If you’ve been here before, and have read some of my previous posts, then it’s more than likely that you’ve come across this subject already. However, it’s a critical part of succeeding in sales and should be revisited once again.
When a customer complains about your price what they are really worried about is how that price will impact their costs. If you can get them discussing how your product will reduce their costs, then you’ll get the sale.
Think about when you go to buy something. You want to have the final say. You want to be in total control. You want information to make that decision easier, but you don’t want someone strong-arming you into buying something you don’t want. Well, the best salespeople gradually take control of the buying process. They subtly steer you towards a decision in their favor.
Customers Use Price to Seize Control of the Buying Process!
When customers suddenly realize their being controlled, all be it subtly, they invariably throw up an objection or roadblock. The most famous of these is the “Your price is too high” customer objection. It’s nothing more than a customer’s way of seizing control.
Unfortunately, far too many salespeople recoil at that statement. It immediately disarms them and gives them the impression that lowering the price will mean the customer will purchase. It doesn’t. There is no guarantee that the customer will purchase, regardless of whether you keep the price as is or reduce it. All it means is that the customer is comparing your price to another competitor, one whose product may not be as good, may not have the same quality and may not last as long.
Your customer has no idea how well your product performs. All they have is this knowledge that your product is more expensive. Now, there are always those customers who immediately claim that your price is too high, regardless of whether it’s true or not. Again, it’s their way of seizing control of the buying process. It’s your job to move that customer away from your price and onto how your product can help reduce costs.
Part of this process depends upon a strong message to market. It requires a willingness to define how your product saves your customer money. This could involve defining cost-per-use benefits, longevity benefits and or quality benefits. However, there are other strategies you can use that reduce customer costs without lowering price.
You can run a number of vendor managed inventory (VMI) agreements that help to reduce your customer’s costs of inventory. You can use blanket orders and Kanban agreements where you hold inventory until it’s needed by your customer. Doing this will reduce your customer’s costs of financing, obsolescence, damage and pilferage because none of those things will take place until you ship them product. Until you ship that product, it will stay at your facility and your customer won't incur the most egregious costs associated with inventory.
Consignment inventory is a great VMI tool.
Consignment inventory is another proven strategy that can reduce your customer’s costs. You ship one large volume of products to their location. This reduces their freight on incoming units because you’re using a volume shipment. The inventory remains at your customer’s facility and is only invoiced on usage.
So, if your customer receives 100 units, and only uses 10 in the first month, then they’re only invoiced for the 10 units they used. The remaining 90 stay at the customer's site but are still owned by you. In essence, your customer is only billed for what they use when they use it.
It’s a good idea to come up with a list of your own ways to lower customer costs without lowering your product’s pricing. It’s nowhere near as involved as it sounds. Start first by reviewing your product’s features and benefits. Next, outline how your product saves money. Apply a dollar value to that savings and use customer references as support. Finally, be sure to investigate those aforementioned inventory agreements. They are valuable tools that help to build long-term customer relationships.