Winning the price game

If you don't believe in your company or the value of the products you sell, it's time to go back to school

By Tom Reilly -- Industrial Distribution, 12/1/2004

Most price objections are the result of self-inflicted wounds. Salespeople routinely sabotage their own efforts at negotiating for higher prices. Here are three cases in point:

The first comes from a real-life scenario, where I was auditing the salesperson's performance. The sale involved a customization fee of $500 for the work the customer wanted performed. When the salesperson presented the charge, he said, "We generally charge $500 for this customization and I know you said that might play a role in your decision. We need to charge for this because of our costs. I guess if it really becomes an issue for you I can go back and try to argue your case." Whew! What negotiator worth his or her weight in salt would accept that $500 fee? The salesperson telegraphed his price flexibility. Do you telegraph your flexibility?

The second example happened in training with two salespeople who were role-playing. The "buyer" said, "I am getting pressure from management to reduce costs. They believe we should get bigger discounts from your company."

The "salesperson" matter-of-factly said, "That shouldn't be a problem." Then, she continued with the conversation, leading the "customer" to believe that a discount was imminent. Again, the salesperson sabotaged her negotiating.

The third example occurred at a major appliance retailer. My wife and I were shopping for a refrigerator. While there, I saw a free-standing, stainless-steel ice machine. Since we entertain a lot I thought it might be a useful item to own. There was no price visible anywhere, so I called across the showroom floor to a salesperson, "How much is this ice machine?"

The salesperson, walking toward me said, "Oh, those things are really high." He obviously didn't believe in the value of what he was selling. I have always followed this rule of thumb: When the salesperson tells me that his company is gouging me, I take his word for it. Ironically, this salesperson was a commissioned rep. His income depended on his ability to sell.

Are these scenarios unique? No. I hear these comments all the time. Generally, they come from salespeople who do not understand the value of what they sell, have little conviction for the value their companies offer, or feel they are gouging the customer. In all cases, the results are the same. The buyer says, "Your price is too high!" and the salesperson agrees. The buyer wins the argument.

If you're sabotaging your own efforts, you need to go back to school. Learn more about your product's value. Price is what they pay; value is what they get. Remind yourself of the value-added services that your company brings to the table. When you accept the buyer's argument that your price is too high, you are also accepting that your company is no better than the competition. Do you really believe that?

Finally, review the value you personally bring to the customer. Your performance must be worth something. Doing all these things will help you avoid the costly mistake of sabotaging your own prices.