Why Prospects Challenge Your Pricing Proposition

Your prospects & clients want several things from you, as their supplier.  They look for fair price, quality products & services, and timely service (though not necessarily in this order).  Surveys suggest most consumers want timely and responsive service as a first priority, quality products & services, second, and low prices, third.

Surveys of sales groups over a 20 year period, asking what they thought was most important to consumers, on the other hand have revealed a different, yet consistent perception…low price comes first, quality next and service last.

There’s clearly a difference in perceptions and expectations between the two groups, which is interesting.

Three elements need to be understood in selling situations if you’re going to effectively deal with the challenge of price.

• First is price, which is what we, as consumers, pay for what we buy.  
• Second is cost,  which is what it costs us over time, what it costs us if we do it wrong, do it late, or not at all.  
• Third is perceived value.  That’s the value we expect for the money we pay.

Most consumers tell salespeople they want low price…when what they really want is low cost.  It’s natural to want to take issue with this statement, but consider what you, as a consumer want.  Do you want the cheapest, or do you want the product or service that best solves your problem, answers your need, or fulfills your desire?

The truth is, most prospects or clients want their problems solved.  They recognise they get what they pay for.  They also know that the distaste of poor quality lasts far longer than the sweetness of the tantalisingly low price.

Buyers will object to price when they feel what they’re being asked to pay is higher than the value they perceive in the transaction.  When an ineffective salesperson encounters price resistance, they usually lower the price.

Unfortunately it’s not usually a price or cost issue at all, rather one of the perceived value being too low. What can you do to raise your prospects/clients notion of the relative value of what you’re selling?

A simple way is to find out what is troubling them most, and then show them how your product or service will satisfy, or overcome this need, want, or obstacle…or, even better, exceed their expectations of value.  This way, price will become secondary.  Not cost, but price.

Real sales pros focus on value…that is, what the product or service does for the customer…and not the price they’ll pay.  They understand that while price is an issue, it’s usually not the most important one.  Price will always seem high when perceived value is low.

The way to change the relationship between price and value in the purchaser’s mind is to focus on raising the value perception.  Lowering price only makes them view your original price, as well as the new, lower one with suspicion.

It’ll become evident that you don’t want to introduce price too early in the sales process…especially not before you've had the opportunity to build a value proposition in the mind of your prospect.  If you have a buyer who’s a price-only shopper (they are out there, aren't they), you’ll need to decide what their business will be worth to you in the long run, or if it will ever be worth anything.

History has shown that prospects who make a big deal out of price, expecting price adjustments…will ultimately require a lot of other concessions, extras, etc., as well.  Use their attitude about price and cost as a barometer of the overall quality of the relationship with you and your products in general.

This isn't to say you should never lower price…only that you should never make your first reaction to price resistance a lower price.

Remember!  Once you've set a pricing precedent with a client, you’ll live with it for the life of that relationship …and, of course, anyone they might refer you to.

Now that's worth thinking about

If you'd ;like to know how to increase the value, focus on the value add in your business attend the Business Growth Program, where we'll challenge you to think differently about how you do business.

Alternately feel free to give us a call on 01626 906348 or email stevegaskell@actioncoach.com 

Compete on Value not Price

Discounts versus Profits

Do you have (or have you ever had) one of those salespeople who thinks that giving a discount is the easiest, quickest way to make a sale?  Of course, they may be right, but what about the profit (your profit) they’re giving away?

If your product has a profit margin of 30% and your salespeople give a 10% discount to make the sale, you’re losing a massive, one-third (33.333%) of the available profit!

During a seminar for the buyers of a large retail group with branches all over the country, an attendee shared the following tactic: “My job is easy.  I just let the salesperson make a full sales presentation.  I ask questions and listen to their explanations.  When they’re finished, I simply say, ‘I’d like to place an order with you, but your prices are too high...’ and I then simply sit there and enjoy myself, because the once-confident salesperson suddenly doesn’t know what to do or say next.  With much less conviction and enthusiasm, they may repeat the benefits and features of their products, but most of them get in to see me by giving me a lower price in the first place.  Whatever new price is offered, I usually respond by saying, ‘You’ll have to do better than that!’  And more often than not, they do…in fact, do better than that!  I get lower prices by just sitting there, enjoying the game!”  The buyer isn’t stupid.  But you don’t have to lose.

If you are selling, or have others selling for you, you must protect your price and your margins.  Teach your people not to hesitate or stutter when a buyer insists on a lower price.  Start negotiating!  Start using tactics to hold firm on your prices.  Sell value…perceived and real

Here’s Why:

Do you think it’s possible to work 50% less and earn the same income from selling?  You bet it is!  Here’s how:

Suppose your company sells pumps, with selling price of £10,000 per unit.  Assume that your net cost per pump is £7,000.  That means that the net profit on each pump would be £3,000.  If ten pumps are sold at the full price, the net profit for your company will be £30,000.  Compare this with again selling ten pumps, but this time at a discount of ten percent.  The total selling price for ten pumps is then £90,000.  The net cost for ten pumps remains at £70,000.  The net profit has decreased to only £20,000 compared to the original transaction £30,000 where no discount was given.

If your company continued to sell at ten percent discount, then you’d have to sell 15 pumps to achieve a net profit of £30,000.  Here’s how it looks:

Sales             Discount          Gross Sales                 Net cost                        Profit

10                    0%                 £100,000                         £70,000                       £30,000

10                  10%                    £90,000                         £70,000                       £20,000

15                  10%                  £135,000                       £105,000                       £30,000

What are the lessons to be learned from this example?

A ten percent discount means your company must sell 50% more units (15 instead of 10) to earn the same profit pounds.

A ten percent discount means someone has to work 50% harder to earn the company the same.

By not giving discounts, in essence the company can “work” 50% less and earn the same income.

In spite of this, you might still think, “But, if I don’t give discounts, I’ll lose sales!  It’s an industry norm to give them...everyone does.  If I don’t give discounts, they’ll go to the competition!”

And you may be right, of course.  You may lose a few deals if you don’t give discounts…but the good news is you can afford to…and still make the same or more profit.

5 Ways to Massive Profit

Hello everyone.

You will have read my blogs on networking and the power of such events. Here I am pictured with the global expert in business networking, the founder of BNI, Ivan Misner. Probably the farther of business networking as we know it. The notion of 'givers gain' is one which underpins my approach to business, creating synergy within business and business types.

To that end I would like to share with you all my most recent presentation from my last networking event; Sandy Parks (Exeter Chiefs Rugby Ground) first B2B Exhibition. I gave a presentation on 5 WAYS TO MASSIVE PROFIT. It is made up of two 10 minute presentations which will help focus your efforts on increasing your profit.

'You'll need to get into action once you have watched them'.

Enjoy.