One of the biggest challenges for any business is dealing with customers who are price shoppers. The other big challenge is educating your salespeople on how to respond to requests for lower prices from their customers. Most salespeople who have not received the proper education in dealing with price objections take the path of least resistance and cut the price to get an order. My salespeople are no different. Yes, I have some unbelievable salespeople who know how to fend off requests for lower prices. However, I also have plenty of salespeople who cave in and give a lower price the first time a customer asks for it. Now, if you do not give your salespeople pricing authority they can’t cut the price, but in today’s fast-paced world I’ve found that we get a lot of orders because our salespeople don’t have to request a price variance from one or two levels above them as with our largest competitor. I was on one sales call where the customer told me that we got the order because our salesperson responded to a price request immediately and our competitor took three days to respond after he got pricing approved by both his district manager and his regional manager.
There is no one correct way to handle pricing. You have to decide what works best for your business. However, if you do give pricing authority to your salespeople you need to ensure that they are properly educated and how to respond to requests for a lower price. One of the best books I’ve ever read on dealing with price objections was written in 1992 by Lawrence L. Steinmetz, Ph.D., a former professor of management at the Graduate School of Business at the University of Colorado The title of this book is, How to Make Your Prices Stick. I’ve read many books on selling and, specifically, on handling price objections but Larry’s book, in my opinion, is the best.
Below is a review of Larry’s book that I found on Amazon. I share it with you as I think the unnamed writer of the review really captured the essence and key lessons of this important book.
The title of this book is somewhat misleading because it does not indicate the full scope of what Steinmetz provides...and achieves. True, he suggests all manner of strategies and tactics to overcome sales resistance based almost entirely on price. (He correctly suggests that those who buy ONLY on price be avoided. More about that later.) However, I think this book's greater value is derived from Steinmetz's systematic and convincing repudiation of various self-defeating mindsets. For example, those who are so desperate to sell (and earn some money) that they make all manner of unnecessary concessions. In effect, they negotiate against themselves. (Steinmetz: "Business is a game of margins, not volume.") Here's another example. Those who fulfill what I call the "Self-Fulfilling Negative Prophecy":
This is NOT a sales manual. Rather, an extended dialogue between Steinmetz and those readers who are reasonably intelligent, very ambitious, highly energetic, eager to learn what they think they know but don't, not easily discouraged, and -- most important of all -- willing to consider vary carefully what Steinmetz suggests. He requires each reader to set aside their (probably cherished) assumptions about "salesmanship," most of them based on received wisdom that is either obsolete or never true in the first place. Is selling always a "numbers game"? No and Yes. No if the percentage is based on the number of sales made as a result of cold calls to everyone in the telephone directory whose last name begins with "J." Yes if the percentage is based on the number of sales made to carefully selected, pre-qualified prospects. True, there are differences between walk-in sales (e.g. at vehicle dealerships and department stores) and offsite sales (e.g. at the prospect's location). Even so, Steinmetz cites five "cases" (price, quality, service, competence of salesperson, and error-free delivery) which apply to both. I agree completely that "business is a game of margins, not volume." I am also convinced that re-orders (i.e. repeat customers), not merely orders, should be a primary objective. As Steinmetz explains, price may result in one order but quality, service, competence of salesperson, and error-free delivery create and then sustain long-term customer relationships.
Why avoid those who buy only on price? Steinmetz offers nine reasons:
1. Price-buyers take all of your sales time.
2. They do all the complaining.
3. They "forget" to pay you.
4. They tell your other customers how little they paid you.
5. They drive off your good customers.
6. There's not going to buy from you again anyhow.
7. They'll require you to "invest up" to supply their needs -- and then they'll blackmail you for a better price.
8. They'll destroy the credibility of your price and your product in the eyes of your customers.
9. They will steal any ideas, designs, drawings, information, and knowledge they can get their hands on.
There are dozens of such checklists, step-by-step processes, reminders, dos and don'ts, cautions, and value affirmations throughout the book as well as hundreds of examples of real-world sales situations. Problems and complications are inevitable. Steinmetz identifies the most recurrent ones and explains how to resolve them. Implicit is Steinmetz's pride in what he views as the profession of sales. He is wholeheartedly committed to quality of product and service. He understands the importance of making prudent promises and then keeping every one of them. He has little (if any) patience with whiners, chiselers, corner cutters, liars, and hypocrites. He views providing service to customers as a privilege, indeed as a moral obligation.
Here in a single volume is a wealth of information and wisdom which Steinmetz has accumulated over a period of many years, presented with a non-nonsense writing style enlivened by his wry sense of humor. All of his advice is eminently practical and easily applicable to most sales situation. However, I presume to offer some advice of my own. Read and then re-read the book, highlighting or underlining whatever seems most relevant to your own situation. Then focus on your most urgent needs. That is to say, do not attempt to apply immediately everything you have learned. Experiment. Take a few prudent chances. Over time, I think you will achieve significant improvement of your skills and a stronger sense of pride in how you earn a living. One final point. Not all prospective customers are worthy of your attention and effort. Concentrate only on the ones who are.
If you are a salesperson, sales manager, or owner and you haven’t read this book I urge you to order it (or the audio version) from Larry’s website (http://www.pricingexpert.com/). I guarantee you won’t regret it.
Copyright 2013 by Jim Sobeck. All rights reserved. This information may be reproduced as long as full credit is given to the author.
