When customers call to tell a seller that they have chosen their competitor, most of the time they are pointing out that their competitor had a lower price, which is sometimes true and sometimes a good way to drop the seller without having to spend time responding. their questions about what they could have done better. If it was the seller's price that cost them the transaction, it was something beyond the seller's control, which provided them with an external reason to assuage their egos and any feelings of pain.
It's easy for sales reps to believe that their higher price is the root cause of their challenge in winning big deals, even though very few companies are making big changes to save money. The majority buy because they need to improve their bottom line in a meaningful way. Here's how to talk to your sales force about pricing.
Understand the strategies
In the discipline of market leaders, The excellent book by Michael Treacy and Fred Wiersema on Understanding How a Business Strategy Enables Them to Succeed, the authors explore three different strategies. The first strategy is to compete with the lowest price, which is more difficult than most suspects. This is a commodity game, and it requires massive scale. The second strategy is to deliver the best product, which would allow you to escape the commodity trap and charge more for the greater value you create. When something costs more to the manufacturer, that necessarily comes with a higher price.
The third strategy is customer privacy, which means you don't have the lowest price, and you might not have the best product, but your business acumen, your situational awareness and your privacy allow you to provide the best overall solution, the one that creates the greatest value for your customer, even if the price is higher.
Our business strategy is customer privacy. This means we need to create more value than anyone else, which we do throughout the sales process by doing a great job of discovery, collaborating on solutions and spending time with stakeholders who will be positively impacted by our solution. Executing this strategy is how we intend to win, which eliminates the other two potential strategies.
The key to execution
When they find potential clients who are unhappy with their current results and are ready to have an exploratory conversation with a potential new partner, they are unhappy with their results and are looking for something better. In a certain percentage of these cases, the potential customer chose the cheapest option, confusing price with cost, it was only later that finding the solution came along with it. Increased costs of poor results. You know that because we had to step in and change things.
The key to execution for our client is making sure we are helping the client make an investment that allows us to execute and deliver for them. Discounting and offering price concessions can be a slippery slope. Large discounts take away the necessary execution profit for the client, and relatively small concessions between many clients add up over time, depriving us of investing in our business and making it more difficult. helping our customers.
We have to execute our strategy. When we don't capture the appropriate and necessary profit that we need to run, we will ultimately have more problems serving our clients, we will lose business due to our failures, and we will start generating clients. When it happens to businesses, it gets harder and harder to achieve your goals because you have to devote time and energy to the issues. It also makes it much harder to grow, as you need to replace your lost customers first before you can create the first dollar of growth.
Try to sell with the lowest price
Even though it looks like it would be easier to sell for a lower price, it isn't. While it is easier to sell to lower consumers, the people who think the lowest price is the highest value are only a relatively small share of any market. When someone is solely focused on the price, their loyalty belongs to the lowest price, not to the company that gives them that price. This is the reason why inferior service providers have no problem switching providers or threatening to do so if their current provider does not match their competitor's lower price.
When a company has the lowest price, it has made so many concessions that it boils down to the one point of differentiation which is its lowest price. If you think it's hard to sell for a higher price, imagine what it would be like to sell to our customers without everything that differentiates and defines us. Our customers buy from the cheapest competitor because they are unwilling to make the necessary concessions to accept that price.
But there is a bigger reason why we are not competitive by having the lowest price.
Who we are and what we do
Weak salespeople and sales organizations resort to lower priced selling because they think it makes it easier to sell. We are not weak sellers and we are not a weak business organization.
Instead, we use a modern sales approach. We are really advisory. We create enough value throughout the business conversation to differentiate ourselves and our solution without having to worry about competing with lower prices. Our best defense is our offense, especially our willingness to talk about the investment needed at the start of the conversation, we justify the delta. So the client understands the investment we make in their solution and by sharing with them the concessions that they will make by paying less than what is necessary to get the best results they need.
We earn the highest price we charge by solving bigger problems, creating more value, and helping our customers improve their business and bottom line. Our price is a little higher than that of our competitors because it allows us to be who we are in the market.
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