I Need a Lower Price!
By Tim Connor
consolidation and restructuring has salespeople scrambling like never
before in the history of American business. The game changes with
regularity and certainty. Yesterday's
decision makers are today's research gatherers. Last week's stable
relationship is no longer a sure thing. There are now buying
committees, group purchasing organizations and senior corporate
executives are making decisions that were once delegated.
It is difficult at best to navigate in today's choppy corporate
seems to want lower or better prices.
Many client and customer relationships are in jeopardy.
can today's salesperson balance the drive for corporate profits, the
customer's desire or need for lower prices and high value and not
sacrifice the organization's ability to maintain market share,
competitive position and long-term success?
There are three areas I would like to address in this article.
Part one, what is the root cause or catalyst for this drive for
better price. Part two, what will be the outcome of this continuous
business or consumer attitude. Part three, how can salespeople
continue to play the game successfully in this new arena.
One. What is the root cause or
catalyst for this trend in the drive for better price?
For the past several years consumers have been effectively
selling salespeople on the idea that price is their most important
concern. This attitude has
moved into business purchasing gradually at first, then with lightning
speed. Purchasing agents
have always been price conscious, often pitting one supplier against
another to gain a better or lower price. This is not new behavior.
But the zeal with which this price shopping is increasing is
taking a great toll on sales efforts in every industry.
corporate buyers are putting increasing pressure on salespeople to get
better prices. Often they
sacrifice customer satisfaction and loyalty in this drive to lower
their costs. These savings
are sometimes not justified if you were to look at the long term
market consequences. There
may be short term apparent savings off the direct bottom line, but
sooner or later the real "costs" will become quite evident.
These future costs can be in poor customer awareness, loss of
competitive market position, turnover of key personnel just to mention
me to expand this idea a little further.
There is low cost and low price. There is high or low value.
And there is a fair price and cost for a good value.
Consumers have proven again and again they want the latter.
is what you pay for a product or service and cost is what it
ultimately costs you. I
have discovered in the past twenty years as a trainer and consultant
to a wide variety of organizations,
that there is always money to fix a problem, but there was never
enough money to prevent it. Time and time again I have seen corporate
buying decisions made with little thought for how a marginal product
or service would cost them increased inefficiency, reputation and
customer turnover in the future. Making
purchasing decisions with the only focus of cutting costs is
recent changes in purchasing practices in the health care industry is
an excellent example. The
trend in this industry is to consolidate purchasing, with Group
Purchasing Organizations, thereby enjoying the benefits of lower costs
because of their ability to consolidate purchasing thereby improving
overall buying power. I believe that this drive for lower prices will
ultimately hurt not benefit the customer or patient. Yes, it is true
that many organizations need to become more efficient and prudent in
their buying, as well as rethink their profit objectives and margins,
but to squeeze corporate America
until it bleeds benefits no one.
two. What will be the outcome
of this continuous business or consumer attitude?
I am beginning to see a backlash in corporate purchasing in
many industries. Increasing
numbers of customers are now venting their disappointment, frustration
and anger with these organizations that have become penny wise and
pound foolish. And they are expressing their disapproval by taking
their business elsewhere.
need to re-visit their willingness to sacrifice the ultimate benefit
of high value for the immediate pleasure of low price. Another trend
these past few years in a number of industries, is that decision
making is moving higher up the corporate hierarchy.
I believe this trend will not last for a number of reasons.
With the thinning out of management levels and staff in many
organizations, the people at the top have more and more on their plate
that often requires immediate attention.
For this reason they will not have the time or ability to make
the best overall purchasing decisions.
In the most successful organization's today, decision making,
authority and autonomy is moving down the ladder, not up.
The sixties, seventies and most of the eighties was dominated
by a top-down management mentality.
The employee rebellion of the late eighties and early nineties
has cured that malady in most of the fast growing and successful
organizations of today. However
some organization are refusing to modify their opinions, expectations
and business style. These
organizations will soon find themselves far behind their competition
with no hope of ever regaining lost market share.
The best people to evaluate a product or service and its worthiness
and value are the people that must use the product or service on a
routine basis. Often they are the point people
dealing directly with your customers. Shoving inappropriate,
poor quality, or outdated products and services down the throats of
employees who must ultimately defend these to the customer is causing
increased stress, frustration and generally firing the pilot light of
History has proven again and again, saving money in the short term is
not always saving money in the long term.
You can't measure everything with a
calculator or a spreadsheet.
Saving a dime per wigit when you buy thousands per month, may
cost a machine operator, customer
service representative, or repairman excessive downtime.
It will certainly take a toll on their attitudes and morale
that will find their way to the customers office, showroom or plant.
three. How can salespeople continue to play the game successfully in this new
arena? There are a
number of contributors that determine whether a salesperson will lower
price or cave in to customer pressure to price demands.
Situation 1: There
is the self-esteem of the salesperson.
Salespeople with low self-esteem tend to reduce prices more
often than salespeople with high self-esteem.
