Price or cost?

Most customers are interested in more than just a cheaper price; they want to lower the total cost of doing business

By Tom Reilly -- Industrial Distribution, 8/1/2006

What do your customers really want: A low price or lower costs? I sought to answer this question in a recent survey of end users, purchasing agents and business owners. I asked them to tell me which was more important to them—price or cost. Two-thirds said that cost was more important. This is great news for salespeople because there are so many ways that you can help customers achieve lower costs. A cheaper price on the front end is only one of many ways to help buyers control costs.

Usage Costs. Does your product or service cost less to use because of lower energy consumption, less frequent maintenance intervals, or fewer replacement parts?

Life cycle. Does your product last longer? Is your product worth more at the end of its life cycle? Does it have a greater trade-in value? Is it more re-sellable once you're finished with it?

Impact. What impact value does your product or service offer the customer? Does it help them solve a problem that they have been unable to solve in the past? Does your product or service empower them to pursue opportunities that were previously unavailable to them? Does this make them more efficient and effective, lowering their costs of doing business?

The cost of doing business casts a bigger shadow than does the simple acquisition price. When you help customers compete more aggressively and successfully in their marketplace, you may help drive down the cost of acquiring business. When your product offers safety features that protect workers, you may help reduce exposure risks and worker compensation claims. When your product makes it easier for users to do their jobs, you influence your customers' productivity and profitability.

Your job as a value-added salesperson is to re-think your product in these terms and re-cast it in the buyer's mind so that he/she understands the full impact of your solution. The simplest way to do this is to think long term. Long term means stretching the buyer's time horizon beyond the acquisition point. Buyers who think only in terms of acquisition will fixate on price. Buyers who think long term will focus on total cost of doing business. This is your challenge.

Buyers depend on you to help them make better buying decisions. In my study, buyers told me that they “cannot be experts at everything,” therefore they depend on their salespeople to educate them about new ways of approaching old problems. A new way to approach an old problem might include viewing an old problem in a new light—the light of long-term, total cost of doing business.

Before responding to a buyer's request for a lower price, ask yourself if this could be an inarticulate way of asking for you to help them achieve a lower cost of doing business.

Some customers simply want a cheap price; the majority wants a better cost.