Negotiation and Selling Against Lower-Priced Competition
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1 Negotiation and Selling Against Lower-Priced Competition Learning Objectives/Outcomes: To identify how and when to present price To avoid common mistakes that invite price resistance To effectively manage price objections Copyright The Brooks Group. All Rights Reserved.
2 There is no victory at bargain basement prices. (Dwight D. Eisenhower) Most salespeople think price is more important than it is. In actuality, our research shows that price is a much lower consideration in a purchase decision. In a study of customer buying motives, 100 experienced purchasing managers and 100 inexperienced purchasing managers were asked how much of several products they would buy from various vendors. Almost all of the inexperienced purchasing managers chose lowest-priced vendor, but NONE of the experienced buyers did. Instead, their selections were split between two vendors based on delivery history and the quality standards. In another study, trained purchasing professionals indicated they didn t buy solely on price. Instead, they wanted a justifiable price. They wanted something else (such as a history of reliable delivery) with a price they could easily use to justify not buying from the lowest-priced vendor. (Source: Lawrence L. Steinmetz, PhD and William T. Brooks, How to Sell at Margins Higher Than Your Competitors, p. 14) What do you sell? Hint: It isn t thread-cutting machines, marking and engraving machines, coolant reclamation equipment or adaptive control systems! 1
3 Neogiation and Selling Against Lower-Priced Competition A rose is but a rose by any other name... But you don t understand! We sell a commodity. We have the same multi-spindle cutting machine that our competitor can sell. What is a commodity? What s your competitive advantage? Every product or service must be sold on the basis of some competitive advantage. One part of your competitive advantage might be price, but don t ever depend on price alone to be your advantage. Instead, depend on one or more of four other fundamental areas as your competitive advantage: 2 Copyright The Brooks Group. All Rights Reserved.
4 There are two components to price: What shapes that perception? The Value Formula V= The way you handle price determines the probability of getting your price. In other words, you can shape the your prospect s perception of price based on how you conduct yourself during the sale. 3
5 Neogiation and Selling Against Lower-Priced Competition Getting Your Price What are key elements that help create price acceptance with your prospect or customer? 1. When do you present your price? Navigating Premature Price Questions Despite your best intentions, prospects will commonly ask for a price early in the sales process. You must be able to address the question quickly and easily, without evasiveness. Your Primary Go-To Response I understand that price is important, and it should be. We have a full range of prices depending on options, choices, volume, and other factors. I d like to make sure I understand what product, with what features, is right for you. Then, I ll give you the price to the penny. Is that fair? OR Your Alternative Response (If You re Really Being Pressed on Price) Our prices generally range from to. No doubt you ll be somewhere in between. However, I ll be able to show you an exact price once I know exactly what you d like to accomplish. Is that okay? 4 Copyright The Brooks Group. All Rights Reserved.
6 Getting Your Price (cont d) 2. Why is this important? 3. How do you do this? 4. Focus on, not or price. 5
7 Neogiation and Selling Against Lower-Priced Competition Presenting the Price Present your price only after you ve created enough value and differentiation for your recommended solution to offset the perceived price. When you present the price, use the Stacking Formula to embed the price of your product or service in between the benefits your prospect will receive. This is how to create added value and price acceptance. The Stacking Formula This is what the Stacking Formula looks like graphically. It s easier to see how the benefits outweigh the product s price as well as the potential emotional costs. Value Cost 6 Copyright The Brooks Group. All Rights Reserved.
8 How do you phrase it? Here s an example: You ask: Before I give you the price, I d like to make sure you understand everything it includes. Is that okay? Your prospect answers: That s fine with me. You say: Great. Let s get started. You told me you were most interested in a two-year warranty, and a dedicated technician and that on-time delivery was your top priority. Is that correct? Your prospect answers: Yes, it is. You say: Based on what you told me, let me tell you how this product will help you achieve all of these things. You ll have peace of mind with our two-year unlimited warranty, a dedicated technician who knows our system intimately and 24/7 service so you ll have no downtime, for the price of $30,000. Plus, you ll get up to speed fast with the complete installation option, you can pay less on a monthly basis because of the extended payment plan and you ll have the opportunity for strong growth based on the free upgrade option. How does that sound? 7
9 Neogiation and Selling Against Lower-Priced Competition Don t Invite Resistance Often, salespeople encourage price resistance or negotiation attempts from prospects simply by what they say or how they act. When presenting price, avoid: 1. Our regular price is... Our price is... Today s price is We really want your business, so... Tell me where we need to be Not making eye contact as you present price Writing the price down and pointing to it instead of saying it aloud What s the Ultimate Test? You should be able to state the price of your product or service with the same ease that you state the time of day. 8 Your real competitor is often wearing your shoes. (Author Unknown) Copyright The Brooks Group. All Rights Reserved.
