by: Landy Chase, MBA, CSP
It never ceases to amaze me how many business people assume that a budget dictates what the buyer can spend. In my experience, this almost is never the case. The truth is that in most cases, budgets are guidelines and nothing more than that. Additionally, they are sometimes based on a flawed or limited understanding on the part of the buying party of what actually is required.
Of course, most salespeople fall into the trap of selling to the budget. They build their entire proposal around this number. They assume that their recommendation must conform strictly to, or be below, the budget threshold. They ignore the issue of value. They dont take the time to find out what the customer actually is trying to accomplish, and they miss opportunities to both increase sales and better serve their customers.
It also is worth noting that budgets often are the domain of people who do not have final approval authority. In other words, when a prospect tells the salesperson, “my budget is $,” this statement usually means “I have been given permission to spend no more than $.” This tells the salesperson that the person is not a decision-maker. The real question here is this: who gave the permission? The person who approved the budget is the one who buys based on value – and isn’t limited to the budget number.
Influencers spend based on what they are allowed to buy. Decision-makers get whatever they want. Put another way, if the decision-maker decides that they need what the salesperson is recommending, they will purchase it. This is an important point. Before assuming that quote is constrained by a budget, first determine if the person being quoted is the “right” person.
Assuming that they are, this doesn’t mean that the salesperson should ignore a budget number. Instead, look at it as a guideline. However, remember that when proposals are put together that meet a pre-determined amount, what is proposed is typically something that is less than what the client would be best served by purchasing. For this reason, budgets are an obstacle to both the buyer and the seller. The seller is constrained by a ceiling of expenditure, but more importantly, the purchaser is limited to getting a solution that is probably less than ideal.
How to get around this issue? The key skill here is to execute a thorough needs analysis. The more that the salesperson knows about the needs of the client, the better prepared the salesperson is to deal with the budget issue. Get on the buyer’s side of the table and look at the decision from his/her point of view.
Once the salesperson has completed this key step and is ready to prepare a proposal, the following method is a highly effective way to sell around budget constraints:
- Prepare two options:
- Option A is based on the client’s budget.
- Option B is based solely on addressing the client’s specific needs and, therefore, disregards the budget.
- At the proposal meeting, begin with Option A. Say, “Here is what we can do for you, based on what you want to spend.” Review this with the buyer first.
- Next, present Option B. Say, “Now, here is the best possible solution for what you want, but this option ignores your budget.” Since the price issue is being ignored here, this option should contain a much higher level of value than the budget-based one.
- Option B should stand out on its merit. This option needs to maximize perceived value. It must be a perfect fit for what the buyer needs.
If this process is followed consistently, the salesperson will consistently close sales that exceed budget numbers. This happens because the buyer realizes, after reviewing both options, that what they need and what they initially planned to spend are not in sync with one another. They will immediately discard Option A and will focus their negotiation discussion on Option B, which fulfills their requirements.
Of course, the salesperson must be selling to a decision-maker for this method to be effective. The decision-maker often will select the recommendation that is the best fit for their needs, which is the higher-priced option. And if they don’t, so what? Plan “A” – the proposal that matches the budget – becomes the fall-back option. The salesperson has nothing to lose and everything to gain.
Landy Chase, MBA, CSP, is an expert who specializes in speaking to corporations and associations on professional selling and sales management topics. His latest book, Competitive Selling, was named an Editor’s Choice Best Books of 2010 selection and is available on www.amazon.com. To book Landy for your next sales meeting, visit his website at www.sellingrevolution.com or call 800.370.8026.