The low self-esteem salesperson hopes to receive appreciation,
approval or recognition which is needed in their psyche.
High self-esteem salespeople are not looking for approval but
to make sales and solve customer needs, problems or wants both short
term as well as for the long term.
Salespeople with high self-esteem tend to be much stronger
negotiators for the same reasons.
Situation 2: If
an organization is losing market share, for whatever reason, they will
tend to react by lowering prices which only accelerates their demise
or shortens their life-span. It
becomes a downward spiral. Increased
competition - reaction: lower
prices - reaction: less
working capital to satisfy the organizations ability to compete -
reaction: less satisfied customers - reaction:
increased customer turnover - reaction:
less and less working capital and so on into oblivion.
look at the increased numbers of business failures of all sizes during
the past several years.
Situation 3: There
is a corporate attitude in many organizations today that to get more
business they have to give away more business.
I have seen hundreds of organizations that have believed that
to penetrate a new market or introduce a new product or service. it
was necessary to "low ball" their products or services to
get a foothold in this new market.
I have never seen this work as a long term strategy either for
the organization or their customers.
Both lose in the end.
Many salespeople are price or numbers driven.
Their mandate from on high, is increase sales at whatever cost.
They are often successful in increasing sales, but at what
cost? High stress,
burnout, high turnover and often at reduced margins.
Not to mention dissatisfied, disloyal customers.
Organizations need to price their products or services with
careful consideration for the following:
Is the product unique in the
Do customers really want what the
company has available?
Is the product quality less than,
the same as, or better than
Is the market right for the
product or is the organization attempting to force a segment of the
market to purchase what it
chooses to design and manufacture?
Is the organization pricing
a particular product or service to make up for general
corporate losses or because other items in its line are weak?
sales compensation unfairly or poorly pegged to force
salespeople to sell certain products or services that would otherwise
back to our original question. How can today's salesperson balance the
drive for corporate profits, the customers desire or need for lower
prices and high value and not sacrifice the organizations ability to
maintain market share, competitive position and long term success?
would like to share three simple, yet proven strategies that can
reduce and often completely disarm this "price only"
mentality among today's buyers.
need to have a number of things going for them to
handle this price issue successfully.
They need to have tremendous
They need to have excessive
They need to know the needs,
fears, problems, concerns or wants of their customer's customer.
They need to have the skill to
match their product knowledge to the needs, desires, concerns and
They need to have a "general
basic business understanding".
They need to bring a great deal
of practical experience or empathy to the
need to have high self-esteem.
need to have exceptional sales skills.
need to have the ability to manage the emotional issues in selling.
need to manage the issue of rejection.
need to believe in the mission, objectives and purpose of their
order? Yes, but then the
rewards can be just as big. Now
to the three strategies. For
the purpose of brevity, I
am going to assume that you have all of the above issues under
Strategy No one:
you believe that price is a major issue with your prospect or
customer, you need to determine what else is of concern to them and
why. This is accomplished
with lots and lots of good questions asked in the right way at the
right time. Do not, I
repeat do not launch into your presentation prior to determining what
the prospect's dominant reason for buying is, other than price.
Once you have discovered this you need to focus on how your
product or service addresses this reason.
If the prospect attempts to control the sales process by
bringing you back to price, you
need to stand your ground and confirm if this is their only
in mind that buyers buy when they are ready and not when you need to
sell. Also remember, they
buy for their reasons not yours.
Strategy No two:
Resist the urge to quote price prior to building value.
Price will always seem high, if value is perceived as low.
Quoting price, any price, before you have attempted to
establish a sense of value in the mind of the prospect, will seem
high. You build value not
by talking about product features, product benefits but what the
product benefits, customer benefits, do for the customer.
Strategy No Three:
be greedy. If you are
dealing with a repeat customer that has a history of buying from you
don't jeopardize the business by not being willing to be flexible on
some products, while not reducing prices on other products or
services. The important
thing to remember is that they are a customer of yours.
They have a history with you and are familiar with your service
levels, response times, new product developments, billing and shipping
procedures. When they ask
you for a better price on an item, they may be looking for a lot less
than you think. Don't
react too quickly. Ask
them why they need a better price on that particular product.
Ask for something else in return if you are asked to reduce a
price where you are not inclined to want to do so.
Ask for advance payment, a
bigger deposit, a portion of their business that you are not currently
getting. But if you must
take less than your desired margin, get something in return.
asking for something in return, you can often stop the price spiral
from continuing. You may
even get some of their business that you might not have been able to
Let's wrap it up:
Price is important, but every survey I have seen in the past several
years has indicated that buyers want three things, low price, good
service and good quality. Which
do you think, again and again comes up number one?
If you guessed service you are right.
Which comes up number two?
If you guessed quality you are right again.
That leaves price as number three.
Price is important, but in the minds of most buyers, it is not
the most important. They
would like to convince you that it is, and often do, but never forget,
most consumers and business buyers do not want to sacrifice service
and quality for low price. They
just want you to think they will.
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