So you sell a premium product or service We’re talking big ticket here, not a dollar store find. So how do you convince your prospect to buy despite your higher price?
Article originally published on Inc.com here.
You can charge more than your competition once you learn how to make price irrelevant. Here’s how.
Probably the most common sales advice in the world is “sell value, not price.” Unfortunately, that advice is horse manure–at least in the way it’s usually interpreted.Most of the time, “selling value” consists of pointing out that your product has more features (or quantity) than the competition’s, even though it costs the same amount.I hate to point out the obvious, but delivering more product for the same price as the competition is just another form of discounting. And therefore, because you’re offering a discount, the discussion remains centered on price–even when you think you’re “selling value.”The only way to get out of “selling price” is to render the price discussion meaningless. To do this, you make the customer feel that buying from you and working with you is far more valuable than the lower price they’d get from the competition.Successful small retailers do this all the time, or they quickly go out of business. They convince customers that it’s easier and more fun to shop where the prices are higher than at, say, Walmart. A perfect example is Wegman’s.In B2B sales, most successful companies don’t “sell value” or “sell price.” Instead, they actually transcend price–by making those pesky price differences more or less irrelevant.
Why Customers Focus on Price
There are three reasons customers focus on price:
In small firms, decision-makers are more interested in working in their business than working on their business. They would just as soon avoid examining the cost structures of their business–a far more complex issue than simple price–and focus on doing what they love.
In midsize firms, decision-makers have too much information and not enough time to understand it. When they make recommendations on what to buy, they know they’ll get less flak if they propose the lowest-price.
In large enterprises, buying decision have been moved to purchasing, which is specifically mandated to purchase things at the lowest price, even if the low price turns out to be a false economy.
In all three cases, the customer lacks the perspective to understand the true cost of their problems and the underlying causes. So instead they glom onto the one number that they can easily understand: price.
Therefore, if two companies are offering similar products, and the customer believes that the product will solve a problem, it only seems logical to the customer to “bargain down” and play the competitors against each other to achieve a price that is as low as possible.
Make Price Irrelevant
However, when the true cost of a problem is fully uncovered, the price of the solution typically becomes irrelevant.
For example, there’s no question that the price of a motorcycle is far less than that of an automobile, although both will get you from here to there. However, if you’re transporting children–or, for that matter, home improvement supplies–the importance of the lower price dwindles into insignificance.
The same is true in B2B sales. On the surface, it often seems as if two products perform an identical function. However, no two competitive products are exactly alike, and those differences always have the potential to address different cost issues with the customer’s operations.
Therefore, if you want to defend your higher price, you must uncover the cost issues that will cause those price issues to dwindle into insignificance.
For example, imagine two order processing systems that have the same features and benefits. If one has a price that’s half as much as the other, the price-focused customer will naturally purchase the lower-priced of the two.
However, if the lower-priced system goes down for maintenance twice as often as the higher-priced system, it might cause the loss of millions of dollars. In this case, the lower price of the less reliable system offers a false economy.
Raise the Stakes & Make the Sale
Almost every product offering has some economic value above and beyond the acquisition price of the core product. Your job is to uncover this economic value in such a way that the customer easily understands why your higher price is irrelevant.
Economic value is the total monetary worth of your offer, from the customer’s perspective. It stems from your core product in addition to the information, services and support that are provided to the customer before, during and after the sale.
However, because the customer does not realize the economic value of your offer, you must help them understand how your offering improves their performance, reduces their overall costs and/or reduces their exposure to risk and liability.
- Clarify the real problem. Identify the problem the customer is working to resolve. Then determine how much this problem is actually costing them. Uncover accurate dollars-and-cents information in order to quantify the total economic worth of your offering.
- Determine the problem’s root causes. Probing deeper enables you to provide a long-term solution that will create more economic benefit for them. It also allows you to increase the total economic worth of your offer.
- Expand the scope of your offering. Find ways to help the customer address these root causes, either with your offering alone or with a combination of your offering and additional information, services or support–such as problem solving, application engineering, start-up assistance, etc.
Approaching the sale in this way forces the customer to focus on the costs of the problem, rather than the price of your product. What’s more, it ties “working with you” (and with you alone) to achieving that financial benefit.
The above is based upon a conversation with one of the smartest guys I’ve ever met: Robert Nadeau, Managing Principal of the Industrial Performance Group.