A common request by Carew program participants is for advice on how to handle price objections and defend against price erosion during negotiations. Often times, sales professionals who pose questions on price are also struggling in other areas; while other more accomplished sales professionals seem much less burdened with price issues. Certainly, the challenge of defending price becomes more relevant during difficult economic times. Customers feeling the pinch demand more concessions and suppliers are hard pressed to comply as they defend their own bottom line. If sales professionals are not equipped to negotiate effectively, the rep and their organization will consistently be on the losing end of pricing negotiations.
What every business and sales professional should know is that price and cost are separate and distinct issues.
Imagine a diagram of a typical two armed scale. There exists, in the mind of every customer, a decision-making scale. On one end of the scale are important issues and concerns that weigh upon the customer’s organization. Each of these issues comes with an associated economic and/or psychological cost. And each of these costs has an impact on the customer’s bottom line.
 On the other end of the scale are your organization’s products or services, and the features, advantages, and benefits they offer to offset the needs and concerns of the customer. Features are the tangible characteristics of the salesperson’s products or services. Advantages are performance characteristics associated with and flowing from the product’s features. Features and advantages are only significant to the degree that they provide evidence that the product (or service) can deliver benefits. Benefits address and resolve the critical needs of the customer. It is the end benefit that provides weight to the salesperson’s selling statements.
Whereas concerns have an associated cost to the customer, the benefits of your products/services have an associated price. The price that the customer should be willing to pay can be up to, but no more than, the offset cost. Theoretically speaking, the customer is completely indifferent to making a buying decision when the scale is at equilibrium. If the customer’s needs/costs continue to outweigh the price associated with the benefits, the customer will pass on the purchase. Obviously, the goal of every sales professional is to achieve a balance in which your product benefits/price outweighs the customer’s needs.
Sales professionals will struggle in their defense of price when they fail to find the issues that weigh down the customer, as well as the benefits which will resolve them. During the sales cycle, sales professionals should conduct a needs analysis through a series of questions called the exploratory process. If the salesperson fails to explore for customer concerns, they will be unable to determine the benefits that will help the customer achieve their desired goals. Similarly, when the salesperson doesn’t know the economic impact of the customer’s concerns surrounding issues like productivity, safety, performance, etc., it can be impossible to determine how much the customer would be willing to pay for benefits.
Consider a situation in which a salesperson is 'selling,” but has not explored with the customer to understand their concerns, nor the impact of those problems on the customer’s organization. In this scenario, the sales rep is literally spraying their solutions to the customer, and praying that something will stick. They are winging it. When the rep doesn’t know the value of their product to the customer, how can they possibly defend their price?
Equally important to discovering the customer’s needs is the sales professional’s ability to articulate and position the value their products/services bring to the customer. Once the customer’s needs have been identified with a thorough exploratory process, the sales professional must then effectively communicate the benefits they have to offer.
Remember, only when the scale tips past equilibrium can the customer justify his or her decision to buy. To make a credible case, the salesperson has to know the issues that currently impact the customer’s costs, and the role of his or her product in offsetting those costs. Only then can he or she justify and protect the price.
Effectiveness in defending the price cannot be overstated. Price concessions come at a high price to the individual sales rep and his/her organization. Concessions erode margins and profitability and send the message that the benefits are not worth the price. And if the promised benefits are not realized, the entire customer/business relationship is placed into jeopardy, regardless of the price cuts made.
Concessions have the potential to impact all of business relationships. Consider what might happen if the word got out that your company offered a unilateral concession to a customer. In addition, when concessions on price are given at the beginning of a relationship, they set the tone and expectations for your future interactions with that customer.
Clearly, the economic climate can influence and increase customers’ sensitivity to price. But pervasive and frequent pricing issues are symptomatic of weakness in fundamental selling skills. Sales professionals who constantly struggle with price need to examine their overall selling process and the communications taking place with their customers. The next time a customer asks you to lower your price, ask yourself, 'Where did I go wrong?” 'What critical need did I fail to uncover and what was the associated cost of that need to the customer?” More often than not, the price of your product is small compared to the potential savings/benefits that will be realized by the customer (immediately or long term) as a result of making the decision to purchase.
| Jeff Seeley - | 
| Jeff Seeley is Chief Executive Officer and majority owner of Carew International. Prior to becoming CEO in 2001, Jeff had been affiliated with the organization for over 20 years as a Carew customer, board member and team member. Jeff enjoys a leadership role in the sales training industry and business community and is a frequent keynote speaker at industry events, national corporate sales meetings and professional conferences. Carew International is a leader in sales training and leadership development; specializing in comprehensive, proven training programs for sales, sales management and customer service excellence. Read More >> | |
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Overcoming Price Objections Lee B. Salz
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