Half the battle is not the price. Half the battle is being comfortable about selling the price. Many businesses think that they overprice their products and services, so many businesses underprice them instead.
Many salespeople are not comfortable talking price. Some of them even signal that they believe their own prices are too high and, as a consequence, subconsciously lead the customer into a price haggle.
The exception to the rule is those salespeople engaged in the selling of luxury or premium-priced items. But, since most of us don’t sell luxury goods, most of us fall into the trap of being worried about the price we charge.
In some industries, the entire industry is so worried about price that it actively invites customers to haggle over it. Who has paid full price for a new car lately? Or perhaps a new plasma TV? Customers now know that price is negotiable so why would they accept the first one presented?
Getting beaten up on price
Next time someone asks you the price, tell them what it is. Then tell them the benefits they receive from choosing that brand over a cheaper alternative. Test the waters. Don’t signal that price is negotiable and see how you get on.
Haggling occurs because salespeople invite it. If you offer cash versus finance prices, discounts or bonuses, waived fees or other monetary inducements, you encourage the customer to focus on price. You’re focusing on price. They just follow your lead. When did you hear of Tiffany the jeweler having a sale?
Instead of referring to prices as “list” prices, or “catalogue” prices, or “volume” prices – just refer to “the price”.
If you want to sell products at a higher price than your competitors, you have to be more expensive than they are to buy from. Also you need to be comfortable that you can still make the sale at the higher price. You need to exude confidence in your product and not be fazed by its price.
Just because someone asks for a discount does not mean you have to give it to them.
Establish Value Upfront
Just how much is your product worth to a customer? For some products, it is easy to calculate. For others it is extremely difficult.
The formula for calculating value looks like this:
Value-based pricing focuses on what you think customers are willing to pay based upon the benefits you offer them. You need to be able to prove these benefits and should use a brand to support your selling. Having a brand provides credibility to the value you offer.
Essentially if you use a value-based model for selling, you need to articulate the benefits to the buyer and these benefits need to be persuasive enough that the buyer will pay a premium price.
One of the classic mistakes salespeople use is to focus on the product features. Your customer does not do this – your customer focuses on something far more self-centered. He or she wants to know what’s in it for them.
Where a brand may be a feature of the product, the benefit to the customer is having confidence in the purchase decision (in other words, the purchase is less risky) or gaining social identity, status or belonging, for example.
Where the feature may be that a product is available online, the benefit to the customer is 24/7 availability whenever they choose to access it.
Where a feature may be a function that the product performs, the customer benefit is the utility that feature offers. This may be convenience or removing a boring task, for example.
The value that the customer may derive from the purchase may be in several different areas.
Some of these include:
- Making their work or task easier or more interesting through improved features.
- The ability to perform new work or tasks through improved features.
- The availability of the product (especially if the competitive product is hard to get). Conversely, making a product hard to get (exclusive) can generate customer value associated with brand association.
- Fuss free support that means no stress or hassle. Anyone tried to get a tech lately to fix your broken computer? If so, you’ll know how much hassle it is. Everyone depends on computers.
- Brand affiliation – especially true if it is a popular brand. Brand affiliation can produce feelings of belonging, status or some other positive reflection upon the customer.
- Sensory perception – the joy that comes from using your product versus someone else’s.
Equip Salespeople with Tools to Help Them Sell
Where practical (and you can do a lot online these days) every product you sell should have a sales cheat sheet. The sales cheat sheet could be placed online (protected from public viewing) or handed out in paper formats (if you are confident that you can control different versions).
Cheat sheets should include the following elements:
- A brief product description (no more than 2 paragraphs). This should explain what the product is and what it does. Get to the point in plain English. No jargon or technical talk.
- The target market. Who is suited to this product? Be specific about this. Not “everyone in business” is suited to this website. This website suits people who are small to medium business owners that want access to skills and advice to help them to compete. Also, they must be comfortable about accessing this assistance online.
- Key selling messages. What are the benefits of this product? You need to articulate them and give them to your salespeople. Avoid vague motherhood statements such as “it will save you time”. Get into specifics – “the average user saved 3 hours per week using this product versus the alternative”. These need to be compelling benefits that will persuade a buyer to purchase.
- Competition. Who are the competitors and what are they offering? How does your product compare? Again, be specific. Where you are at a competitive disadvantage, acknowledge it and devise a response. (Competitive information can change frequently which is why it is often better to load the information online and provide your salespeople with access to it.)
- Pricing. How much does it cost? Are there extra charges? Be transparent with your pricing and, if your competitor isn’t transparent (and you have proof), say so. You can create FUD without naming names.
- What else did these customers buy? If you can use the sales opportunity to cross-sell or up-sell products, do so. Include a section recommending other products that customers buy when they buy this one.
- Who can salespeople call if they have more questions? Always include contact details of staff or suppliers that more technical questions relating to the product can be directed to.
What if Competitors Drop Prices?
Hold firm. Wait to see if your sales volume is adversely affected. If it doesn’t make any difference to you, you don’t need to reduce your price.
If you want to make a goodwill gesture to a customer who has noticed a difference in prices between suppliers, offer the customer something extra which makes it hard for the customer to compare prices.
Don’t knee-jerk react. You must be sure that there is an adverse impact to you for maintaining the status quo.
The important thing of all is to avoid a price war. If you drop your prices, chances are good that your competitor will drop their prices even further. Then where do you go from there? Further south?
Businesses that drop prices have to find ways to drop costs to stay alive. So they let staff go, cut service corners, reduce product quality and after sales customer service levels. Before long, they have upset the customer sufficiently that the customer is happy to go with a different supplier. And pay more for the privilege.
If you cut your price, you have to sell a great deal of product to make up for it. (Do the math using the methodology in Pricing and The Gross Profit Margin.) You are not going to be able to do it because your competitor will not allow it.
The Power of FUD (Fear, Uncertainty and Doubt)
Low prices make many buyers suspicious. They wonder what’s wrong with the product or the supplier that allows them to be so cheap. They wonder whether the supplier will still be in business tomorrow or the day after.
Fear, uncertainty and doubt works well as a sales strategy in industries where buyers have been “burned” by suppliers failing to adhere to quality standards, deliver on time, or surprising them with unpleasantly with hidden charges and so on.
In the environment of FUD, buyers gravitate to reputable brands. If you’re a reputable brand, you’re in luck and this is a good sales strategy to use. (Of course, you can’t say things that are untrue. You’ll damage your own brand credibility doing so.)
Promoting Your Advantages – Other Than Price
For many customers, price is not the primary deciding factor when it comes to purchasing. In fact, it could be as low as third or fourth on the list.
When a young woman walks into a store to buy a dress, she doesn’t necessarily buy the dress that is cheapest. She buys the dress that looks best on her. If the cheapest dress in the shop looks terrible, she’s not going to buy it.
In the business to business market, for many buyers delivery is more important than price. The reason is that if a raw material or equipment does not turn up on time, it can affect their own production timetables. This directly affects their ability to make money.
TABLE 1: Factors you can use to help sell your price.
(You will need to personalize this to your own business.)
Walk Away from Unprofitable Customers
There is no point getting tangled up with unprofitable customers.
They sap your energy, leave you feeling resentful, tend to complain a lot, and want everything and more for nothing.
Save your energy for customers that appreciate the value you offer.
READ: More about pricing strategy.