Every salesperson has, at one time or another, been intimidated by a customer's demand for better pricing. Most cringe when a customer tells them they’re price isn’t competitive, or that a competitor's bid is going to win the order. However, when customers ask for better pricing, what exactly are they asking for? This isn't meant as a riddle. Instead, it's meant to get you understand that price demands are nothing more than a customer's request for you to help them lower their expenditures. In the end, a request for a better price is a call to action for you to help lower your client's costs.
We Need to Save Money!
Customers equate lower pricing with saving money. It makes perfect sense doesn’t it? So, if customers ask for lower pricing, what they’re really saying is that they need to save money. Saving is important to them. Once you realize that these customer requests about pricing are merely requests for you to help them lower their expenses, you immediately open the door to other avenues to help customers do exactly that.
There are a myriad of ways to save customers money, and not all of them have to do with lowering your product or service’s price. For instance, you can save your customer on cost-per-use benefits. You can save them on their freight costs on incoming parts. You can save them in inventory financing by using consignment inventory agreements to reduce the damaging effects of inventory stock outs. You can use loss-leader pricing strategies and use complimentary product lines in order to reduce your customer's overall costs.
Defending pricing is one of five essential business-to-business (B2B) sales competencies your sales team must master.
When You Have to Lower Pricing
However, if you must absolutely give in and lower your price, don’t! Now, I am sure you’re wondering what the heck I mean by this one. Well, have you ever noticed how some companies rarely lower their pricing but instead offer their customers discounts. We all know this is just another way of lowering prices, but at the time it happens, we often view it differently. We tend to see it as somewhat of a favor or a bonus. You’ll see this all the time with certain automotive manufacturers. Their sticker price remains the same, but they offer all kinds of rebates, discounts, and incentive programs.
When you are in a situation where you must reduce your price, don’t just immediately reduce it outright. Use it as an opportunity to put forth one of your own rebate programs. Keep the sticker price as is, but use the opportunity to get your customer involved in a back-end rebate program or offer a “one-time” discount.
The following article shows how to run a back-end rebate and customer reward program similar to the one in the above table. This type of reward program is essential when looking to improve your customer retention. Here is the article: The Customer Retention Plan that Keeps Customers & Grows Sales
When your business is faced with a customer that is asking for better pricing, understand that the request is rooted in a concern about costs. Once you get your customer to think about cost reduction, you’re well on your way to putting forward some initiatives to reduce costs, without lowering your product’s price.
Given the state of today’s economy, with every business fighting for orders, it’s completely understandable why companies are constantly asking for better pricing. Instead of being intimidated by these requests, take the time to investigate them further with your customer.
Being able to defend your position as the incumbent supplier is essential to maintaining your market share. The video below shows how to keep your position as your customer's primary vendor. You can read more by going to: Stop Losing Business to Overseas Competitors: Define Your Customer’s True Purchasing Costs
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