July, 2007

Fight Price Pressure– from the Sales Staff

Price is usually a bigger issue to salespeople than it is to builders.

By Bill Lee

Most salespeople are scared to death that their prices are going to be too high when they quote. But most often, price is a much larger issue among salespeople than it is among their customers. Of course, customers will say that price is of primary importance to them because they are trying to get the salesperson to cut the price, but when it comes down to brass tacks, price is rarely the customer’s overriding concern.

Selling Service

What service advantage do you offer your customer that sets your company apart from your competitors?

If you were to go to a purchasing agent’s convention and ask 100 buyers their No. 1 criterion when making buying decisions, how many of them do you believe would say price? My guess is very few.

When a buyer gets chewed out by his boss, what do you believe is the most frequent cause? It’s almost never for paying too much; instead, it’s for not getting materials on the job on a timely basis or for buying materials that don’t perform to acceptable standards.

Of course, buyers will tell you that price makes the difference, but that’s only because salespeople are so price sensitive. Naturally, customers are willing to accept a lower price if the salesperson falls for their negotiating tactics.

Most consumers buy products that are actually of higher quality than is really necessary. Take golfers as an example. How many golfers do you know who play with the cheapest golf clubs that they can buy? If you see the latest and greatest Callaway driver in their bag, odds are you’re looking at around a $500 price tag.

How many contractors do you know who drive the cheapest car on the market or live in the least expensive home they can find? When contractors tell salespeople that price is their No. 1 issue, they are simply not telling the truth.

Most buyers make buying decisions based on quality and service. It’s only when salespeople fail to convince a buyer that their company’s quality and service is superior to the competition that price becomes an issue. When it comes to price, quality, and service, you can pick any two you wish. It is almost never the case that a company can offer the highest quality and the best service at the lowest price. (Companies that adopt this marketing strategy also usually go broke.)

Examine Your Sales

What’s the purpose of a salesperson? A salesperson’s role is to educate buyers about the value that his or her company represents. If salespeople cannot do this, they almost always fall for their customer’s negotiating tactics.

If price were the real issue, then only one supplier in town would get all of the business. The only supplier that would survive would be the supplier that had the most capital and, therefore, the most “staying power.”

Refuse “Low Price Pressure”

Companies that employ salespeople who must have the lowest price to move products continually struggle to produce a satisfactory bottom line.

To achieve an optimal gross margin, salespeople today must add more value than their competitors do to the products they sell.

When you analyze your sales force, what kind of salespeople do you have?

Do you have a group of men and women who believe that they must have the lowest price to meet their sales goals? If so, your gross margin will be always under attack.

Invest the training dollars necessary to educate your sales force to deal with pricing objections.

I think you’ll find that your return on investment will be phenomenal.