Pricing almost always comes up at the end of a demo. That’s just how these conversations naturally flow,; opening with a little rapport (which yes, is still important, a topic for the future), an intelligent discovery, you walk someone through the platform and justify the need, then get to the investment. The problem is, if the only number in someone’s head by that point is a guess, you’re negotiating against whatever figure they made up on their own, and that number is rarely going to work in your favor.
This is where anchoring comes in, and it’s one of the most useful things I do in a demo and it happens long before pricing ever gets mentioned.
An anchor is simply a reference point you plant earlier in the conversation so that your actual price, when it finally comes up, feels small by comparison.
Say I’m walking someone through the part of the platform that builds out a model of their best fit potential clients, essentially telling them who to go after next. Instead of just showing the feature and moving on, I’ll make clear the fact that a consultant doing this manually would routinely charge over $50,000 and take a month or more to deliver something far less complete than what they’re looking at on the screen in real time. Now that number is sitting in the room.
Another example: If the data surfaces 600 target individuals, I would state the fact that “each of these tagets could make a purchase of over $10,000, and you’ll typically have at least a 10% conversion rate with these prospects.” (Which would be about $600,000)
When pricing comes up later and I say the investment is $16,000, it’s being compared to $650,000. Suddenly it sounds like the deal it actually is.
The key is that the anchor has to be true and it has to be relevant, not just a big, unrealistic number thrown out for effect. If a prospect can tell you’re inflating a comparison, you lose the credibility you spent the whole demo building.
I try to anchor against something specific to what I’m actually showing them in that moment, a real cost of doing it manually, a real cost of a consultant, a real cost of the staff hours it would take internally, and the lost new business of $600k. That way the anchor takes care of two things: it justifies the price and it reinforces the value of the featur.
The other thing I’ve noticed is that anchoring works best when it’s dropped naturally, in the middle of showing value, not as a hard sell. In the consultant example, I’m not saying “this is worth $50,000” I’m saying “this is the kind of thing people pay consultants over $50,000 for,” and letting the prospect do the math themselves.
By the time we actually talk numbers, the real price isn’t the shock. The absence of a $50,000 invoice is the nice surprise.
Love these posts…Very informative, insightful and well written!