Selling Price: How Not To (Part Two)

Picture of Clone BusinessmenBuyers are going to ask you about your price.

Sometimes they will ask you about your price before they will even agree to a meeting. Sometimes they will ask you about your price during your needs analysis. They are absolutely going to ask you about your price after you have given them your presentation.

You are going to be asked about your price, even when it would be more beneficial to your dream client to think in terms of costs.

Here are some thoughts how not to sell on price.

No one believes that the lowest price ever equals the best offering.

We sometimes believe that the lowest price is what it takes to win. But that is rarely ever true. No one believes that the lowest price ever equals the best offering, and most people don’t want to overpay or underpay for what they need.

The buyer or buying committee makes a calculation, if only in their minds, as to where they can capture the greatest value for the lowest price. In order to command a higher price, you have to demonstrate that you provide the lowest cost by producing the greatest outcome in the way of a return on their investment.

To do this, you have to attach a cost to the problems you solve. This is what your price is being measured against.

Sometimes price is the only factor being considered.

Sometimes price is the only factor being considered. If you are selling to Wal-Mart, you are going to join them in being the lowest priced provider. It is their business model, and by selling to them, you make it your business model—even when it isn’t your business model.

If the lowest price is your business model, have at it and sell price. But if it isn’t your business model, and for most of us it isn’t, then mercilessly disqualify these prospects (who resemble dream clients only in the amount they spend on your category) and spend your time where you can create the value your company was designed to deliver.

Your Price is Evidence that You Behave Like a Commodity

More often than not, price is a factor being weighed against many other factors. The more your price becomes the determining factor the more you are being commoditized.

Your behavior determines how commoditized your offering becomes. If you compete on price, you are behaving like a commodity. If you fail to create a differentiating and defining value outside of price, you are behaving like a commodity. If you fail to explain to your dream client that your price is higher because the return on the investment is higher in the way of a lower overall cost or greater production improvements, than you are behaving like a commodity.

If you don’t want to be treated like a commodity, don’t behave like one. This means you have to find a way to create a massively better outcome and you have to prove that you can deliver it.

Your Competitors Behavior Can Commoditize Your Offering

Your competitors are willing to be commoditized, which means you have to work much harder to differentiate yourself and create value that provides you with the opportunity to capture some for your company and yourself. This isn’t easy.

Your competitors say they have similar offerings. They say they have the same features and they say they produce the same benefits. They look like you. They talk like you. They provide the same product or service that you provide. This is true to the buyer (in part, because they want it to be true), even when it isn’t true at all.

To break out of the commodity trap, you are going to have work very hard at differentiating your offering on the results, the return on investment. It is extraordinarily hard to create a defining and differentiating offering based on features and benefits. If you plan to get out of the commodity trap, you are going to have to work very hard and you are sometimes going to lose on price anyway (even if you did everything possible to create value).

Buyers Want You to Be a Commodity. Some Salespeople Prefer to Be a Commodity

Buyers, including the mid-level managers who are responsible for their own P&L statement, are focused on price because they are not equipped to see their role in investing the firm’s funds. They think in terms of the price and have a difficult time believing that they can improve their outcomes and/or that you can help them.

Price is the easiest shortcut to take. It means that all they have to do is decrease the costs at the top of their Profit and Loss statement and they improve their net profit on the bottom line of that same statement. It means none of the heavy lifting of a real change effort, and no disruption. It means they can take the blue pill and continue to live with their problems.

For buyers, a price focus says: “I agree that you might have something more valuable for a little more than I am paying now. I understand that my outcomes would be improved and that it would return a greater investment. But I have no confidence that I can make the changes necessary to capture that value, and I am not sure that you can either. No one will ever be mad at me for choosing the lowest price.”

For Sellers, a price focus says: “You don’t really want to improve your outcome in any meaningful way, and I don’t really want to work that hard to help you. Instead, let’s agree to the status quo, I will pretend that I am equal to my competitors who are failing you now, but with a slightly lower price, you pretend that you are getting a much greater value for a slightly lower price.”

Don’t prefer to be a commodity and don’t play the game.

When Price Loses

Lowering prices works for some companies for a while. It works until it doesn’t work anymore, and then the salesperson is heartbroken to discover that their proposal to shave off pennies no longer gets them any traction.

Once the buyer has recognized that there is no value to be gained from a slightly lower price, that the cost of change exceeds the tiny amount of money that can be saved, even lowering your price will not win you the deal.

Congratulations! You have made it to the bottom of the commodity barrel. Now start climbing out!

Conclusion

Don’t learn to sell price. Spend your time learning to create more value than your competitors, and focus on proving you can create greater outcomes—outcomes where both you and the client can capture more value and share what you have created.

Questions

  1. When have you ever found the lowest price to equal the best offering? What did it take for you to rationalize paying more for a better offering? How can you apply that experience to what you do as a salesperson (or as a sales organization).

  2. How can you quickly discover that your dream client is really a prospect that is only focused on price and mercilessly disqualify them?

  3. How much of the reason that you are being treated like a commodity is caused by your behaving like a commodity in the first place? What would you have to do to change the behaviors that cause your clients to believe you are one of many with no defining differences?

  4. Your competitors are willing to be commoditized? They have a great influence on how you and your offering are perceived. How do you ensure that you are perceived as being different?

  5. Your buyers want you to be a commodity because it makes things easier for them. How do you move them to the idea that they can pay more and generate a far greater return on their investment, even when it means the a disruptive change?

  6. Do you want to be a commodity because you don’t want to work hard enough to create a real, defining, and differentiating value?

  7. Have you ever lost even after lowering your price in an attempt to win? Have you ever purposely priced under the known provider only to have your offering rejected? Why was that strategy ineffective? What does it mean you need to change?


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