As a B2B salesperson, how do you go about explaining to your customer that their cost to purchase is actually higher with your competitor, despite your competitor’s lower price? Answering this question comes down to doing a comparison of your customer’s price versus your customer’s cost to purchase. These are two entirely different things and helping your customer understand this important difference can help you win business.
It’s common for some corporate buyers to fixate on the price of the part they’re buying as opposed to their total cost to purchase. A number of buyers don’t find out about their total costs of placing an order until long after they’ve ordered. In fact, it’s common for them to never find out what their true costs are.
So, what is the difference between a customer’s price versus their cost to purchase? Well, one pertains to the sticker price while the other includes all the costs to get that part into the customer’s facility. First, there are costs of freight. Second, there are costs of taxes, duties and brokerage. Third, there are also times when a customs clearance cost must be absorbed by the customer.
A number of companies will quote an extremely aggressive price and yet leave out all the little details about these three aforementioned cost drivers. The customer sees this very competitive price and bases a decision that is not indicative of what those other costs are.
Your job as a B2B salesperson is to plant a seed of doubt in your customer’s mind and expose the obvious flaws in your competitor’s offer. However, it’s not about slamming your competitor. Instead, it’s about subtly asking your customer some simple and straightforward questions that get your customer to reflect upon what your competition is actually offering.
- Does the price include delivery?
- Do you have to prepay or partially prepay the order or do you have terms?
- If you do get terms, what are they?
- Does the price include duties, taxes and brokerage?
- Does the price include customs clearance?
- Do you have to pay for an extended warranty and if so, what is that cost?
There are a number of questions you could use to get your customer to understand that a lower sticker price doesn’t mean a lower cost overall. The best approach to accomplishing this is to gather your competition’s pricing and then build a business case as to why your offer is actually better.
Ultimately, you are exposing and deconstructing your competition’s offer by explaining why it’s less expensive to buy from your company despite your higher pricing. Surprisingly, this is often a simple process. Once your customer is exposed to their true cost to purchase from your competition, they are much better able to understand why your offer is better.
The above video outlines several customer fears and concerns.
An Example to Work With
Let’s assume your company is offering 1000 lbs of a given product. Your company’s pricing includes DDP (duty delivery paid). This means your customer only has to place the order and your company will cover all the transport, freight and customs clearance. Your pricing is $95.00 per lb.
Your competitor offers $89.00 per lb. However, their terms are CIF (cost of insurance and freight) which means your competition is shipping the product to the nearest port. From there your customer must cover an additional cost of freight from the port to their location, a cost for duties and taxes and most importantly, a cost for customs clearance.
Your job is to turn that $89.00 pricing into a real quantifiable price so that your customer truly understands what their costs to purchase are. So, you go about by asking your customers those aforementioned questions.
Focus on getting your customer to define these hidden costs in detail. At the very least, your questions will force them to investigate what these actual costs are. If they can’t give a definitive cost, then ask an open-ended question about percentage and or a round-about pricing. Or, if you are very proactive, you could find out these freight costs yourself.
In the end, you want to build up a case as to why your offer is better. Yes, you may have a higher price upfront, but with little to no hidden additional costs, your offer may be substantially better. Customers tend to focus on a product or service’s sticker price as opposed to what it costs them to make a purchase. Having to prepay or cover additional freight, customs and duties are surcharges they tend to ignore when they initially get excited about the price they’ve received.