It can be difficult to tell whether your prospects and dream clients are price-driven or results-driven. You want to spend your time with prospects that want you to capture part of the value that you create.
Some of your prospective clients will lead you to believe that they want to pay for results, even though price will be their main consideration. Others may appear to be price shopping, and you will later discover that they are willing to pay for results.
It’s sometimes difficult to tell how important price is to your prospects until you are engaged in your sales process. But there are some clues that allow you to make an educated guess.
Look At Their Business Model
One of the fastest ways to determine if your prospective client is going to be a price-driven buyer is to look at their business model. If your prospect is the low price leader in their space (a strategic choice called operational efficiency), their business model depends on acquiring what they buy at the lowest possible price. They pass the savings off to their clients. It’s a tough business model, and the companies that operate this model effectively are sophisticated buyers with a laser focus on price.
If your prospective clients operate a different business model, like industry innovator (think Apple) or the customer intimacy model (think most of us in the service industries), they won’t necessarily have to buy on price alone. Their model allows them pay more so they can create and capture more value themselves.
You can make some assumptions about your targets by looking at their business model. Just know it’s not a perfect method. If you can create enough value, even a prospect with the operational efficiency model can be a good prospect. And you are still going to be asked about your price by your dream clients operating some other strategic business model. But model is a good starting point.
Look At What You Already Know
You know some things about some of your prospects. If you know a prospect only buys based on lowest price, then there isn’t any reason to pretend otherwise. If you can’t acquire their business at a price that allows you to capture some of the value you create, your time is better spent elsewhere. You know these clients; you have called on them in the past and watched them chase the bottom.
It’s just my experience, but I have found that even when most price-driven buyers reach the end of their rope and are finally willing to pay for results, they aren’t willing to pay much more. You can end up wasting a lot of time pursuing prospective clients who need the better results you can provide, but whose idea of paying more doesn’t come close to what you need in the way of pricing.
Look At How Much Value You Can Create
Your price is going to be accepted (or rejected) based on the value that you create.
The smaller and more easily solved your prospective client’s problems are, the less value you can create. The less value you create, the less you can charge your prospective client. This is why it is imperative for sales organizations and salespeople to climb the levels of value creation, becoming their client’s strategic partner. If you only provide a good product or service, you are going to have a tough time differentiating yourself and your offering.
The larger, more complicated, and more strategic the problems you solve, the more value you can create. This is where higher profit margins are found. Targets with strategic level problems that you can solve aren’t price-driven; they are results-driven. They’ll happily pay for the results that need. And they’ll let you capture some of the value you create.
It can be difficult to tell if your prospect or dream client is price-driven or results-driven, but you can make an educated guess. And when you aren’t sure, ask questions early enough in the process to get agreement on what the right investment needs to look like to return the results your prospects or dream clients need.
How can you tell whether your prospective client is a price-driven or results-driven buyer?
How much do business models drive pricing decisions?
Do you know the prospects in your territory that have demonstrated that they will only buy the lowest price? What would need to change for them to be willing to pay more for greater results?
Why is worth more to solve bigger, more strategic level problems?
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Filed under: Sales 3.0