A SMALL Price Decrease Is A BIG Deal

While it should be only on rare occasions, there are times when you will need to offer a discount and lower your price to close the sale. A well-orchestrated and properly timed price drop can indeed help close a sale.

However, a price reduction – no matter how small – done incorrectly can cost you the loss of more than just the sale at hand as well as additional sales; but also your credibility and reputation.

As you may know, I often write about this subject and how to properly reduce the price, including a methodology to accomplish this successfully. However, I have had requests to explain the method using more generic wording. So, without further ado…

The Formula
Take these steps for a proper price drop

1. Stand firm
2. Raise the value up to three times.
3. Find a justifiable reason
4. Slightly reduce the price
5. Repeat, only if necessary

#1: Stand Firm
This is where most sales people blow it. You cannot arbitrarily jump to lower the price as soon as the customer offers the slightest resistance. Hold your price.

#2: Raise the Value Up to Three Times
Always keep in mind that a price objection is not about price; it is about value. Don’t start debating and negotiating price. Instead, raise the value. Also, keep in mind that you will usually not have to do this three times. Two is normally enough for the buyer to feel that he or she did not “roll over.”

#3: Find a Justifiable Reason
If the price you first offered was indeed real, then how can you simply change it with the stroke of a pen? You have to have a legitimate REASON to change the price, and it should involve the customer doing something to EARN the reduction.

#4: Slightly Reduce the Price
Don’t instantly go to the bottom line! A small, incremental decrease could be all that you need. Often it is not the actual amount of money, but the small victory that the buyer needs to help him or her logically justify the decision.

#5: Repeat, Only if Necessary

Example
What follows is a clear example of the process. As always, it is not a script, but will demonstrate the concept.

Sales Person
“So, Steve, we are looking at £200 per territory for three territories or £600 per month. Does that make sense?’

Prospect
“Well, yeah, but that’s a lot of money per month. I don’t know if I can handle that.”

Sales Person
“I appreciate that Steve. However, if you sincerely have a problem with £600 per month to get your web site on the front page of Google, and dramatically increase your customer base, then you need this service immediately! Let’s get this paperwork done so I can take it up to our technical staff and get started today.”

Prospect
“Well, on hold. I mean can you do a little better on the price?”

Sales Person
“The price is exactly what we are trying to reduce, Steve. There were 9,765 searches for YOUR services in YOUR area last month and the majority of that business went to your competitors! THAT is a heavy PRICE to pay for coming up on page three or four. Do you want to use 20 keywords, Steve or do you have more in mind?”

Prospect
“I know, it can help. But what kind of special can you give me?”

Sales Person
“Please consider this, Steve: You told me that your average customer grosses you about £520. You also agree that with 9 to 10,000 hits on that front page, that you would HAVE to get a few new jobs every week, right? I’m not talking about hundreds, just one or two every other day or so. Steve, we’re sitting here debating £600 as you continue to lose £60,000 every month. I think it makes sense to put that money back into YOUR pocket, don’t you agree?”

Prospect
“Yeah…I know it could work. But…I just don’t know.”

Sales Person
“You know, I have an idea Steve. I could really use a reference in this area. I mean, a respectable business and website that I can show to potential customers. I am certain that will help me gain at least two or three new clients in the area. If you will be that reference for me, and maybe even accept an occasional telephone call, I will pay you a referral fee in advance and take it right off the top.

I’ll give you 25% for three territory sales that I know I will make. So, that brings your areas to only £175 each or just £525 per month. Is that fair enough?”

1. Stand firm
2. Build value up to three times.
3. Find a justifiable reason
4. Slightly reduce the price
5. Repeat, only if necessary

Happy Selling

Sean

Sean McPheat
Managing Director
MTD Sales Training
http://www.mtdsalestraining.com

(Image by FreeDigitalPhotos.net)

Price Objection? Is It The Price Or The Cost?

Of course, price objections run rampant and are certainly here to stay. However, I believe sales people need to understand, and more importantly; help their prospective customers understand the difference between price and cost.

Is it the Price or the Cost?
The next time you get that objection on the price; before you go off arguing about pounds and trying to justify and defend your price, and before you start to lower the price; find out exactly what the prospect means. As an example…

Prospect
“Like I said, it all looks great. But that’s too much right now. That’s a lot of money. I mean can you do something about the price?”

Sales Person
“Steve, you’ll have to help me. I’m not sure what you are referring to. When you say it is too much, are you referring to the PRICE or the COST?”

Prospect
“Uh…What do you mean? What’s the difference?”

Sales Person
“Well Steve, the difference is that if you are referring to the price, that is the actual amount of money that I am going to charge you, our fees, and such, that is one thing…and frankly, our price is quite fair. Yes, we are a bit higher than our competitors are, but we decided long ago that is was better to explain a slightly higher price once, rather than make excuses for poor service and merchandise over and over.

