How does your B2B sales team handle customer demands for lower pricing? Does your sales team try to secure customer concessions and justify a lower price for higher purchase volumes? Or do they simply give in to these customer demands and grant a lower price? It’s not uncommon for salespeople to become easily intimidated by a customer’s demand for lower pricing. However, it’s something else entirely when management starts thinking the surest way to winning business is to match the lowest possible bid. Don’t allow this to happen. Management controls the conditions of the sale. They are the gate keepers and the second line of defense when it comes to protecting your price. Your first line is your B2B sales team. Therefore, I’ve decided to come up with five reasons why you don’t have to lower your price.
1. Cost-Per-Use and Longevity Sales Benefits: If your company has a product whose quality is above reproach, then make a statement. Quality speaks volumes, if, and only if, you can show your customer how your higher price actually saves them money. No, that’s meant to be a riddle. However, it is meant to turn the conversation away from your product’s sticker price, and onto criteria that are in your product’s favor.
If you can’t beat your competitor’s lower price, then don’t waste any of your time playing on that field. Avoid it altogether. Get your customer to measure your product’s features and benefits by how much that product saves them. Dollarize the savings of your product for your customer base by focusing on its cost-per-use benefits.
2. Ignoring Existing Customers: Granted, you want that new business, but at what cost? Why should your company offer a lower price to a customer who has never purchased from you, instead of offering that price to your existing customer base? The reason you don’t is because your existing customers don’t measure your company’s value by its ability to match the lowest bid; they measure your company and its product offering by its value-proposition. These customers get it. These other ones don’t. Ignoring your existing customer base is a sorry excuse for devaluing your product.
3. Lowering Costs is Important, Not Lowering Price: Customers who demand lower prices are simply demanding lower costs. There is a difference. Your company can save your customer money without simply lowering your product’s sticker price. When customers demand lower prices, turn the tables on them and use the following statement: “When a customer asks for lower prices, what they’re really asking for is lower costs. We can help you lower your costs with a number of initiatives!”
Still not convinced? Then ask yourself the following question: When you need to reduce costs, do you limit your focus solely to the prices you pay for products? Or, do you use multiple approaches to lowering costs? It's a guarantee you use multiple approaches. Use those same strategies with your customers.
To learn about how to defend your position as the incumbent supplier against a low-cost overseas competitor, please go here.
4. Pursuing the Wrong Market Segment: Customers that define their purchase criteria solely on how low a price you offer, aren’t customers worth pursuing and aren’t worth building your business on. When you work with these customers, you are essentially pursuing the wrong market segment.
These customers aren’t reliable, and they certainly don’t represent the best your market has to offer. You can’t plan anything with customers who move from one vendor to the next. Treat these customers are opportunistic sales only! Use them to unload outdated inventory. Use them to drive down your costs of capital by granting their lower price, PROVIDED they prepay for the entire order.
To benefit from some of the strategies outlined in the above video, please read: Sales Negotiation: Defend Price, Customer Scare Tactics & Managing Concessions
5. In the End, Price Won’t Matter: This last reason is perhaps the most important. What happens when you refuse to match that lower competitive bid and have lost this particular business? Well, you’ll likely be second-guessing that decision until that point when that customer suddenly calls you back. When this happens, price is no longer an issue. If you’ve clearly defined your product’s value by distinguishing its features and benefits, then any decision by this customer to come back to you isn’t based on price – it’s based on the poor quality product your competition was offering.
When that customer finally returns, it will be because something, somewhere, went wrong. Your competitor let them down. Regardless of why, you can be assured that your price isn’t a going concern of theirs. Instead, focus on moving the discussion around ways you can save your customer money without touching your price.
Now, by no means am I implying that your company should never try and maximize on its B2B sales opportunities. This is especially true given the difficulty of winning business in today’s economy. However, your customer’s request for lower prices is nothing more than a “call to action” for you to help them lower their costs. It’s their way of saying “we need you to help us lower our expenses”. If your product has longer life benefits, then apply a dollar value to those benefits. If your price is justified in its market, then stand your ground and defend your price. If you question the motives of the customer, then grant that lower price on the condition that they’ll prepay their order. Finally, remember that if you hold your price, and your customer returns after trying your competition, they aren’t coming back because your price is better; they’re coming back because your product is better.
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