I'll take it By Steve
Waterhouse
Cutting prices can lose business
“If you can do
it for $12, you can have the business.” With his next
three words, Bill lost thousands of dollars of business.
He said, “I’ll take it!”
Too many sales people focus on price and forget about
value. Price is simply what you charge. Value is the sum
total of all of the positive effects that the product or
service has on the buyer’s business. In most cases, your
offering has many benefits for the customer. Each of
those has a corresponding value that adds to the
equation. Business customers buy because they believe
that they will get value that is significantly larger
than the cost. In fact, most buyers are unaware of many
of the benefits of their purchases and therefore
underestimate the value they receive.
Every price is too high without an appreciation of
value.
If that is true, so is this:
Every price the customer offers, before they
understand the value, is too low!
Could that be why you lose proposals that simply
respond to RFP’s? Maybe the customer can’t find your
value in that sterilized document?
Could that be why you lose when you respond to the
caller who says, “I just need a price?” Maybe they think
you are just like everyone else. After all, you did not
bother to tell them any differently.
Hey, we all reject stuff we don’t understand.
How many times have you seen someone handing out free
stuff on the street or in the mall and simply passed
them buy. It’s FREE and you won’t take it! You don’t see
the value.
To increase our chances of making the sale, we must
do three things to ensure that we have maximized value
in the customer’s mind:
1. Understand their business
You must understand your customer’s business well
enough to explain to them how your offering will improve
their bottom line. This means asking more questions and
doing more research before making your proposal. The
good news is that once you understand one company in a
given industry, most of the others will have similar
circumstances.
Example:
A distributor of Swiss watches was trying to get a
container load to their US jewelers in time for the
critical pre-Christmas buying season. She was shopping
for shippers and two responded. One offered a price that
was $9,000 and assured the shipper that they could get
them there on time. They had years of experience and
many testimonials that showed that they had done it
before. The second shipper cut the price in half and
guaranteed that if the shipment was late, they would
rebate 100% of the fee.
Which shipper won the business?
The first one.
They knew that a container of Swiss watches holds
5,000 watches with a retail price of $3,000 each or 15
million dollars. If the container arrive late, the
watches will have to be sold at an after Christmas
discount. That’s a loss of $1.5 million! Clearly the
distributor would care more about the reliability of
company A than the potential $4,500 rebate from company
B.
2. Maximize your value
If is often true that different people in the buying
organization will see different value in your offering.
In the example above, the person on the loading dock
might like the lower price. But the product manager, the
CEO and others will appreciate the value of reliable
service.
Identify all those departments in the buying company
who might see value in your offering. Make sure they
know what you are proposing and get them to be internal
advocates for your solution. When you get a large enough
cheering section, it’s like having a “home team”
advantage.
3. Include your value in your proposal and quote.
Too often, we make our value propositions in a face
to face discussion with the buyer. Then, when we believe
the sale has been made, we formalize the number in a
quotation or proposal. In many cases, one or more people
may review this before it is signed off. Even the best
sales people get blindsided by a last-minute influencer
that was not disclosed earlier. When that person sees
the numbers with no sense of the value, they may reject
the proposal as over priced. Head this off by adding to
the proposal, a summary of the value that you and the
buyer agreed on.
This is the subject of chapter 12 of my new book, The
Team Selling Solution: Creating and Managing Teams that
Win the Complex Sales. Click on the link to learn more
about it and to hear a sample of the book on CD.
So what about Bill and that $12 deal?
The customer had called Bill because he wanted a
supplier who was open longer hours than his current
supplier. Bill’s company is open 24-7-365. He told Bill
why he wanted to switch and that he was currently paying
$13 and bought thousands each year. That’s when he
offered Bill the business at $12.
Bill’s mistake?
He failed to see that the customer was currently
paying $13 for less service and wanted more. The
customer saw value in Bill’s hours of operation. If Bill
had asked why the extended hours were so important, he
would have learned that the customer was paying overtime
to work with the other company’s shorter hours. This
move would save them many times the cost of the service.
Bill could easily have justified an increase to $15 and
still won the contract! His failure to see his value
cost his company thousands of dollars and cost him some
nice commissions.
Remember: Think Value and Win More Sales
Steve Waterhouse is Principal and Founder of Waterhouse
Group (www.waterhousegroup.com), a sales consulting and
training company that helps companies dramatically
increase their sales. He can be reached at
1-800-57-LEARN or
info@waterhousegroup.com.
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