“Dare to be…. avoid being hammered on price”

For many companies there is a perception that customers are obsessed with price and that their competitors are more than willing to “race to the bottom” and win new business by going low on price. It is true that in the global economy, the financial crisis, cheap Asian competition and the internet have resulted in downward pressures on price and for many the response has been one of reluctant resignation. If this sounds like you then maybe you should consider a different type of price negotiation because there is another way.

The good news is that whilst these macro forces are in play there are some compensating factors – many businesses to business buyers are more sophisticated and knowledgeable. Yes, there will be some buyers who continue to focus on price but there are many others who are looking for real value.

For many industries the iceberg represents a good analogy where the tip of the iceberg (typically 15% of the total) represents the price and the part below the waterline (85% of the total) represents all the hidden values.

To avoid being hammered on price it is important that your sales team answer the question “why should I buy from you?” by focussing their answers on non-price responses. They need to give a value based reason. They need to understand the 85% of value that is typically unseen and below the waterline.

Value driven selling is a strategy that demands sales people to really understand the prospects/clients operation and to demonstrate the value that your product/service offers and to enable the value proposition to justify any price difference. Salespeople must dig much deeper into the customer’s operation and tie the product’s benefits closely to measurable values (such as increased revenue, reduced cost, higher profitability, or other financial based measurements).

To sell on value it is important to engage with the client/prospect early on in the negotiations and to discuss the Total Cost of Ownership. It is important to get the client to articulate how your product/service effects them. You are looking to highlight the hidden values that you bring “to the party.” and that they can benefit from. The values you must explore are too numerous to list and will depend on your unique business proposition but could include the following: (important note – not all values are tangible – some are emotional and emotional values are very powerful! Firms that sell sports shoes sell dreams of success or better wellbeing; perfume companies sell romance, sophistication or both. These outcomes are valued far more by consumers than the actual products that achieve these outcomes.)

  • Time saving.
  • Downtime cost if product fails – value of service response time.
  • Brand image (lots of buyers do like to be seen to be buying a recognised brand).
  • Training support.
  • Ease of use
  • Inventory levels.
  • Assembly costs, pre assembly options
  • Market experience.
  • Organisational commitment – family owned, vision to be no 1 in the market …
  • Working with the brand leader.
  • Delivery times…. specific or flexible
  • Customisation options
  • Switching costs.
  • Highly trained service staff.
  • Certified technical people.
  • Free delivery.
  • Ease of ordering – online ordering.
  • Money-back guarantee.
  • Life-time warranty.
  • Technical capabilities.
  • Maintenance costs.
  • Energy and other operational/operating costs.
  • Design & Innovation.
  • Free upgrades.
  • Dedicated internal sales support.
  • Opportunity cost etc.

At your next sales meeting I recommend that you draw an iceberg onto a whiteboard/flip chart and get the team to discuss the hidden values that your company is offering and represent them below the waterline. This exercise will help your salespeople know and appreciate the additional value they and your organization bring to the sale. Once your team understand these other values they can move any sales conversation away from price and onto value.

The role of the salesman in using a value driven strategy is to get the customer to develop an accurate picture of the total cost of fixing their problem or addressing their need, as well as of the price of your solution.

Notes on successful negotiations:

  1. Make sure your sales team can answer the question “why should I buy from you?” If the salesperson doesn’t know why a prospect should buy from them, it’s a safe bet that the prospect won’t know either. If the prospect can’t tell the difference between you and your competitor, they are more likely to make their buying decision based on price.
  2. Engage prospects/customers at the start of the selling cycle to develop the quantifiable value your solution provides over time.
  3. Engage with senior people – people lower down in the organisation tend to be focused on price and their budgets rather than the more strategic benefits on buying value. It also tends to shortens the buying cycle.
  4. Be clear on the type of customer who you don’t want to sell to.
  5. Buyers are emotional – risk aversion, patriotism, local purchasing, relationship with account manager, empathy, rapport, trust etc – do effect the buying decision.
  6. Monetarise your offer – be prepared to communicate the ROI (return on investment)
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