Infamous “What’s Your Budget”
We’ve all asked or been asked this question. In theory it’s a good idea. For the person selling it helps them understand how much value you are assigning to something, what resources are available. For the person buying, it helps set boundaries on the project. There is a big difference between what you can buy for $500 vs. $5,000 vs. $50,000.
There are so many reasons this question needs more context:
- It’s awkward. We’re trained from a young age not to ask about money. No matter how many times we do, that little voice in our head still cringes.
- Budgeting processes are not the strongest. Particularly for small businesses, budgeting is based off what they hope to earn and what they guess things will cost. As those numbers fluctuate, the budget usually isn’t updated until the next cycle.
- It doesn’t account for ROI. In the marketing world, we’re regularly asked to provide return-on-investment information. While for some investments it’s difficult to calculate a specific dollar figure, (long-term branding projects) other projects make it possible (AdWords campaign with conversion tracking). Make sure that potential return is factored into the budget.
- Who goes first? Logically, there is a belief in negotiations that the first person to speak loses. If the seller goes first, they are leaving money on the table. If the buyer goes first, they are going to get over charged.
- People buy with emotions. I know I’ve overpaid for things in my life because I really wanted them. There are also times where even when it’s a good deal, I’m not interested. If a large portion of the process is based on budget, you are leaving the emotional appeal on the table.
Ways to improve:
- Be transparent in your pricing. Before you even get to negotiations, provide a pricing overview. Let people know what it’s going to cost and then use the sales process to defend the value provided for the investment.
- Know Your Audience. A lot of budgeting conversations go wrong when there is a disconnect between the level of the product and the needs of the organization. For instance, a small, regional service business doesn’t need a $20,000 website. A large manufacturer is likely looking for more features than the $10-a-month SaaS product can offer for inventory management. There are exceptions, but the principal is the same. You should only be doing budget conversations with people in the market for the product you are selling based on the value it provides.
- Know Your Value. Change the conversation from budget to value. The value could come from a direct return (savings or increased sales) or an indirect benefit (saves time, prevents loss, etc.). Based on your audience, figure out your audience’s pain points. Perhaps the most telling story of this is a current client. Their product can save nearly a million dollars per year for organizations in an industry struggling with budget. However, that’s not enough for the market. It still feels like too much work to implement when already overworked. Their outlook is very short-term so the messaging needs to address immediate pain points to create value.
This is just a starting point to this age-old problem intended to get you thinking. There are countless more reasons the question sucks and ways to improve. If you have any tips to add, I’d love to hear them!