Price Pressures

If you are not losing one out of five deals because of price, your prices are too low.

If price was as big of an issue that mainstream salespeople make it out to be, companies arguably would not need an outside sales force. So consider yourself lucky if your prices are high. As Jim Desaro says, “There is no price-driven marketplace that has an outside sales force.”

Price is never the real issue. The real issue is customers do not believe you are worth the price, and in many cases, you legitimately are not. Keep in mind that so often the way you position your offering forces customers to use price as their only criteria against their usual preference. The way you sell will often be more of a driving force for customers to buy on price than the way they personally buy.

Customers buy on price because they cannot find extraordinary quality, convenience, service and value, or they do not care about extraordinary quality, convenience, service and value. Salespeople will continue to attract pesky, price-conscious customers until they learn this valuable lesson.

Be aware that the way you acquire a customer is the way you will lose them. If you sold on price to win a deal, you will be equally vulnerable and at risk to lose on price. Likewise, if you sold a customer transactionally, you will be vulnerable to losing that exact deal to a competitor transactionally. Salespeople set the stage on how they will win or lose on price by how they position their offering.

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The following represent many factors that lead to salespeople selling on price, or being vulnerable to price-conscious shoppers:

  • The later in the sales process you bring up price, the more vulnerable you are to price negotiation. Early discussion of budget projects a stronger position.
  • Customers are more inclined to be focused on price when their focus is short-term. They tend to buy higher prices when their focus is long-term. “Price shoppers have vision problems. First, they are nearsighted. I call this price-shopper myopia. They fixate on the immediate, that which is in front of them, acquisition price. They plan short-term. Salespeople need to teach them to think long-term by asking questions that stretch their time horizons,” says Tom Reilly.
  • If the company you are selling to does not sell value-added solutions or premium products, it is going to be culturally tougher to sell them value-added solutions.
  • “There is hardly anything in the world that some man cannot make a little worse and sell a little cheaper, and the people who consider price only are this man’s lawful prey,” says John Ruskin.
  • Price pressures frequently arise when salespeople launch a premature and indiscriminate spray and pray pitch and customers realize they do not need all the features and benefits being sprouted, and conclude the offering is too complex and is more than they need.
  • Price pressures occur with technical products when a case is made technically before a business case is made.
  • Price is dominant when positioning one’s product logically and less dominant when positioning one’s product emotionally.
  • Discounting and leaving money on the table can be rampant when salespeople prematurely try to close with customers who are not ready.
  • Salespeople who personally buy on price are at risk in attracting like-minded customers.
  • Frequently salespeople can minimize the price factor if they can become an integral part of the customer’s buying decision. With the absence of your insight and value, they would be predisposed to choose a lower-priced supplier.
  • A salesperson’s ability to maintain price integrity is directly related to their ability to shortening the sales cycle, and playing a leadership role on both the timing and dissemination of information.
  • If you have a customer who has a procurement mentality, they will always try to beat you up on price. As Jeff Thull says, “You need to find extrinsic buyers (they value your offering beyond the specifics) and not intrinsic buyers (all they care about is your product and what it specifically delivers).”
  • The key to getting healthy pricing consistently is for salespeople to do a good job of finding overlooked, unrecognized and unacknowledged problems.
  • Research by HR Chally underscores the overall importance of price for customers in choosing vendors. Here is their ranking: 1) 39%-salesperson’s competence; 2) 22%-total solution; 3) 21%-quality of offering; 4) 18%-price.

As Oscar Wilde once said, “A cynic is a man who knows the price of everything and the value of nothing.” Salespeople too often make customers cynical. Price pressures for most salespeople are self-inflicted. The law of attraction demands reciprocity. If you question your prices, or are price-sensitive yourself, you will attract like-minded customers.

There will always be price shoppers. The key is to disqualify them as quickly as possible. The reality is if you are not losing one out of five deals because of price, your prices are too low anyway. So the key to deal with price shoppers is to realize it is very difficult to sell value to customers who do not buy value. Find out who needs value, and find out what they have to lose if they do not get it.

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89a_farrellrichard Meet the Author
Richard Farrell is president of Tangent Knowledge Systems in Chicago, Illinois, and at www.tangentknowledge.com.