(Note About Author: If you enjoy the below article then don't miss Alan's upcoming sales management teleseminar, The Sales Compensation Conundrum - How to Develop a Truly Effective Sales Compensation Plan in 2 weeks.)
How "price sensitive" are your prospects and customers?
How often do they ask for a better price? When they compare your products or services to competing products or services, are the differences between the products or services obvious? Is it easy for the prospect or customer to justify paying a higher price for your products or services?
The above questions identify the issues that are at the core of selling Value vs. Price
If price is the focus of your discussions with prospects or customers, the unspoken assumption is that your products or services are basically identical to competing products or services. Is this assumption valid? Are there really no identifiable (and quantifiable) differences between your products and services and competing products and services?
If there truly are no significant differences between your products and services and competing products and services, you have to sell based upon your price and your relationships with prospects and customers, the quality of service your company provides and your negotiating skill. However, this tends to be the exception rather than the rule. For most products and services there ARE identifiable and quantifiable differences that can be leveraged to enable you to sell value rather than price.
What are these differences?
The best place to start is by doing a feature comparison between your product or service and a competing product or service. Compare the products or services feature by feature. Highlight the features for either product or service that seem to be unique or offer extra value.
Next, attempt to calculate a dollar value for any feature differences you have identified. How do you do this? Here are two examples:
1. Let's assume that two competing products offer different length warranties. One offers a one-year warranty and the other offers a two-year warranty. How do you calculate a value difference for this difference in warranty length?
If your company has a department that performs warranty repairs, you can ask someone in that department to tell you the kinds of repairs they perform most frequently for the product in question during the second year of its warranty. Then ask them what these repairs would cost if the product was not covered by a warranty. This will enable you to identify a specific dollar value for the difference in warranty length.
2. Maybe your product is more ruggedly constructed than a competing product. Because of this rugged construction a customer does not have to spend as much money on maintenance or repairs. How much money will this save a customer over the useful life of the product?
Change the focus of your prospect and customer conversations
If you are successful in identifying specific, quantifiable differences between your company's products and services and competing products and services, you will have the ammunition you need to change the scope of the conversation you have with prospects and customers. Instead of focusing on just the up-front purchase price for your products or services, focus on the total investment the prospect or customer will make during a specified time period or the entire useful life of the product or service. How much will they pay to purchase the product or service AND how much are they likely to pay for maintenance or repairs? How does the sum of these two numbers compare to the sum for competing products and services?
Does value selling always work?
The honest answer is "no." Some prospects and customers aren't willing to consider anything other than the up-front purchase price for a product or service. Fortunately this is also the exception rather than the rule. Most prospects and customers recognize that cash outlays are cash outlays, regardless of when they happen. They will see the merit in looking beyond the purchase price and considering ALL of the costs involved in owning a product or service.
Other uses for quantified value differences
Whenever you perform a feature and value comparison, it provides you with a "sanity check" for product and service pricing. In some cases you will discover that the quantifiable feature differences do NOT justify a higher price. In other cases you will learn that the quantifiable feature differences are so substantial that you could ask for, and justify, an even higher price!
Conclusion
If a product or service is truly a commodity and there are no substantial differences between it and competing products or services, it can be difficult to convince prospects or customers to pay a higher price. Your only leverage points are your relationship with the prospect or customer, the quality of service your company provides and your negotiating skills.
If you can identify specific, quantifiable differences between your company's products and services and competing products and services, you will have the ammunition you need to help you change the focus of your conversations with prospects and customers. Instead of focusing solely on the up-front purchase price for a product or service, discuss the total cost of ownership for the product or service during a specified time period or during the entire useful life of the product or service. If the total cost of ownership for your product or service is lower than that of competing products or services, you can win even when you charge a higher up-front price. That's selling value!
©2009 Alan Rigg
About the Author
Sales performance expert Alan Rigg is the author of "How to Beat the 80/20 Rule in Sales Team Performance", and the companion book, "How to Beat the 80/20 Rule in Selling." His 80/20 Selling System™ helps business owners, executives and managers end the frustration of 80/20 sales team performance, where 20% of salespeople produce 80% of sales. For more information and more FREE sales and sales management tips, visithttp://www.8020sales.com.
Posts
No comments:
Post a Comment