I’ve come across the following situation a number of times when discussing sales negotiation training. A company has an innovative, high quality product where the cost-per-use benefits trumps anything the competition has to offer. The product lasts longer, is of better quality and is all around a much stronger product offering. Yet despite this, the company continues to lose business to low cost, low quality competitors. In fact, in most cases the company ends up selling their high quality, longer-life product in the same price range as their competition’s lower-end product. Instead of securing premium pricing, they downgrade their product offering and secure business at a lower gross profit margin simply to keep their competitors at bay. So, why does this happen?
Price Means Savings, It’s that Simple!
If there was ever one phrase that immediately disarms sales professionals it’s the “price is too high/price isn’t good enough” statement. In fact, any customer statement relating to price immediately puts most sales people on the defensive. It’s almost as if they’re embarrassed to say that their company’s higher quality product deserves a higher price.
Now, this isn’t true of all sales professionals, but it might be true with those sales professionals who are unaware of how to handle the dreaded “price” statement. However, is it because they're embarrassed or is there something else at play here? Perhaps it's because these sales professionals have not been taught how to respond, or more importantly, what those customer statements about price really mean. Surprisingly, it's not about the price, but about saving money.
What is a customer really asking for when they say the “price is too high”? What is their biggest concern overall? Now, most of you will immediately think that when a customer says the price is too high, that's exactly what they mean, the price is too high – right? Well, no. What these customers are really saying, even if they don’t know it themselves, is that “saving money is important to them”. When a customer complains about pricing, what they are really implying is that they need to save money, and there are a number of ways to save customers money. Cost-per-use, longer life, high quality products save customers far more money than price alone.
The problem therefore becomes, “How do we show the customer out product saves them money even if it’s more expensive?”
The above video outlines the essentials of business-to-business (B2B) sales negotiation. If you would like to learn more, please see: Five Sales Competencies Every B2B Salesperson Must Master
Once your sales team realizes that customers who want a lower price really want to save money, it opens up a myriad of different approaches to impart upon customers the benefits of the company’s higher quality, longer-life and subsequently, higher priced product.
The key is to first come to an agreement with your customer that what they really want is to save money. To get started, let’s assume the following scenario occurs between a sales person and a customer.
An Example of Cost-Per-Use Product Sales
Example:A Telecom company, specializing in point to point communications, has recently been awarded a large terrestrial earth station contract. The contract calls for the company to act as an integrator. It will require a large amount of work to keep the project under budget.The scope of the project is large, as is the number of items they require. One of those items includes electrical junction boxes – which are supplied by a company whose product quality is above reproach. However, their pricing is on the high end.
The company’s representative calls the Telecom customer to begin discussions. Before calling, the sales representative knows his/her pricing is on the high end, but also knows that their junction boxes typically last 20% longer than the competition, are easier to link up with connecting cable, and rarely need repairs.
- Sales Person: “Hi Mr. Peterson. It’s John Anderson. I hope you’re doing well.”
- Customer:“I’m fine thank you. What’s up?”
- Sales Person: “Well, I heard the great news about the contract. Well, done. You guys must be happy.”
- Customer: “We are, but there’s a lot involved, tight timelines, budget constraints – it’s a monster project. I guess you guys want a shot at the junction boxes – right?”
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Sales Person: “We do, and to get started…..” (Customer interrupts)
- Customer: “Hold on a second John. I don’t mean to cut you off, but I have to first explain that while we’ve never used you guys, you do have a reputation for extremely high pricing. The problem is our budget and timelines are tight and I can’t envision a situation where your company’s price range makes any sense within our project’s budget. Your pricing is way too high!”
- Sales Person: “I understand. However, may I ask you a question?”
- Customer: “Sure”
- Sales Person: “When you express concern about pricing, what you’re really saying is that saving money is important to you and this project, right?
- Customer: “Yeah, I guess you could say that.”
- Sales Person:“After all, the project can’t encounter too many delays, go over budget, or encounter too many repair costs. If these things happen I am sure the costs to your company will be severe – am I correct?”
- Customer: “Yes, they will. In fact, as is always the case with these projects, there are penalties for not completing the project on time. They really hammer us with these delivery requirements and the penalties can be costly. We’ve seen this first hand with a project where we had to replace a number of critical parts.”
- Sales Person: “Well, what if I told you that not only would you never have to worry about that with our junction boxes, but that they last 20% longer, take half the time to link up to cables, and rarely need servicing. Link up time is an extremely important aspect of maintaining project times on installations – as I am sure you’re aware. Mess around with the time constraints of linking up cable to junction boxes, and you’re certain to go over budget.”
- Customer: “That’s definitely true – we had this exact problem on our last installation. Complete nightmare. Ok, let’s talk, but I need proof.”
Essential Steps in Selling Cost-Per-Use Products
The above scenario is a perfect example of the type of negotiation role play to introduce into your company’s sales negotiation training exercises. Your sales people can not feel intimidated by their product’s higher pricing. They must disseminate what the customer is saying and get to the heart of their concerns. These are the critical steps for sales professionals who must sell a premium priced product where the benefits are cost-per-use, and not its price tag.
1. Don’t Apologize for Your Price
Don’t ignore your product’s higher pricing. Don’t make excuses and don’t immediately respond to a customer claim that your product is too expensive by immediately trying to make excuses for it. It is what it is. It’s a higher priced product with better quality. Use the “price” statement to delve further into the customer’s real concerns.
2. Explain How Price Concerns are Really Savings Concerns
Get your customer to admit that what they really want is to save money. Once they do, you can begin to work on how your product can do just that. Remember, there are a number of ways to save money – not all of them have to do with lowering the price of your product.
3. Provide Evidence in Support of Claim
If you want your sales people to close the deal, then you have to provide them with what they need to do just that. Some customers will take your company’s word and simply move forward on the purchase. However, most won’t. Your company must be able to back up its claims with evidence. Make it a point to provide referrals from existing customers. If no referrals are available, then do a case study analysis on the pros & cons of your product and use this information when meeting clients.
When it comes to sales negotiation training, it’s important you match your sales strategies to your product or service’s unique traits. If your company has a higher quality product, then quantify what that quality means in a way your customers can appreciate. Finally, understand that concerns about pricing really imply that the customer is concerned about saving money. There are a number of ways to save money. This is but one example, but there are a myriad of others.
The above video explains how to protect your business against competitors. You can learn more by going here.
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