The High Cost of Selling On Price

When pitching a prospect, priority one should be the value of your product, not its price. How to accommodate a sale without becoming a commodity.

Do you ever find yourself negotiating with a sales prospect on price and wonder how you got to that point? You know you should be determining if your product or service can solve the customer’s problem, but once again, priority one is price.

Does price matter? Of course it plays a role; however, it only becomes essential if salespeople allow it to be. Price becomes a critical issue for a customer when we haven’t provided anything else as criteria for buying. In other words, when we haven’t sold a customer on value, we have to sell on price.

I find that when most people pitch a new prospect, they first negotiate with themselves about what is the right price to name at a meeting or to put in writing in a proposal. Then, after they’ve already been through that negotiation, a sales prospect will say something like, “Can you do a little better on price?” and they end up discounting even more. The result of this double negotiation? People don’t feel like they’re being paid what they’re worth.

This isn’t just a problem for your ego; it has a direct impact on your company’s bottom line. If you value your time, product or service, the first thing you need to do is an honest assessment of your attitudes about your pricing.

Begin by asking yourself, do you want to be the lowest price in the market?

Probably not. Chronically low margins can be a company-killer. Besides, if all you have to offer is a low price, you’ll soon find that larger companies can incorporate economies of scale that will allow them to undercut your price.

Another bit of self-examination you need to perform is to ask yourself if you feel comfortable walking away from a sale if you don’t get the price you need. Most people fear losing business or not making that commission, or worry they’ll go out of business if they turn a customer away. But if you want to stay in sales, you need to know when to walk away. Remember, you have as much of an obligation to qualify the prospect as they have to qualify you. If they can’t afford you, then walking away is the right thing for you and your company. Settling for business hurts in other subtle ways. For example, you become less referable. Providing high quality service at a fair — or even high — price is remembered more than when you price yourself as a commodity. Ask the buyer directly: Is price the only factor in their decision? If they truly view your product as a commodity, this may not be the kind of business you want.

The best way to avoid being perceived as just another commodity is to bring value to prospects, not price. You have to ask questions and discover the compelling reasons someone wants or needs your product or service. Price will not be essential if you sell value. It will become one of many details. If you are offering the best solution for their situation and are savvy enough to help them realize it, price fades away.

Value can be represented by many things, but it must include finding and solving the emotional issues that will get the prospect to buy. It’s useful to have a systematic approach and process that allows you to understand the compelling emotional reason that a prospect needs to change. (If you have focused only on your product’s features and benefits up to this point, then you have probably looked and sounded a lot like everyone else. If you’re like everyone else, then price does become the most important factor. )

Success depends upon understanding why a prospect needs you.

Providing value has to become personal. Most prospects will only give you their intellectual reasons for meeting with you. For example, if you sell printers and a prospect calls because his printer is not working, you need to work hard to understand how that is impacting him. You need to ask things like, how long it has been a problem? What have you done in the past to try to fix the problem? What it is costing the company in time and money? How does it make you feel if the problem can’t be fixed? He may say that if the problem isn’t fixed it will cost him his job, or he’ll have to stay late and miss seeing the kids tonight. Now you have a sense of the customer’s compelling reason to act or change, and you can better tailor your solution.

Before you even begin a discussion about budget, you have to ascertain how committed he is to fixing the problem. If he is not committed to fixing the problem, it doesn’t matter how good your price is. To test a customer’s commitment to change, summarize the reasons the prospect has given you for needing your help, confirm that these reasons are true by asking if you missed anything, and then measure how important it is for your potential customer to fix these problems. Ask him to rate the problem on a scale of 1 to 10. If the problem is big enough, price is rarely an issue.

What if you already find yourself talking about discounting? How do you turn it around? Sometimes you can’t avoid it, and you don’t want to forgo the business. If you do find yourself in that situation, it’s important not to give additional discounts without getting something back. Your conversation should sound something like this: