Giving away the margin and undercutting your prices because you can’t say ‘NO’ is no good for anyone. It devalues you, your product, and your market. If done on mass then customers expect ‘cheap’ all the time, not fully appreciating the real value of the products or services they buy. All you do is risk devaluing you and your business.
Just look at the ‘perpetual sales’ going in retail all the time. No one ends up making any money and people go out of business.
Let’s face it; there will always be someone offering their products or services cheaper than you. But are they offering exactly the same as you? Make sure you know how you compare to the competition. It’s worth it – are you comparing apples with apples?
If your customer is saying “I can get the same thing much cheaper down the road” don’t just accept this as truth. Too many sales people accept these statements at face value not bothering to check if it is true or not. And some customers try this tactic to see if you will cave in or not so they can get something at your expense.
A particular example springs to mind for me:- I recall, in the early days of starting my business, meeting with a recruitment consultant with the express need of helping me find an admin person. I needed an admin person and I didn’t have the time to find one myself so I was ready to buy. The meeting went well and I thought she would do a good job for me. Having been a recruitment consultant myself I knew what was good value in this field. So I asked her how much her fees were. Her immediate response, with no prompting or bargaining from me was this “Oh it’s 12% but you can have it for 10%!’ I was quite shocked. Not only hadn’t I haggled, I didn’t even say anything to indicate I wanted a discount. I would have paid 12 % but instead, took advantage of the discount. Why not was I going to say ‘oh no I’ll have it for 12%’? She was clearly at fault here and had assumed that I would try and beat her down on price so she got in first.
This got me thinking about what is the real price for things and why do so many sales people drop their prices time and time again. If sales people continually do this it can leave the customer doubting the people they are buying from and questioning the real value of what they are getting.
Jeffrey Gitomer is the author of “The Little Red Book of Selling” points out that more than 74 percent of all people are willing to pay the recommended price. He suggests that your prices need to be fair and your need to be firm. You need to be able to stand your ground and know how to prove your value. He then recommends that you ditch the other 26 percent and let them hammer your competition into no profit and bankruptcy, and concentrate on the customers who are willing to pay.
I recall my days working as recruitment consultant for Morgan & Banks. We were not the cheapest in town, in fact we were in the upper quartile for fees and service. When I met with potential new customers to see if we could work with them we would also discuss the fees we charged. We charged 15% and upwards for recruitment assignments as compared to the industry average at the time of 10% or 12%. Many prospective customers assumed that we recruitment consultants were all alike and baulked at the idea of 15%+. Now I could have crumpled and said ‘ok you can have it for 12%” but I didn’t. Instead I asked them what they were getting for their 10-12% so I was able to understand what was on offer and what they saw as value. Once I had that information I was then able to compare our service offering to what they were getting. What they found was there was more on offer for our 15%+ than what they were getting for 12%. And they were able to compare and contrast the various offerings using evidence not just hearsay and make an informed decision. And so was I.
More often than not they went with me and paid the 15%+.
Don’t forget The price is just an arbitrary figure until it is ascribed a value. It means nothing in of itself. Sure the pricing of your product or service needs to be pitched in the right market level, however, make sure you can articulate the value of your product or service offering using real evidence. If you do your homework you might find that you are selling yourself, your products anfd services too cheaply. Here are some hints:
- Make sure you know how your products and services compare and contrast with that of your competition.
- Make sure you fully understand what the customer needs and what they value so you can build a sound business case for using you and make sure you have an economic case to justify your price point. Know what your Return on Investment (ROI) offering is.
- Stand up for your business. Do not fear confrontation or conflict. Be proud of what you do and tell your customers that you do not discount unless it is based on volume. Make sure you can always make money.
- If your strategy is to buy market share then be very careful as lifting prices from a lower base is much harder. And you don’t want to end up like Visy or Amcor.
- Do not give things away to keep the customer ‘sweet’ either, they will not respect you and will keep trying to take advantage of you at your expense.
Learn to sell to the ‘right’ customers:
It helps to identify a ‘Viable’ customer – someone who can buy from you right now for the right reasons. Do they have the following three conditions operating simultaneously?
- MONEY – the willingness & ability to pay for it?
- AUTHORITY to make a decision, and
- A real NEED for your product or services?
If so then sell to them, if not move to the next customer but always leave the door open so they know to come back to you when they are viable.
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