Focus instead on winning the sale at your listed price…
Today’s customers not only want to buy a product of great value, but in many cases they expect a discount. You may think this is the difference between making or breaking the deal, but, even if you get the sale, it will have been at a cost.
For starters, giving a discount can dramatically cut into your company’s profit margin. It can also set a precedent where the customer expects discounts on all future purchases; they may even tell their friends about the great deal, who then expect the same discount treatment. Importantly, it could show that you lack belief in the quality of your product. This may result in the customer still walking away, as they may feel that if you don’t believe in the product, why should they? In the case of a service where there is an annual fee, agreeing to a cost reduction will make it hard to justify proper price increases in the future.
In the face of these far-reaching consequences, what can be done when you’re face-to-face with a client who is objecting to paying the advertised price for your product or service? Kick off with asking them some key questions; for example, “Why are you looking for a deal? Is our price over your budget, or do you want us to meet a competitor’s price?” You could probe their typical buying behaviour: “Do you always buy something based on who offers the cheapest price?” and query competing deals, “What are the other providers including in their price?”
Stick to your guns
The key to keeping your price intact and still making the sale lies in focusing on the value that the customer is getting. If you have done your sales homework properly, you will have uncovered the buyer’s needs and motivations. Are they buying on price, or value? What need is your product solving for the client, and is it a critical need to them? The more critical the need, the more likely they will focus on quality and buy at the price you set. Thus, focus on the value of your product as it relates to their needs; and the peace of mind that comes with getting the highest quality products. If your value is stronger than competitors, show them how they will benefit more from your product.
If they claim they can do better elsewhere, call them on it. Find out who the other seller is and compare products. How is your product different, and better? Focus on these strong elements that add the most value to your client. Talk these elements up with confidence, and don’t look nervous. Be prepared to walk away if you don’t get the desired price. You may actually be surprised when they decide to go with your product. That is because you did your homework and uncovered their key buying needs, and because you were successful in selling on value, and to the features that matter most to the client.
Depending on what others are including, you may be able to add an additional service for free, rather than drop your price.
If worst comes to worst
If you feel that you have no choice other than to drop your price, then consider the following:
Use this as an opportunity for a Quid Pro Quo – meaning, you scratch my back, I’ll scratch yours. You can agree to give a discount, but only if the customer does something for you; for example, ask them to give you two referrals of other potential clients in their network. A proper introduction is even better. Also, have them promise to provide you with a positive testimonial after 30 days – provided of course they are completely happy with your product. These two examples should not be too much to ask for from your customers, especially since they only cost them a little bit of time to do. But they can add immense value to your firm.
Only offer the discount for a short time period, like a week or two. They must be ready to buy from you. There’s no point in talking discounts if the client is only looking today, while the buying time is several months away.
You don’t want this to become a habit, so make it clear that this is a one-time only deal. Otherwise they will expect a discount every time. Focus rather on the strong value they are getting for the list price.
Higher price, more sales
Believe it or not, there are a few industries where increasing prices can actually result in boosted sales. How can this be? Have you ever gone to a retail store, picked up a pair of shoes that caught your eye, only to find that the price is way below what you had expected? You may think that you found the deal of the year, or you may suddenly think, well maybe these aren’t as posh or as high quality as I thought they were. And you put them down and look for another pair…yes, a pair that is more expensive, and, believing that it must be better quality, you buy it. What’s going on here?
Consumers may want a super deal, but when buying certain items like clothing, shoes, jewellery, wine and artwork, a low price can have the psychological effect of cheapness, or inferiority. In these cases, the pricing is based solely on perception. And your low-priced product sends the message of inferiority.
Another example frequently occurs in the wine aisles of supermarkets. Not being a wine expert, you scan the aisle and see bottles for R30, R40 and R50. Then you see some other bottles for R90, R120 and R200+. As R200 is out of your budget you choose the R120 bottle, thinking you’re buying a fairly good quality wine. But are you?
Maybe the producer of the R40 bottle has just changed the labels of the cheaper bottle, and put on a new one along with a higher price tag of R120 – and it is selling! It can happen – and some studies have shown that certain companies are able to sell as many units at R120 as they did at R40.
I will say it again, that for some shoppers (especially those with less product knowledge), the pricing (and therefore quality) is based solely on the perception of value that the price suggests.
So, in short, try to avoid dropping your price at all costs and instead ensure you un-cover their buying needs, opt to educate customers on your value and then you will be in a much stronger position and bring more confidence to stick to your price.
This article first appeared in Your Business magazine. Read the latest issue here!