Cutting prices can lose business ďIf you can do it for $12, you can have business.Ē With his next three words, Bill lost thousands of dollars of business. He said, ďIíll take it!Ē
Too many sales people focus on price and forget about value. Price is simply what you charge. Value is sum total of all of positive effects that product or service has on buyerís business. In most cases, your offering has many benefits for customer. Each of those has a corresponding value that adds to equation. Business customers buy because they believe that they will get value that is significantly larger than cost. In fact, most buyers are unaware of many of benefits of their purchases and therefore underestimate value they receive.
Every price is too high without an appreciation of value.
If that is true, so is this:
Every price customer offers, before they understand value, is too low!
Could that be why you lose proposals that simply respond to RFPís? Maybe customer canít find your value in that sterilized document?
Could that be why you lose when you respond to caller who says, ďI just need a price?Ē Maybe they think you are just like everyone else. After all, you did not bother to tell them any differently.
Hey, we all reject stuff we donít understand.
How many times have you seen someone handing out free stuff on street or in mall and simply passed them buy. Itís FREE and you wonít take it! You donít see value.
To increase our chances of making sale, we must do three things to ensure that we have maximized value in customerís mind:
1. Understand their business
You must understand your customerís business well enough to explain to them how your offering will improve their bottom line. This means asking more questions and doing more research before making your proposal. The good news is that once you understand one company in a given industry, most of others will have similar circumstances.
A distributor of Swiss watches was trying to get a container load to their US jewelers in time for critical pre-Christmas buying season. She was shopping for shippers and two responded. One offered a price that was $9,000 and assured shipper that they could get them there on time. They had years of experience and many testimonials that showed that they had done it before. The second shipper cut price in half and guaranteed that if shipment was late, they would rebate 100% of fee.
Which shipper won business?
The first one.
They knew that a container of Swiss watches holds 5,000 watches with a retail price of $3,000 each or 15 million dollars. If container arrive late, watches will have to be sold at an after Christmas discount. Thatís a loss of $1.5 million! Clearly distributor would care more about reliability of company A than potential $4,500 rebate from company B.
2. Maximize your value
If is often true that different people in buying organization will see different value in your offering. In example above, person on loading dock might like lower price. But product manager, CEO and others will appreciate value of reliable service.