However Steve, if you are referring to the COST…then I agree with you 100%! You are right. The cost is high. That is the cost of you losing money every day in the factory due to the inefficiency of the inventory system. Yes, the cost is high when you are losing £320 every day because of outdated technology. Steve, as I thought I demonstrated, you are throwing away over £7,650 a month! Yes, that is too much!”

It’s About Value
The price is merely what is on the invoice. The cost is what the prospect looses by NOT having what you sell. Help the buyer understand that the COST is always much higher than the price.

Happy Selling!

Sean

Sean McPheat
MTD Sales Training

(Image by Arvind Balaraman)

3 Ways NOT To Handle The Prospect Who Is Shocked By Your Price

You went through the entire sales interaction without much problem.  However, as soon as you mention the price, the prospect, noticeably stunned, slips into a comatose gaze, and a look that says, “Are you kidding?!”

As mentioned in, “3 Ways To Handle The Prospect Who Is Shocked By Your Price,” when the sales interaction fails to uncover problems and pain or build value, there are but a few steps you can take to possibly save the sale.  However, here are three things you should not do, in this situation.

The Three DON’Ts

#1.  Don’t Try to Justify the Price
The only way to justify the price is to rationalize and defend the price, which only further diminishes the value.

“Well, our pricing is in line with the industry…”

 “Our price is lower than most of our competitors…”

“Due to the economy and oil prices, our costs go up…”

“Sticker Shock” at the end of the sales interaction is not a reaction to price; it is a matter of value and likely a failure of several steps in the sales process.

#2. Don’t Begin Discounting the Price
Do not lower the price!  Changing the price or the offer at this point only proves the prospect was correct in that your price was outrageous.  Sadly, some sales people justify the price and discount it at the same time; driving the value of their product and company into the ground.

#3.  Don’t Agree
Many sales people like to agree or empathise with the prospect in this situation.  This is a mistake.  There is a time to agree that your price is high, even to brag about your high rates.  However, that is only when you have built the value to where the prospect feels it is significantly higher than the price.   If the perceived value is so low that the prospect is shocked by the price, then do not agree.  Don’t use statements like:

“Yes, it is high, Mr Prospect, but everything costs more these days.”

If you routinely get prospects that feel your pricing is extraordinarily high, understand that you have more than a pricing problem.  In fact, you may not have a price problem at all.  Conversely,  you probably have very serious problems within your sales process, your sales interaction, and in building value.

Before I sign off, here are some more tips on becoming a great sales person:

Happy Selling

Sean

Sean McPheat
The UK’s #1 Authority On Modern Day Selling
MTD Sales Training

Dealing With The Price Objection

Today, more than ever before, customers are looking at price as a key denominator in the criteria they use to judge the effectiveness of your offer. But many prospects are still hung-up on price and forget the cost justification to themselves or their managers. This element of buying criteria is influential but not overwhelming when it comes to progressing the sale.

A positive interaction with the prospect when the price issue is raised is one way to persuade them that they will be losing out by not using you. They will not be expecting you to have a point of agreement when they provide an objection, so find some elements of their statements you can agree with.

Then ask a question or two to delve deep into the thinking process the customer is using. This helps you clarify the processes they are using to ascertain their supplier; a great piece of information if you don’t know it already.

Here’s an example:

Prospect: “Sorry, your price is too high”

You: “OK, Mr Prospect, I understand that money is an important issue to you. Can you tell me what criteria you use when choosing a supplier?”

This helps you determine how he makes the choice. Rarely will he say he always goes for the cheapest. There’s often something else that will motivate his decision-making process.

Here’s another:

Prospect: “ABC Ltd has offered the same deal for 7.5% less than you”

You “So obviously getting the best value is really important to you. May I ask, how important is price compared to quality (or service or on-time delivery or something that you do better)? How do you judge potential suppliers for evaluation purposes?

What’s most important – the cheapest price or the lowest total cost? If our product could give you an X% ROI, would price still be an issue?”

Of course, you would only ask the most appropriate of these questions. Each time, you pre-frame the questions with a statement of agreement. This helps you form a good rapport with the prospect as you are now facing the situation with the same point of view, as both of you agree.

And another example concerning budget:

Prospect: “We have no budget for this”

You: “Naturally, managing finances is vital, but may I ask a question? What will it take to secure funds so that that you no longer have to experience the problem you have? How important an investment is this now? How much might you be losing if you wait until the new budget is available? Is there a way you can use a different budget to take advantage of this opportunity now?”

Again, use only the most appropriate questions.

These processes rely on you constructing great questions to meet the price issue. Then actively listen to the customer to determine their key drivers. After that, you can assist them to see how the value of your product outweighs the initial price. All that’s left then is for you to pave the way to the sale.

Remember: if the prospect perceives the price is too high, it’s reality to them. Get them to identify a different image and you persuade them it’s in their best interests to decide on you and your products.

Happy Selling!

Sean

Sean McPheat
The UK’s #1 Authority On Modern Day Selling
MTD Sales Training