10 Word Choices that Intimidate Three common strategies prospects use to intimidate salespeople into making price concessions. Tactic #1: Look, I believe all you guys sell the same thing. I see no difference between your product and everyone else s. In my experience, all this stuff is basically the same. Tactic #2: I can get the same product from your competitor for less money. My other contacts can give me a far better price. I know my other suppliers will give me the same deal. Tactic #3: If you guys don t cut your price, you re out of here. Either you guys get competitive or we are not going to do any business. Unless you guys cut your price, we are not going to do any business. What do these tactics REALLY mean? 9
11 Neogiation and Selling Against Lower-Priced Competition Six Strategies for Addressing Price Objections 1. Prospect: You re 20% higher than everyone else. Your response: Tips for using this strategy: 2. Prospect: I am not paying that kind of money. Your response: Tips for using this strategy: 10 Copyright The Brooks Group. All Rights Reserved.
12 Six Strategies for Addressing Price Objections (cont d) 3. Prospect: I can get the same thing from for half that. Your Response: Tips for using this strategy: 4. Prospect: I don t know who would be crazy enough to pay that price. Your Response: Tips for using this strategy: 11
13 Neogiation and Selling Against Lower-Priced Competition Six Strategies for Addressing Price Objections (cont d) 5. Prospect: That price is way too high. I can t pay that! Your Response: Tips for using this strategy: 6. Prospect: You re killing me. Your price is just too high! Your Response: or or Tips for using this strategy: 12 Copyright The Brooks Group. All Rights Reserved.
14 Exercise: Presenting Price by Stacking Benefits Choose an account with whom you have an upcoming presentation/price discussion. (If you don t have such a meeting already scheduled, use your most recent experience presenting price to a customer.) Complete the table below, then practice presenting the price by stacking benefits. Active Account Name Three Customer Interests Recommended Product/Cost Benefits Evaluate Your Results After the Sales Call Did you use the Stacking Formula to present the price? If so, how did the customer react to your price presentation? (If not, why didn t you?) Did you receive any price resistance or negotiation attempts? If so, why do you think it happened, and how did you handle the situation? What was the outcome of the call? What, if anything, will you do differently next time? 13
15 Neogiation and Selling Against Lower-Priced Competition Exercise: Handling Intimidation Tactics Make a list of up to three ways your customers use initimidation tactics to wrangle a lower price from you. For example: Mary Jones of XYZ Company. She threatens to pull the business. Customer Primary Intimidation Strategy Next, determine the best responses to deter these or other price-cutting attempts - and be prepared to use them! For example: I invite her to compare what we offer against any competitor. Your Best Response to: Strategy #1 Strategy #2 Strategy #3 Evaluate Your Results After the Sales Call Did your customer attempt an intimidation tactic during the sales call? If so, which one(s)? What was your response to the tactic, and how did your customer react? How comfortable were you in handling this situation? 14 Copyright The Brooks Group. All Rights Reserved.
16 Notes Letter to Customers The printed material enclosed herein is protected by the Copyright Laws of the United States and should not be reproduced or otherwise distributed to others without permission of The Brooks Group. As the owner of the copyright in these written materials, The Brooks Group has the exclusive right to distribute copies of this material and to prepare works based upon it, as well as other enumerated rights contained in title 17, United States Code, section 106. The Copyright Laws provide that anyone who violates the exclusive rights of the copyright owner may be liable for the owner s actual damages and any additional profits of the infringer; in addition, a court may award a reasonable attorney s fee to the prevailing party in appropriate circumstances and may order the destruction of any unauthorized copies. Willful infringement of a copyright may also be criminally punished under title 18, United States Code, section
Negotiation and Selling Against Lower-Priced Competition
Negotiation and Selling Against Lower-Priced Competition Presented by Steve McCreedy and Michelle Richardson of The Brooks Group Moderated by: Michelle Richardson mrichardson@thebrooksgroup.com Presented
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