I spoke at a conference and was asked to address the role of “price” in the sales cycle. There was much debate as to the state of the market, but for me, the state of the market did not impact my position. I broke my stance down simplistically – you’re either built to compete on price – or you are not.
“Pricing should not be used as a Band-Aid solution for bleeding income statements. Rather, they should be a part of a long-term plan for fiscal fitness”.
I was thumbing through some articles in preparation for the presentation and came across an interesting quote from Reed Holden, a leading pricing strategist who explained that “Pricing should not be used as a Band-Aid solution for bleeding income statements. Rather, they should be a part of a long-term plan for fiscal fitness”. I knew who would be in the audience at this meeting and I knew that these individuals did not build their business to be the “low-cost provider”. If they had – I would have said “fantastic – go out there…. compete on price and gobble up market share”. But alas, not one of them was. So, instead I began my message with “Think you’re going to win the price war? Your competition (who is built to compete on price) would like to see you die trying”. At that point I introduced the low cost providers who could sustain their low cost pricing structure now, during recovery and beyond.
I knew what the reaction would be in the room. Super. So now what? You are telling me I can’t compete on price, but price is a factor in every single discussion that we have with prospects. Yes, I knew the reality. I obviously didn’t have the holy grail but I felt I could provide a few basic levers to pull before resorting to the ”fire sale”.
Know your Unique Bundle Of Promises: If price were not a factor in the discussion what would you compete on? Sounds simple – it’s not. Know the key benefits that are unique to your company and that make the competition irrelevant. And, ensure anyone selling your product or service know how to convey that message.
You had me at “hello”: Well if “hello” is “fire sale” pricing and that’s what made your prospect fall in love – you’re in trouble. Set the stage from your first impression. Differentiate your offering from the first time the prospect sees your offering. Give the prospect something to talk about other than price.
Check out your product line: I always fall back on the BMW 3, 5, 7 series example. The 3 series has fewer features at a lower price, 5 series more features and a higher price and so on. The value proposition for each is equal but BMW has created an offering to meet the needs of each prospect’s feature and price requirements. Check out your offering. Do you have a line of lower-priced products/services with fewer features/benefits? Or, are you left to drop your pants on your core product because you don’t have any other options?
Go ahead – use promotion: Promotion is short lived. If you have a product or service that renews – then create a promo pricing structure that allows for a ramp up so that there isn’t sticker shock at the renewal.
Invest in those who love you: Clients who are loved – love back. The longer they stay, the more they spend. The less price sensitive they are, the more they refer you new business. Get out of complete acquisition mode and invest in your most powerful revenue source – your clients.
Empower your extended sales force: Time after time, referrals convert higher and a referred client typically pays more. But, referrals don’t just “come to you”. You need to ask for them, you need to tell your extended sales force what you want them to say and you need to thank that extended sales force over and over again for the referral.
Never negotiate from a position of weakness: This is when we separate the killer sales people from order takers. Anyone can order take. The sales person who will prevail is the one who can sell in the complete value proposition (benefits and price) through needs identification and objection handling.
Finally, Always remember your value proposition: Value = Perceived Benefits / Perceived cost. Determine whether your prospect “can’t afford y0u” or whether your prospect feels you are too expensive. If the former, then you might be targeting the wrong audience, if the latter then you have not proved your value proposition. We will have many more posts on value proposition. We have only touched the surface on pricing strategy here.
Do you have any examples of how you are addressing price when competing against low-cost providers? We would love to hear.
Need help? Contact us. We have extensive experience with competing and winning against the low cost provider.
