The five most dreaded words for salespeople are, "Your price is too high." It's the ubiquitous, universal, and unfortunate objection. What self-respecting salesperson has never heard this? Not hearing price objections is a sign that your prices are too low.

Buyers offer price objections because salespeople reinforce this behavior by lowering their prices. Behavior is maintained by its consequences — that's Psych 101. Research shows that 75 percent of salespeople cave in when the buyer challenges their price. Who wouldn't ask for a cheaper price with those odds? I often ask salespeople whether or not they would ask for a cheaper price, knowing what they know about their industry, if they were a buyer in that industry. They unanimously agree that they would ask for the cheaper price.

One of the great myths in selling is that your competition cuts your price. They don't. The competition may cut their prices, but you alone (and maybe your boss) cut your price and you do it freely — no one holds a gun to your head and makes you do it.

Cutting your price to gain the business is one way to compete, but it's not the only way. For the average distributor that operates from a gross margin potential of 40 percent, a 10 percent discount means that you must increase sales by one-third to compensate for the lost net profit dollars; a 20 percent discount means you must double your sales; and a 30 percent discount means you must quadruple your sales. Woe the cynic reading this who says, "Reilly, you're nuts. No one in distribution makes 40 percent margins these days!" If that's true, then the 10, 20, and 30 percent discounts have an even more devastating impact on your net profit.

Cutting prices to compete is a serious decision that most companies treat lightly. Pricing is a strategic decision that is often executed tactically by salespeople. Every time a salesperson arbitrarily moves the price, his or her company is repositioned — and positioning is a marketing decision. Do you really want your salespeople repositioning your company on a whim?

Having trained over 100,000 salespeople during the past 21 years, I can tell you first-hand that your salespeople adjust price because they're concerned about losing a sale, not because they're thinking strategically about your company's position in the marketplace.

One company I worked with conducted a pricing experiment at its six branches. Five of the branches allowed the salespeople to set their own selling price; one branch assigned pricing decisions to one person who controlled bids and special pricing actions. The single-person pricing branch had an average gross margin double that of the average of the other five branches.

Remember this when it comes to price objections: First the buyer tests your price, then he tests your resolve. It takes courage to face price objections with conviction and tell the buyer, "No."