I’ll repeat that again so the folks in your accounting department can hear me. Price isn’t the problem.
If you are already established in your market and you have set your prices competitively, then price-cutting is the last thing you should be thinking about as a solution to boosting your sales. Even in today’s tumultuous marketplace. To be clear, you do need to make sure that you price yourself strategically because your price determines a lot about who will buy what you’re selling—not just in the short term, but in the years to come. Consider who you want to attract as a customer – a Tiffany’s™ minded consumer or a Walmart™ minded consumer? I am not making a value judgment here, just noting that for each consumer there is a corresponding strategy.
Let’s start by considering the risks of price cutting and then we’ll look at solutions.
Price can determine who you are and who your customers will be
The trouble with playing the low-end pricing game is that it comes with a cost. Costs influence how customers perceive your products or services and can even reshape who buys them and why they choose you over a competitor.
Sure, some cite high-volume retailers like Walmart™ as proof that low prices and sales success can go hand-in-hand. But here’s something worth considering. How many successful low-price/high-volume retailers or airlines can you name? Now name as many successful higher-priced, value-driven retailers you can think of (e.g., Banana Republic or American Airlines). I’ll bet that your first list is shorter than the second one.
The high-volume business model is one that most simply cannot emulate. Even fewer can sustain it. One of my mentors, Dan Kennedy, says it best: “being the second-lowest price has no advantages.” If you are going to be the cheapest, be the cheapest, but that’s a very hard game to play.
Seasoned sales professionals will attest that a low-pricing strategy can also have an adverse influence on who you do business with. Instead of attracting customers who appreciate dealing with a sales staff and organization focused on value and excellence, you risk attracting buyers with fewer expectations other than your ability to offer the lowest price. Not only is that expectation difficult to sustain over the long term, it also makes it much harder to engender an emotional connection with them. And without that magic ingredient, those customers are less likely to stick with you. And why should they? They chose you largely on price in the first place.
Low pricing can very quickly become a slippery slope—once you start down that path, it becomes increasingly difficult to recover from it. Instead, consider the solution that I share with my clients. Start by re-examining what it is that your customers are buying from you, what needs they have that compel them to make the decision to buy and why they choose to buy from you rather than from someone else. What value do you bring? And if necessary, defend yourself against a price-lowering competitor.
Focus on value and benefits
Top-ranked sales performers don’t sell their products or services based on price. They focus on the value of what they are selling and how it can best meet the needs of the customer. They do that by finding compelling answers to the number-one question that every buyer asks themselves when considering a purchase, no matter how large or how small: “what’s in it for me?” Your customers want to know what they can expect to gain by choosing your product or service at the price you’re offering. Recognizing this, focus your energies into ensuring that your product- or service-offer meets (and even exceeds) those expectations.
That’s not to say that the value and benefits that a customer perceives is something that’s carved in stone. Far from it. Needs change with the times and the value that customers associate with your product or service today could very well be different from what it was just two years ago. That’s one of the key reasons why the most successful sales professionals invest a lot of their time talking and networking with their customers—they are always learning more about what their customers want today and in the coming years. The kind of insight you gain from that kind of legwork can prove to be invaluable, especially in a changing marketplace.
Defend yourself against a price-lowering competitor
Just because one of your competitors decides to start competing on price alone does not mean that you have to make the same mistake. If this is what you’re facing in your marketplace, push back by focusing on your strongest suit—the value and benefits you offer to your customers. Tony Cram of the United Kingdom’s prestigious Ashridge Business School (and noted author of “Smarter Pricing”) recommends conducting a “benefit audit.” Take stock of the following:
• Look at your products or services and ask yourself if there are new innovations you can offer. Also, consider how you might improve the range, choice and selection you offer to your customers.
• Reconsider the needs of your customers. Are they changing? If so why…and find out how you can keep meeting those needs.
• Reinforce peace-of-mind in the mind of the buyer about choosing you over a competitor. Offer a money-back guarantee, or extend the warrantee on your product.
• Position yourself as a leader or expert in your field. Be more than a provider to your customers…be a resource.
• Personalize your service and make sure that what you offer is always relevant to your audience.
By maintaining pricing a premium level, you continue to work with the best customers out there—the ones who are motivated by great service, who recognize the value behind what you do, and with whom you can connect with emotionally. Not only are these kinds of clients easier to manage, they are vital for you to be successful at your job of selling more to more people in less time.
Staying in-tune with the needs of your market does take work. It still requires legwork and thoughtfulness on your part to remain focused on fine-tuning the value and benefits of your product or service. However, it pales in comparison to what you’d be up against trying to find ways to constantly keep up with falling prices.
Colleen Francis, Sales Expert, is Founder and President of Engage Selling Solutions (www.EngageSelling.com). Colleen has studied the habits of the top sales performers to complement conventional sales wisdom with proven strategies that get results in today’s tough economy.
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