Imagine a situation where each time your company submitted a proposal, your B2B customer used that proposal to lower costs by asking your competition to match your price. Granted, this happens a lot. However, how does your sales team respond to these situations? Are they be able to defuse the customer’s tactic and get them to understand that your company can’t be used as a reference on pricing? Or, do they easily capitulate, thereby becoming unpaid consultants and forever positioning your enterprise as a tool to lower competitive bids? Regardless of your answer, it’s important to understand that your company isn’t in business to do your competitor’s homework. Your customer must understand that as well.
Your B2B customer must respect your efforts and not use your price against your enterprise. You’re not in business to help your competition increase their revenue and grow their market share. You’re in business to win business, to grow your revenue and increase your market share. You have every right to protect your pricing. Unfortunately, many companies assume that it's wrong for their sales team to stand their ground, to defend their position and most importantly, to defend their time and efforts. However, protecting your pricing is perhaps never as important as it is now - especially in today's economy, an economy where customers are continually trying to lower prices in an effort to reduce costs.
B2B customers have every right to save money, but they should reward those companies that offer the best pricing and not use your enterprise to lower your competitor's offer. Therefore, if your customers are using your company’s pricing against you, then it’s incumbent upon your sales team to put an end to it. So, how is this done?
The above video is from the post: Sales Negotiation: Defend Price, Customer Scare Tactics & Managing Concessions
1. Reaffirm Customer's Purchase Criteria
One of the reasons customers continually use your price is because your salespeople fail to reaffirm the customer’s purchase criteria. Reiterating what the customer wants, their volumes and requirements, and confirming when they’ll make a decision, goes a long way to defining the conditions of the sale. Your sales team should reaffirm the customer’s purchase criteria by reviewing all of their criteria aloud. After they do, they must ask for customer confirmation on each point. When a customer confirms on each point, they are confirming their own purchasing criteria. You aren't guaranteeing you'll get the order, but you are confirming what criteria your customer will use when they place an order. Below is an example of some statements and questions your sales team can use.
“You want 20 units delivered two weeks from now. Is this Correct?”
“You’ll be making your decision this Thursday. Should we call you Thursday morning or afternoon?”
2. Define Conditions for Proposal
It’s always a good idea to explain how your company comes up with a price. What exactly does this mean? Well, if the customer knows that your salespeople must work through internal channels, and must at some point negotiate on their behalf, then they are more likely to appreciate the time and effort that goes into making a proposal. The idea isn’t to do this all the time. Instead, it’s to use this tactic with those customers who continue to use pricing against your company. Either they are doing this intentionally, or are taking your efforts for granted. Regardless, it’s up to your sales team to define the conditions for receiving a price. Here is an example of a statement your sales team can use.
"Before we provide your company with a price, we first have to discuss the volumes, conditions and pricing levels with our product management group. Is it ok if we get back to you later this afternoon, after we’ve ironed out our internal negotiations?”
3. Use Trial-Close Technique
The purpose of the first two steps is to give your customer one last chance to reward your hard work with a purchase order. However, if that’s simply not going to happen, then you need to move forward with the trial close sales technique. The premise is simple; instead of your company continually providing pricing without orders, your customer will have to provide the price they are guaranteed to place an order at. In doing so, you’ll explain that your company can ill afford to provide pricing while your competitors simply match your offers. It’s not meant to be confrontational, but it is meant to redefine the relationship with this particular customer. Below is a sample of the statement your sales team can use.
“Unfortunately, you’ll have to provide us with the price you’re guaranteed to place an order at. While we would love to become a vendor of yours, it’s become readily apparent that our best efforts aren’t producing results. We know our pricing is extremely aggressive based the business we’ve secured this quarter. However, if your company is serious about moving forward, then we need to know what price you need to place an order with our company.”
4. Secure Firm Purchase Commitment
The final step is to advise your customer that there is a time limit on your proposal. As such, if they do not move forward with a purchase order, you will no longer be able to provide what amounts to below market pricing. In essence, this customer will simply get your standard list price. Or, if you want, you could state that if they don’t order, you’ll no longer be able to provide any pricing, regardless of the requirement.
Don’t be intimidated by the trial-close technique. Customers need good vendors and this customer may not be entirely cognizant of the damage they’re inflicting, or the amount of resources you've allocated to winning their business. Your company is not in business to help your competition. You’re in business to secure orders. Let your competition sharpen their own pencils. You shouldn’t do that for them! Here is a final statement that your sales team can use to define your position.
“If we had your business, we wouldn’t need our competition’s pricing to keep us inline. We wouldn’t need them to offer your company our best price and we certainly wouldn’t wait for them to raise the bar. This is ultimately why we can’t proceed until we receive a purchase order for the pricing we’ve agreed to. Once you place that order, we’ll continue to prove ourselves on each subsequent proposal.”
This customer has used your pricing to lower their costs. They have done this despite your best efforts at winning their business. Imagine how much they would save if they decided to move forward with your enterprise. That’s what you must remind yourself of. Customers need good vendors and this particular customer may simply feel that your company is more than willing to offer its best price, with or without an order. First, reaffirm the customer’s purchase criteria. Second, explain what’s involved in providing a proposal. Third, if the customer hasn’t ordered, and continually uses your price against your enterprise, then move forward with the trial sales technique. Finally, close with a statement that explains how well your company will manage the customer’s account once they decide to move forward with their first order.
If you want more information on the trial close sales technique, please read: Protecting Your Price Against the Price Shoppers
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