“I am having trouble with is getting potential customers to share a budget with them. I know they have a number in their head. How can I ask a better question to get the result I want?” — J.L., Scottsdale, AZ
Great question. While customers do not always have a “budget” in mind, they do have a “spend tolerance.” The difference between “budget” and “spend tolerance” is that with a budget your prospects have probably set aside or allocated a certain amount of funds in their business plan for a particular product or service. In the case of “spend tolerance” they have not really thought about how much something will cost; but, they do know how much they may be willing to consider spending for the product or service that they are looking at acquiring.
In dealing with a person who has not defined their budget, or not willing to share it, work on testing their “spend tolerance.” Here are the steps:
1. Go through the relationship building and learning process to properly qualify them. If you get stuck on the budget question, help them discover their “spend tolerance.”
2. Explain to them that the budget for a project like this “depends” on how important their need fulfillment is. The program you are offering can meet all their needs, most of their needs, or simply the most critical needs. They would need to define that more specifically as you get to know them better.
3. Provide them a budgetary range to test their “spend tolerance.” If you know that you can meet most of their needs for a project at $1,000 use that as your benchmark. Then, use the “Half and Double Rule.” Tell them the probable budget for this project ranges somewhere between $500-2,000. Make sure you use a disclaimer like, “this is simply a quick estimate to help you develop your budget and help you define what your priorities with this program are.”
4. Pay attention to the response. If they say that $2,000 is high, you know that they are not willing to spend that much, but you know you are obviously in the range or they would have said $500 is too high. If they say that $500 is too high, you may want to rethink whether this is a customer for you.
5. Close the conversation with the reminder that these are estimates. Make certain that based on the information you provided them they are still interested in proceeding. If not, find out why and discover what the issues are. Address those now before wasting everyone’s time with quotes and proposals that will not go anywhere.
Everyone knows how much they are expecting or willing to spend on something. The trick is helping them reveal it. Discovering what that is, educating them on what something really costs, and managing expectations based on their “spend tolerance” is a key part of the effective qualification process.