“It all comes down to price.”
“Price is the only thing that sells.”
“It’s different in our industry. Customers are more price-sensitive.”
Does this sound familiar?
Sellers often use these statements to justify discounts. The common thread among these assertions is attitude. These sellers believe price is the buyer’s primary concern, so they behave in a way that reinforces their attitude. But these sellers are wrong (83 percent of the time).
Here’s the reality…It’s not all about price. Even in heavily commoditized industries, 83 percent of customers will pay a higher price for greater value. Our research shows that only 17 percent of buyers are pure price shoppers — meaning price is the primary factor. I find this data reassuring. If 17 percent buy on price, then 83 percent of customers do not.
Here’s another reality: You should lose some business because of price — roughly 17 percent. If you’re not losing some business because of price, you’re not charging enough. Let the competition have those low-margin, high-maintenance, aggravating price shoppers. Value-added salespeople distinguish themselves by how they sell and to whom they sell. Focus your energy and effort on the other 83 percent.
You can compete aggressively and profitably by selling value, not price. Here are three ideas to hold the line and protect your profits.
Begin a Discounting Diet
It’s popular to participate in “Dry January” and abstain from alcohol. What if, this January, you abstained from discounting? Imagine the impact this initiative will have on your performance and your company’s bottom line.
For sales leaders, remove your team’s ability to discount. Or, at the very least, tighten the discount parameters. Parkinson’s Law states that “…work expands so as to fill the time allotted for its completion.” Similarly, discounts expand based on the parameters set in place. The more freedom your team has, the more they will discount.
What if your team was forced to sell value, and not price? When Caesar invaded Rome, he crossed the Rubicon River. Once his army crossed the river, Caesar ordered his generals to burn the bridge. Soldiers fought harder knowing retreat wasn’t an option. How much harder would your team fight if discounting wasn’t an option?
Challenge yourself. For one month, refuse to discount; hold the line. You might lose some business, but you will gain more profit.
Focus on Fairness
Buyers give price objections when there is a perceived lack of equity. Buyers don’t believe it’s a fair exchange. The distance between the buyer’s perception of value and your price is called the equity gap. The wider the gap, the more intense the objection.
Price objections trigger a knee-jerk reaction from sellers to discount. Sellers use price to close the equity gap. But there is a better way to close the gap — increase value. The next time you hear a price objection, shift the conversation to value using this framing technique.
“Mr. Buyer, it sounds like there is a disconnect between the price we’re asking and the value you’re getting. If that’s the case, let’s look at some ways we can bundle more value into our package. Here are three ways we can increase the value.” Or, “Mr. Buyer, it sounds like this is really a question of fairness. To make this a more equitable exchange, what are some ways we can add more value to this package?”
Detail the Impact
Justify your price by detailing how your value impacts the buyer. Your solution produces soft value and hard value. Hard value is easily quantified. Soft value is less tangible and more qualitative.
Detail your hard-value impact through value audits, costs-savings reports or other financial reports. Regardless of the tool, you must demonstrate exactly how your solution impacts bottom-line profitability. Hard value offers a clear connection between what the buyer pays and receives. Clearly detail this impact for the buyer and position it as an investment.
Soft value also impacts the buyer. Soft value is more qualitative. When presenting your soft value, use stories or case studies to explain the impact. For example, it’s hard to quantify the impact of your value-added training, so share stories of how the training has impacted the customer. One salesperson explained how his safety training created a more cohesive team and increased open dialogue in a specific department. He then asked the customer, “Imagine if every employee experienced this training. How would that impact your overall business?”
Price is only an issue in the absence of value. It doesn’t matter if that absence is actual or perceived. The buyer sees a fundamental imbalance between what they give and what they receive. Before discounting your price, detail your value. You can close the equity gap without cutting your price. Remember, it’s not all about price… 83 percent of the time.
Paul Reilly, is a speaker, sales trainer, author of Selling Through Tough Times (McGraw-Hill, 2021), coauthor of Value-Added Selling, fourth edition (McGraw-Hill, 2018), and host of The Q and A Sales Podcast. For additional information on Paul’s keynote presentations and seminars, call 636-778-0175 or email [email protected]. Visit www.TomReillyTraining.com and signup for their free newsletter.