Dealing with price

Price is surely one of the biggest challenges we face today!

Your Coach Online   Written by: Alan Rodway – YCO

Price is surely one of the biggest challenges we face today, possibly more now than ever … global competition, bigger businesses to compete with, online selling becoming more prevalent.  Pressure to lower prices to get the sale, inability to make sales because of the prices we set, sales people sometimes struggling with the selling process because they can’t handle the price question, the difficulty to maintain margin … are all significant issues for many businesses.  Also, large suppliers and purchasers often adopt a ‘Take it or leave it’ approach to dealing with smaller businesses, with many being ‘squeezed’ from both sides.  Being a ‘price taker’ rather than a ‘price maker’ is not happy territory … who can prosper or even survive by competing on price, unless you’re of very large scale?

Also, large suppliers and purchasers often adopt a ‘Take it or leave it’ approach to dealing with smaller businesses, with many being ‘squeezed’ from both sides.  Being a ‘price taker’ rather than a ‘price maker’ is not happy territory … who can prosper or even survive by competing on price, unless you’re of very large scale?

So, how can we deal with the challenge of the price?

Let’s define price to start.  It’s the dollars on one side of a transaction between a supplier and a purchaser.  A transaction which doesn’t happen unless both sides believe they have either ‘won’ or at least come out equal.  So, as sales people (and we’re all that … but some people don’t like to call themselves that), we have to rid ourselves of the term ‘cost’ …. that word implies one party is giving up something; no, they’re not .. they’re exchanging dollars for what’s coming back to them .. how can that be a cost!  

It’s about VALUE not price.  Purchasers make a purchasing decision by comparing the dollars to the return they expect and will only go ahead if they like the comparison … that’s

Purchasers make a purchasing decision by comparing the dollars to the return they expect and will only go ahead if they like the comparison … that’s VALUE!  If any salesperson thinks ‘cost’ they have lapsed into the worst mistake possible.  We are EXCHANGING here, not supplying to a cost!

Let’s explore the notion of Value further.  

Answer these questions honestly.

  • Are you wearing the cheapest clothes you could buy?
  • Do you drive the cheapest car you could find?
  • Are you living in the cheapest house that was on the market?
  • Do you eat the cheapest food?
  • Do you have the cheapest mobile phone?

I could go on … the answers are all a resounding ‘No’!  So, why not?

You purchased clothes that look good, will last awhile, and (if you’re male) that are comfortable.   You factored at least those aspects into your buying decision and paid a price that you concluded was reasonable.  You made a Value decision, not a price decision!

You bought your car considering, at least, resale value, reliability, style, look, safety, power, fuel economy, etc.  You then compared all those aspects to the price and, again, made a Value decision.

You bought your house (or rented it) by considering, at least, look, comfort, size, maintenance, neighbours, traffic, privacy, security, position, construction, appreciation, etc.  You then made a Value decision about all those things and coughed up say $750,000 for it (when you could have bought one for $400,000 if it was just about price).

I will assume you don’t eat spam (the cheapest) because you considered taste and nutrition … so you eat better food than that.

You don’t use the cheapest mobile phone because it would lack functionality (and would make you look ‘lame’ in the eyes of colleagues).

See … every buying decision you made considered a range of factors, compared them to the price, and resulted in a Value decision.  So, why do we go around as sales people, allowing purchasers to engage debate with us about price?   It’s not about price; it’s about Value !!!  Take them through some of the examples above to make the point (I do !).

Next, price per what? 

  • If someone is baulking at a car worth $80,000 … ask them how many kilometres or years they will drive it for?
  • If they will drive it for 80,000 km’s, that’s $1 per km … cheap !  If they will drive it for 4 years and trade it for $30,000, that’s $12,500 per year .. cheap!
  • If someone’s baulking at paying an extra $50,000 for a house, ask them how many years they think they will live there?  If 10 years, that’s $5,000 per year!
  • What about a printer … price per copy.
  • A computer … price per month.
  • Advertising and marketing… price per extra dollar in revenue.

Get the point, the price is relative to duration, use, revenue, enjoyment or some other measure that is meaningful to the purchaser.  Make the point obvious to the purchaser so they make the comparison, to see the Value.

Slightly different to the previous point is the price (and therefore expenditure) as a percentage of the purchaser’s turnover, or asset base, or profit, or some other financial measure that relegates the price to something less significant than it first appears.

What is the Price For

A fundamental point to remember for professional service and advice providers is what the price is FOR, and this is critical, as well as very simple to explain to the purchaser.

It’s for four things:

  1. The time/work put in.
  2. The expertise behind the service/advice (usually adding up to many years of study and experience; translating into very high levels of knowledge and skill).
  3. The expected outcomes for the recipient.  
  4. The risks the provider has to bear in providing the service/advice (ask the insurers!).

