the customers detriment. If you tell me you want the cheapest burger, sure McDonald’s will serve you something at the lowest cost. But you might not feel so great a few hours later.

PS. Shout out to Todd for the engaging conversation as always. If you’re not already subscribed to his newsletter, go ahead and do that here.

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