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Why do you cut prices?

Salespeople continue to cave in on price resistance; is management sending mixed signals?

By Tom Reilly -- Industrial Distribution, 6/1/2003

After I present groups with compelling arguments for why it makes sense to hold the line on prices, I ask them why salespeople continue to cave in on price resistance. I generally hear any number of explanations, not excuses. Here's a sampling of what I hear.

Lack of skills or knowledge. No one has taught these salespeople how to sell at higher prices. Imagine asking salespeople to explain a product on which they've never been trained. Asking salespeople to sell at higher prices without adequately training them is a management failure.

Lack of conviction. Some salespeople lack the confidence in their company's ability to deliver value-added solutions, or they don't believe in their products. Before you get mad and fire salespeople, ask yourself this question and answer it honestly, "Is there an explanation for their lack of conviction?" It's easy to cut the price. In some cases you don't even need a calculator. And there are some salespeople who will choose the path of least resistance.

Fear of losing the sale. I can almost hear the protests now: "If I don't cut the price or match the competitor's deal, I won't get the business." Yes, you might lose the deal. And you might get the deal if you cut the price. When you cut the price to avoid losing the deal, what do you lose in the process?

Guilt. There are salespeople who believe that if your company sells your product cheaper somewhere else, that their customer should be able to take advantage of that deal. They don't want to be perceived as gouging customers.

Projection. The salesperson cuts the price because he or she is a price shopper and projects his or her feelings on the buyer, assuming that price should be important. The salesperson on your staff who complains most of price objections is probably a price shopper when he or she is a buyer.

Mixed management signals. Imagine the confusion when management says, "We want to sell our value added, but don't turn down any deal." Or, how about the management team that switches their message from profit to volume at the end of a quarter? That, too, results in confusion.

If it makes sense for your sales force to hold the line on prices and to sell at higher margins, why do they lower their price when the buyer raises an objection?

Tom Reilly is a professional speaker and author of Value Added Selling and Crush Price Objections. Visit Tom's Web site, www.tomreillytraining.com, or call him at 636-537-3360.

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