A customer’s price concerns are really concerns about saving money. Once a salesperson and the customer agree that price alone isn’t the driving factor, they are then able to move forward on more proactive means of saving the customer money. Moving customers away from a product's price, and onto reducing costs, is one way to ensure that your company maximizes its gross profit on sales. In this case, it's about focusing on a product's main selling points, instead of its sticker price.
Distinguish Your Product Offering
If your company has a high quality product, with longer life than your competition’s, then it’s essential that your salespeople don't capitulate to customer price threats. If your product deserves premium pricing, then it must not be played around with. Otherwise, it damages your company’s position in the market. More importantly, it sends signals to customers that they can get a higher quality product for the price of a lower quality one.
When a customer says “your price is too high,” what they really mean is that reducing expenses is important to them. In this case, it's a price threat that points to another more important issue: The customer needs to control expenditures. There is an inherent trade off between a product’s price and its quality. Most customers will come to understand that, if and only if, the salesperson gets them thinking about other ways to save money.
A price threat is nothing more than a request for lower costs. Take the time to come up with a list of ways to lower your customer's expenditures.
The above video provides insight into the critical steps salespeople should use in business-to-business negotiation. If you want to read more, please go to: Five Sales Competencies Every B2B Salesperson Must Master
Strategies to Maintain Pricing While Reducing Customer Costs
Work with your customers to help them find solutions that lower their expenditures. The moment your customer expresses a concern about price, you should immediately attack the situation head-on. Don't give in. Instead, understand what the customer's real concerns are. So, what are some ways that a salesperson can save customers money?
- Prepayment Discount: Is the customer willing to prepay for the product? Prepayment initiatives are great ways to save customers money, while maintaining your company's gross profit on sales. The sooner your company gets paid, the more profit you make.
- Prompt Payment Discounts: This is different from prepayment. In this case, the company will provide the customer with net-10 day terms and a 1% discount on its invoices. This means that the customer pays the invoice within 10 days. If they do, they receive a substantial discount.
- Consolidated Freight Shipments: Does your company ship a lot of product to the customer’s location – or to other customers near them? Your company may have better freight rates than what your customer can secure themselves. Open up the conversation to saving them money by using your freight courier.
One way to help your customer save money is by using a consignment inventory agreement. The above video provides some insight into how these agreements work and the pros and cons of using them to grow market share.
- Evidence on Cost-Per-Use Benefits: If your company’s product lasts longer, and is a much better product, then show why that is. Quantify its value in a way that speaks directly to the customer’s concerns about saving money. Come up with a list or table that shows the savings that can be accrued with your product offering.
- Extended Payment Terms: If the customer isn’t willing to prepay, or is simply not interested in prompt payment, then it might be worthwhile to offer extended terms on invoices. This is not the best method to use, but if the sale is extremely important to your company, and you can’t risk losing to the competition, then keep your pricing as is (to protect your market position) and offer extended terms.
- Use “Loss-Leader” Product Lines: Take the time to look at some of those “me-too” product lines within your company. Those product lines that are your “loss-leaders” may be ideal for such a situation. If the customer needs them, then throw them in as part of the order – at a much lower price of course. Use your lower value products as bait to keep customers happy.
One of the best examples of a loss-leader pricing strategy is the one adopted by Sony with its PS2 and PS3 gaming consoles. The company intentionally sold these products to lose money in order to secure high profit on the sales of games and software. To read more, please go to: Product Life-Cycle Management: Grow Market Share by Selling at a Loss
- Sell Dead or Slow Moving Stock: Take this opportunity to sell some of those slow moving or dead stock items in your inventory. Your customer may need these products. Sell them at a discount and use these products to provide your customer with savings. Liquidating inventory helps your company and your customer.
If your company is selling a high quality product that deserves its price tag, then take the time to empower your salespeople on the ins and outs of selling the product. As mentioned, there is an inherent trade off between quality and price. Customers’ concerns about price are based on concerns about costs.
If you take the time to come up with some innovative ways to save your customers money other than lowering your price, then you’ve protected your product’s market position, and solved your customer’s going concerns. It's about understanding the real issues customers face. In the end, they want to reduce expenditures - not simply go with the lowest priced option, one that will cost them more in the long-run.
One of the more important strategies sales must employ is defending business as the incumbent supplier. To read more about keeping competitors away, please read: Stop Losing Business to Overseas Competitors: Define Your Customer’s True Purchasing Costs
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