Many sales people sit in front of a customer and ask them what is their budget or how much do they have allocated to spend on the products or services that they want to sell them. Understanding the budget early is a very logical thing and will avoid a lot of misunderstanding early on in the discussion, however, is it the right thing to do? This is a very important thing to consider during the sales process, let’s look at the question and work out if it’s a good or bad selling technique.
Will You Upset Your Customer?
So, you have asked for their budget; “Exactly how much has been budgeted to purchase your new labeling machine?”, for example, and suddenly the customer’s demeanor changes and they go on the defensive. In this scenario, they may well be thinking:
- Why do they want to know this?
- Why can’t they just tell me what their price is?
- Am I going to get ripped off?
- Why is my budget going to impact what they are going to offer me?
In all honesty, I think the client is in many ways right with these questions but of course, there is the reverse side to look at. Why does the seller ask for the budget amount? Can it be for the benefit of the customer? And why do I think there is some logic there.
Can You Avoid Wasting Time?
I believe that the number one reason the seller asks the question is to – simply know if they are within their target market (and therefore likely to buy) or not. They don’t want to invest their valuable time (or that of their client) to later find out that he was never going to buy from them even if it’s the Wolf of Wall Street sitting in front of them.
So, a harmless question seems to separate the buyer and seller at a very early stage of the sale when you really don’t want the buyer to be defensive. This is a crucial stage. It is essential for the client to be open and comfortable with you so that you can gather the information you require to develop needs and build value.
Will Knowing The Budget Help?
Also, if you only focus on the budget, you could be walking away from a potential client who does fit your target audience but there may be a misunderstanding on what you are offering or they are not aware of all your products and services. In my experience, this happens more times than not across most industries.
In addition, people’s budgets are not normally what they are willing to spend. Just recently, I went to buy a car for my wife and we paid 20% more than what we budgeted for. Why? It made sense. The warranty of the car was more than what we expected and my wife fell in love with it straight away. This obviously is worth the extra money for me! “Happy wife, Happy Life” is the term I remember hearing on one of my kid’s TV shows.
I’m sure everybody has many examples of where they have paid more than they budgeted for. Well, buyers do this as well if they see the extra value of what we are offering. However, if we simply ask for their budget, we will get a number that could mean we decide on how much effort we will put into the sale. More often than not this turns out to be a mistake.
It seems we have a few clear conclusions on asking a customer for their budget:
- Asking a potential client for their budget usually makes them defensive and more difficult to sell to.
- If we get a number from them it often leads to us behaving inappropriately, often walking away from what is, in reality, a good prospect.
- In some cases, understanding what the customer has planned to invest can help both of you avoid wasting time and effort.
So, What Can We Do?
The first thing is to learn more about the client, developing facts that should help you understand if they would ‘likely’, be willing to pay for what you are offering. For example:
- If you are in the digital media business and you can bring them four more customers a month at 2,500 USD profit for each. Would you be able to convince them to spend 2,000 USD on a monthly campaign?
- If you are selling high-end Interior Design and the client has just moved into the Versace Hotel. Would it be likely that they could to afford to buy from you?
- If you are selling premium, healthy meals to somebody with a heart condition that needed to improve their health. Are they likely to find the extra money?
These might appear simplistic examples, but whatever you are selling you need to consider early on what impact your solutions could have on their business.
Unfortunately, like many sales topics, there is not an exhaustive list of questions for every organisation that we can provide to help achieve this. They will vary from industry to industry and from company to company. There could be so many variables but, whatever industry or company, you have to work this out first — what is it about your product or service that can be translated into value for your customers?
Do some homework, looking at your customer’s business before the meeting. Relate your research, try to link information to evaluate if the customer is in your target market or not.
I have worked with clients who have established that they have received leads but never closed business for prospects, based on the following broad criteria:
- Where the prospective client is located
- If a company has less than a given number of employees
- The number of salespeople at the company
- How many IT staff are employed
- Certain specific industries
- Where they currently focus resources
…plus, many more
What About Giving Your Price?
In the same way that it is usually best to avoid asking for a customer’s budget, you may also want to avoid answering the question ‘What is your price?’ in the early stages of a sale. If your products and services have lots of value and your costs are at the higher end of the market, then simply stating a price could leave you out in the cold. To be realistic sometimes you have no choice but to offer a ballpark figure, but try and avoid it by focusing it back on the subject of the fact it will vary from one client to another.
If they insist, provide the simplest no-frills price you can offer and later in the sale if it needs to go up you can explain why. Never deceive a client so always make it clear what you are offering. The extra cost will only be warranted by additional value in your offer.
So try and stay away from the price and budget from the outset. Focus more on questions about what value you can provide, to work out if they would be willing to pay the price you offer in the market.
Nothing is foolproof but this approach can only increase your chances of more sales while not wasting time.
It will always be tempting for a salesperson to try and get to understand what a client is willing to pay and this is normally achieved by understanding (asking) what has been budgeted for a product or service. The main reason for this is to make sure that the most time is spent on prospective clients who seem most likely to be in a position to buy from you.
In my experience, working with sales teams across industries, bluntly asking for the budget usually makes the client defensive and less easy to get information from. Additionally, I think it also stops the salesperson from working hard for every opportunity. It’s a little like when top teams in their league lose to teams fighting to avoid relegation at the end of the season. The top dogs just underestimate their competition and don’t work hard enough to win.
Treat clients, big or small, as equally as you can. Obviously, you will dedicate more time and resources to the biggest opportunities but the quality of the work you do should be the same.
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