It’s NOT just time.  Sometimes, it amazes me to hear Lawyers and Accountants say ‘we sell time’ … rubbish!  They sell these four things, not just time.

Get Very Clear What You Are Selling.

Think of these:

  • Family Law or Peace of mind?
  • Doctor services or Health?
  • Financial Planning or Financial freedom?
  • Houses or Lifestyle?
  • Gym equipment or Health?
  • Conveyancing or Transition into the home?
  • Clothing or Looking good?

Very obvious, I reckon … sell the sizzle, not the sausage (that’s “Sales Skills 101”).  Who would want to pay anything for a car service rather than for safety and reliability, or for a computer rather than time savings, coverage and work quality, or for business planning rather than better business results … and so on.  Get clear what your business’s ‘sizzle’ is, to downgrade the price problem.

Get clear what your business’s ‘sizzle’ is, to downgrade the price problem.

Then, the saying ‘you get what you pay for’ is true.  Don’t be afraid to quote that … most consumers understand that.  People know that when they have gone for the ‘cheapie’, they have often gotten the result they deserved; ineffective functionality, breakdowns, wears out quickly, looks poor, poor re-sale, etc.  Remind the purchaser not to repeat the error.

Quality is Part of the Price Discussion

Further, take some notice of the many products around the world, through history, that have built success on being more expensive.  Mercedes, Prada, High priced jewellery, Exquisite perfumes, Expensive clothing labels, etc.  These products and brands have been smart enough to make ‘expensive’ their point of difference and, rather than have to negotiate price down, they trade off the fact they are more expensive !  Why do so many other businesses feel they have to ‘compare’ to their competitors … being a similar price to your competitors actually tells the market you ARE similar to them and that can make it harder for the purchaser to distinguish between the alternative offerings.  There is nothing wrong with being more expensive; but you DO have to back it with factors that are explainable and / or demonstrable, even if it’s just ‘brand’ that people want.

Why do so many other businesses feel they have to ‘compare’ to their competitors.  Being a similar price to your competitors actually tells the market you ARE similar to them and that can make it harder for the purchaser to distinguish between the alternative offerings.  There is nothing wrong with being more expensive; but you DO have to back it with factors that are explainable and/or demonstrable, even if it’s just ‘brand’ that people want.

Next, if the sales people themselves are not buying and using the product themselves (if indeed that’s possible) then how can they possibly ‘swear’ to purchasers that they should be!  I have seen way too many instances where sales people don’t use the product and then lack the ‘connection’ to the product to be able to skilfully promote it.  It’s like trying to sell Nike runners when you wear ASICS yourself … is it then possible to give genuine testimony to a potential purchaser as to the worth of Nike?  I think not.

Product Commitment

Sales people have to be committed to their own use of the product (if that’s possible, of course).

Following the previous point, avoid getting ‘salesy’ in explaining price … stick to the truth, pure and simple (it works).  And if the truth is that the product represents value and that it’s a damn fine product, then communicate that with sincerity, belief and sometimes passion.  If the salesperson doesn’t communicate that with conviction, then how on earth is the purchaser ever going to get to that point?

Too many sales people run on ‘scripts’ … No!  These remove the very belief and emotion that’s needed to sell the thing.  We are human beings and react well to someone telling us the truth, heartfelt (and that’s not cheesy).  Saying things like ‘if I can remove the problem for you, sir, would you, be prepared to go ahead’ … bah humbug!  To me, that’s playing people for fools.  

Tell the truth, be yourself, believe in what you’re selling and the rest takes care of itself.  If it’s more complicated than that, you have a more fundamental problem than price.

Without ‘points of difference’ you are competing on price … if there are no distinguishing features between what you are offering into the market and what your competitors are offering, then that’s all the purchaser has to make a decision on.  Hardly territory any sales person or business wants to be in.  Points of difference are not the same as strengths.  Saying things to purchasers like ‘good service’, ‘good product’, ‘good people’, ‘strong backup’ is exactly what your competitors are saying … that puts you into the game; it doesn’t win it.

So, dealing with the price question skilfully is critical to the success of any business.  High-level skills to deal with this question should always be part of the training provided to internal people.

Contact us today on 0423 838 008 for affordable accounting that supports your business goals

Sign-up to receive free business building and bookkeeping information

Each month we send articles of interest to business owners and managers to keep them better informed.  We provide you articles on bookkeeping, PLUS articles from our ABBS business coach on business building topics we know you will find valuable.

We are pleased to be able to provide these to you no obligation and no cost, so sign up today and don’t miss any of this valuable information.

Like you, we hate spam and do not provide your information to anyone for any reason.

Previous Articles

Click any title to read a previous article