Countering the “your price is too high” objection should never start with your simply being willing to accept less Gross Profit.
The key to making more money for 98% of all businesses lies in the Gross Profit. Sacrifice this first level of profitability, and you give yourself fewer dollars to cover your overhead and nonoperating costs at a profit to you.
Use the Magic Square to help people see the value in your solution for the charged price.
Overview
The Magic Square is a proven technique for countering “your price is too high” objections. Use it to help potential customers appreciate the value being offered by the price you are charging versus simply lowering the price you are willing to accept to make a sale.
For example, the recommended solution has a price of $1,000 that includes $1,300 worth of features. Your potential customer wants the proposed solution, but tells you they are only willing to pay $800 for it. The Magic Square would have you counter their $800 offer with your $900 solution combination, not simply roll over to make the sale.
By stripping out added cost features, you are in a position to lower your price without sacrificing your Gross Margin. In this example, if the customer wants the fully loaded solution, the cost is $1,000. If they don’t want to pay $1,000, offer them the $800 solution that solves the problem, but has fewer features. By being willing to pull out features from your solution, you get down to exactly what components your solution the customer values. If they want the complete solution set, the cost is set at $1,000; if they are willing to remove features from your solution, you can lower your price because your solution will cost less to deliver.
The guiding principle of the Magic Square is you go up and down, trading off features for a lower price never across. I.e., a customer won’t pay $1,000 for $900 in value. That’s a Dead End in their consideration of your offer, nor should you be willing to accept $800 for a solution valued at $1,300.
You deserve to earn a profit. The best way to do this is to know what product components cost and what people are likely to value each component. Know this, and you can reduce the price you charge by reducing your costs, not by simply reducing the Gross Profit you will earn on the transaction.
