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Research suggests more than 60% of salespeople will cut their price if the prospect requests it – even if the prospect acknowledges the solution is better and worth more. Think about that. In our world, this equates to the prospect telling you they believe you’re the better choice and you deciding to give them a discount anyway. And to be clear, the prospect knows this will happen – that’s why they ask for the discount. Experience has taught them to apply pressure because when they do, the salesperson will cave. It’s as simple as that.
If you’re asking yourself why salespeople do this, I’m going to share with you my Top Five Reasons. It’s my hope this will help you reshape your beliefs and put you in a much better position to escape the price driven sale.
Without the proper training, salespeople will be out negotiated every time. The prospect will always try to commoditize your proposal and steer the conversation towards the price because it’s in their best interest to do this.
Salespeople must be trained to control the sales dialogue and guide the conversation down a path focused on total value. Salespeople need to understand how to use the sales process to increase the perceived value of doing business with them. They need to be skilled at asking powerful, emotionally engaging questions that pulls the prospect into the selling dialogue. The salesperson’s efforts to understand the prospect’s wants, needs, concerns, and perceptions will go a long way in the salesperson being able to use the company story presentation to speak directly to the needs of the prospect.
Conviction is defined as a firmly held belief or opinion and what I’m talking about here is the salesperson’s firmly held belief that they are the best choice for the project.
If the salesperson doesn’t believe their product or service is better than the competition, they will never be able to win the value battle. How can they convince the prospect what it’s worth when they themselves don’t understand the value they bring? I’ve had a salesperson tell me that their company – on paper – is no different than the other guy who is typically $5,000 less than them. This is one of those occasions where I would encourage salespeople to tap into their personal why story. Why do they work for the company they work for? Why don’t they go a work for the other guy who’s typically $5,000 less? In what ways to do their reasons help justify the higher selling price and why do those reasons make you worth $5,000 more? The more you believe that to be true, the greater your ability to communicate that belief with conviction to your prospect.
Imagine hearing a price objection and looking the prospect in the eye as you say, “Mr. Prospect, when I started this business, I made a commitment to myself that I would much rather explain my higher price than ever have to apologize for poor quality. There are many contractors who’ll offer you a low price to get the business and then cut every corner they can to make a profit. I priced your project exactly where it needs to be for us to do the job right and deliver the quality you want. As much as I want to do business with you, I will not offer you a price that sets us up for failure.” That is no doubt a powerful statement – if and only if – you have conviction.
Some salespeople feel guilty charging higher prices. Some salespeople may not see themselves paying the price they charge, and they feel bad asking their prospect to do something they themselves wouldn’t do.
Guilt typically happens for one of two reasons: The first is the salesperson doesn’t understand the cost of doing business and what it takes to deliver a quality project, safe jobsite, and an overall positive remodeling experience.
And some business owners may want to share the blame for this one. How many of you have taken the time to educate your salespeople on the cost of doing business? You’ve got to consider that your salespeople are being challenged every day by low-cost contractors bidding the job for not much more than it’s costing you to buy the materials. How many of those salespeople assume the price difference is a function of your profit. Heck…that’s how many of you got into this business, right? You were working for a guy who you thought was driving home every day with a trunk load of $1,000 bills and you questioned why you’re working so hard for him when you could be doing this yourself.
It’s my assertion that the more they know about how the company makes money, loses money, and keeps score, the more they will care. With their newfound understanding of the company’s profitability, they’ll eliminate that guilty feeling and focus more on selling the value.
The second reason salespeople feel guilty is because they’re too close to their prospect. They’ve spent a fair amount of time with the prospect and developed a strong relationship with them. They feel guilty asking their new friends to pay a premium price because they assume it’s too expensive and something the prospect can’t afford.
This is an area where the business owner or sales manager needs to help the salesperson come to terms with the fact that their premium price is not an expense. It’s an investment that pays for itself over time. Salespeople need to know there will always be cheaper options, but those options come with a substantial risk. If the salesperson really believes with conviction that they work for the best company, they should be proud of their price and peace-of-mind that comes with choosing them.
When the salesperson is afraid of losing the sale, they will do just about anything to avoid letting that happen. Fear is an extremely powerful motivator, and the buyer knows this. Your prospect knows you don’t want to lose the sale and they won’t be shy about making you think that’s going to happen.
Even when the prospect knows in their heart, they’re going to choose you, they still may tell you “The other guy is cheaper”. They do this because they know there’s a good chance the salesperson will lower their price to avoid losing the sale. They’ve got nothing to lose because the worst that can happen is the salesperson telling them there’s nothing you can do – which is EXACTLY the approach I’d ask you to take.
As a matter of fact, I’d suggest salespeople try to neutralize the price resistance by letting the prospect know that you know your price is higher and you offer no apologies. This is one of the areas where the salesperson needs to have conviction and be prepared to deliver a response that seems natural and not forced. The prospect tells you your price is $2,000 higher than the other guy, for example, and the salesperson responds with conviction asking, “I understand. We’re never going to be the cheapest. Do you recognize the differences or is that something we’re going to need to talk about?” The prospect might respond saying, “No…we recognize the differences but $2,000 is a lot of money.” The salesperson can respond by saying, “So…obviously, this is something we’re going to need to talk about. What do you see as some of the differences?” When the ask the prospect to identify the differences, they’re getting the prospect to tell them the reasons they want to use you. After listing those reasons, the salesperson can ask them to measure the perceived value of those differences against the $2,000 higher price.
It’s not uncommon to see when given the authority to discount, most salespeople will take full advantage of that authority. But what would happen if you took away that authority? Yes...you might hear some belly aching from your salespeople and may even see a short-term dip in sales, but in the end your salespeople will find a way to overcome that challenge, and everyone will make significantly more money when they do.
If you want your salespeople to stop lowering the price, you need to start by taking away their authority to lower it. Your price reflects all the costs incurred by your company to profitably deliver exactly what the prospect wants from their project. Your price is strategic and directly impacts the company’s profitability. It should not be left up to the salesperson to determine how much money the company makes or doesn’t make on any given project.
This is why it’s important for salespeople to have the skills and conviction to sell their value. They shouldn’t feel guilty about their higher price or be afraid of losing the sale. And they shouldn’t be allowed to offer a discount. Salespeople are paid to sell not to offer discounts. Anyone can cut the price; that takes neither talent or skill, just a sharp pencil and a calculator.
The bottom line: Buyers are paid to ask for a cheaper price; salespeople are paid to say “No.”
If you’d like to learn more about how to overcome these challenges and escape the price-driven sale, please contact me at JDeRosa@SRSDistribution.com