40. How can you justify rather than discount?
If you don't know the reasons that justify your price, it is important to find out what those reasons are.
The business department of a major university conducted a test on 100 companies. They divided them into three groups according to how they sold.
The first group of 30 companies sold strictly on price. The sales people had as much flexibility as they felt they needed to get the business.
The second group of 40 companies was allowed to give heavily controlled price discounts.
The third group of 30 companies gave no discounts and sold at book price.
The results...
Group one sold the least amount on a per sales person basis, earned less gross profit, return on investment was the poorest in the industry. Price buyers would search for the sales people who sell on price and try to squeeze the price even lower. The sales people constantly complained that there was no loyalty among buyers.
Group two had a higher sales per person than group one, earned a higher gross profit and had a better return on investment. The sales people complained that if they had lower prices they could sell more.
Group three had the highest per person sales, the highest gross profit and the best return on investment. THE SALES PEOPLE WERE BETTER TRAINED IN SELLING STRATEGIES AND WERE ABLE JUSTIFY THEIR PRICE RATHER THAN DISCOUNT IT!
Here are some of the things a sales person might say to justify the price:
"Yes, our price is higher - but our product has longer shelf life. You will never lose any money because of spoilage. We get it in and out of our warehouse and onto your shelf faster than any other distributor.”
Then show them the comparative figures on spoilage. Highlight this benefit they cannot get anywhere else.
Or you might say: "Yes, our machine costs $30 more-but other machines can cost you twice that $30 saving every few months in repairs. Here are the frequency of repair records for our machine and for our two top competitors. "Show him the figures-and then make your big point. 'A machine that hardly ever needs service and repairs is a tremendous advantage today, when service is so expensive and hard to come by. ”
Here are some reasons your buyers will pay more for.
When your customer trusts and knows what to expect from you, you gain an advantage. Consistent quality, delivery, service, and constant innovation create exceptional value in a sale.
When you can demonstrate that your products are guaranteed to arrive in perfect condition, you increase your value.
When a customer perceives that your company responds instantly to their problem, the customer will do business with you again.
Your product may cost less for operator training, a lower cost to run, and reduced cost to repair than a competitive offering.
Customers will select a technically sound company over one that's obsolete or on the brink of failure.
Your customer will pay more to eliminate and avoid headaches.
Comments:
Often times, some of our customers don’t want to hear the reasons our products cost more. Many times, their customers wish they would.
Jim Ruth
People do not buy on low price - they buy on value. Sometimes that is the lowest price but that is rare. A good salesperson constantly hones their skills to promote the value of their product and services just as a buyer continuously works on their skills to determine the best value for their dollar.
When the customer believes that your price is higher because you have added too much profit you will never sell them. When they believe your price is higher because you have spent money to increase the value of your product/service you will usually make the sale.
The “new guy” in business usually jumps at the lowball offer but, with experience, learns that it will lower his profits in the long run.
Crocker Smith
You must be able to justify qualities and benefits of your product/service to reinforce your price. If I am giving 100% of my time, energy, and life why would I consider discounting my price? My service and quality are not “discounted” so why should my price be? Bob sums this up in one important sentence………
“When your customer trusts and knows what to expect from you, you gain an advantage. Consistent quality, delivery, service, and constant innovation create exceptional value in a sale.”
Brooke Knight
We must be fully informed of all of our services and be prepared for any type of question they may throw at us. If they ask us a question and we get stumped, how does that make us look? We have to be informed of not only our services and what we offer, but also on our potential clients company. Do research on them before you ever walk in their door.
Kimberly Burgess
I’d much rather have to explain the reason(s) for a higher price than have to apologize to the customer for unacceptable quality.
Doug Barringer
It’s important to inform your customer why the prices are what they are. Sometimes it’s supply and demand, bad weather or a number of other reasons. What ever the reason you shouldn’t make something up always get the facts.
Scott Forgie
I am currently focusing more on service, rather than just selling cases. I deliver twice or more a week and will haul product in my car to correct mistakes, either the customers or my own. I answer the phone on weekends. I answer the phone at night. I respond to customer requests for new products, better products or service issues as rapidly as possible. I look for value added items to upgrade and save them labor or cut their waste.
I deserve to be paid and I deserve job security. If I can’t make a living, if my company can’t make a profit delivering my accounts, what’s the point? I am beginning to communicate this to my customers more often. I am WORTH a little more. They aren’t paying for higher priced groceries, they are paying for ME and the exceptional service and quality my company offers.
Chris Chase
Well the best way to justify rather than discount is to know exactly what your company can do for the potential customer, and then know exactly what services you can offer as well. By doing this you can grab the attention with other features rather than price. If you can show that you can offer the customer a lot more than just a price then price will not matter.
Jason Kirouac
"Ask your customers what they are willing to pay more for. The answer will tell you how you can justify your prices rather than discount them."