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They Only Want to Talk Price

by Bernard Zick    

It's true; a lower price will usually produce more sales. Yet, if the price is low enough, you can sell yourself right out of business. You can't make up for losses by increasing volume. But, you don't have to have the lowest price or cut prices to be successful. Otherwise, the marketplace would be limited to Chevrolets and K-Marts, and not include Cadillacs and Nordstroms. The key to success is not cutting price to the bone, but matching customer needs and wants. Providing value-more value than your competition-is the answer. How do you do that when "they only want to talk price?"

People naturally focus on price because dollars and cents are a specific, tangible commodity, making comparisons easy. If you buy or sell a house, you want to share the excitement of your bargain with relatives and friends. You tell them you got a "great price." Even with personal possessions, you share your department store victories. When you are making a serious investment or negotiating commercial or industrial purchases, there is usually a lot more than price involved.

Always Shop Price?

An easy way to put price in perspective is to pose the hypothetical question: if you required a heart transplant or other serious surgery, would you shop for the lowest-price surgeon? Most people would immediately respond, "Of course, not." If you probed further, you probably would hear, "I want the best." Or, you might be told, "Get me the most expensive one you can find." If you were on trial for your life, would you select the cheapest attorney? Unlikely. (You may have heard executives bragging that their corporate attorney is the most expensive one around.)

What makes these situations, where you have to have the best and price is no object, different from everyday negotiations? Obviously, they are life-threatening situations. Not so obvious is both have a clearly-defined objective: save my life whatever the cost. Because of the severity of the events, anyone can quickly analyze them and reach a uniform conclusion.

The Buying Decision

Other, less critical events, such as renewing last year's contract with your biggest customer or closing the sale of a warehouse, have specific objectives, too. They are just more difficult to identify. Also, they usually are different for each party in the negotiation. Different buyers of the same goods or property buy for different reasons.

Buyers buy to feel good. They feel good by feeling secure in their job because they made the best decision, or because they made a profit, or they feel the prestige of having the best. Buyers talk price and rational decision-making, but usually buy for emotional reasons.

The only way to make buyers feel good is to know what they want and need. Are they the type of buyer that buys only from friends? Do they demand reliability more than anything else? Or, perhaps, they value a long-term supplier commitment, or an endorsement from a satisfied customer, technical assistance, or fast delivery. Some businesses value extended terms and are willing to pay more for improved cash flow. Almost any one of these considerations can outweigh price, IF you know the buyer needs it and you offer it. You must know your customer.

Even the federal government, which uses a lowest-bid purchasing system, must, by law, consider the reliability of the bidding company and how close the products or services offered in the bid match the government's needs. If the lowest bid alone is not satisfactory for Uncle Sam, it's not going to be good enough for your buyers, either.

Computer Deal

I'll share one of my experiences to give price decisions another perspective. If you are like most business people today, you are facing the challenge of which computer to buy and which software to use. When we added a desktop publishing system, we did what most businesses do, but we requested quotes or bids. We were overwhelmed with databits, bytes and megabytes. When we had to pick a vendor, we chose one that had an accessory that the others lacked (and we needed), even though purchasing that system cost us a few hundred dollars extra. That accessory was Jim. Jim was the technician on call that would repair, replace, fix or do whatever we needed to keep the system going on short notice. We only needed him once during the first year, but our decision was the right one. The extra money we spent more than paid for getting back in operation quickly when one of our people pushed the wrong key and caused the system to crash. We would have been stuck. We paid for service and it was an excellent investment.

Lowball Offers

Sometimes buyers try to get a large price concession from you at the start. Usually, this is only a negotiating ploy; they ultimately pay more than they initially suggest. They figure it's worth a try. And they are right because sometimes it works. Knowing the marketplace is your best defense here. (Francis Bacon was right: knowledge is power.) You'll know if the lowball offer from your buyer is unrealistic if you know the market.

Don't be taken in by the "you'll have to do better" response, either. Always ask "how much better" and ask for a concession in return. Remember that the buyer is trying to do his or her best for the company. Watch for these price-cutting techniques.

Keeping Your Price

Foremost in keeping your price intact is to have a printed price list or agreement readily available. It's psychologically more difficult to question printed authority, so your price will be less negotiable than verbal quotations.

Before you can support and defend your price, you have to know your product's unique features and be able to translate those features into customer benefits. Whether you are selling goods, a service or property, it's a product and it has unique features. Nobody else's product is the same, despite what buyers may claim. (The same item delivered sooner, or from a more reliable company, is a different product.) Tailor your description of your product to match the buyer's needs. Examples of unique features include payment terms, guarantees, service, management (for property), custom specifications or labels. It always surprises me how hard some companies try to sell something different from what the customer wants, thinking price is the obstacle that prevents closing the deal. You can't sell apples to someone who wants oranges-even at a big discount.

Lowering Your Price

If your buyer really wants a price concession, you can satisfy him or her and still survive. Here's an example. I was negotiating the sale of training courses with an international distributor. In reviewing the printed price list, they spotted a price they liked (we list several prices, based on quantity ordered), but the quantity they had to order to get that price was more than they normally would need. We agreed to give the lower price and accept a split order-one shipment now, another in ninety days-which totaled the quantity they needed to get the desirable price. We maintained the integrity of our prices and the buyer got the price they wanted. If you don't use a graduated price schedule, consider using one. It's worth giving a price concession to get a larger order.

Another technique to satisfy the price-sensitive buyer is to offer a discount for cash payment on delivery (cash flow has value to you, too). Sometimes, you can change the specifications of the product to meet your customer's needs at a lower cost, without compromising product quality. For example, we offer a one-day seminar for companies who cannot afford the two-day presentation.

Here's a caution: avoid making a unilateral price concession without receiving some tradeoff from your customer. Otherwise, it may appear as though the original price was inflated and unfair.

Tips for Sales and Marketing Managers

Sales persons will zealously defend a price if they believe it to be the lowest possible. When you give sales persons a range of acceptable prices, they are the most comfortable when they quote customers a price just above the minimum authorized. From role-play exercises and from on-the-job observations, sales persons always aimed slightly higher than the minimum. A sales person given a range of $70 to $90 will aim at $75-$77 as a good price for the product. If you give them a range of $80-$100, they will try to sell it for $86-$88. The message: raise the minimum. Raising the floor of the price range is an easy way to increase profitability and maintain pricing structure. (Some companies have special product "cost" information for their sales staff.)

Listen

The next time your buyers only want to talk price, listen closer. Find out what they value, besides price. Use these techniques and you will be prepared to give them what they want. Remember, if the only reason you give me to buy your product is the price, the only reason I would buy it is because it is cheap.


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"Deal-Maker" Bernard Zick, a top Business Growth Expert, has spoken to over 250,000 top leaders in America. His expertise is widely recognized, and he is considered a master negotiator. You can contact "Deal-Maker" Zick at www.zick.com. His best-selling b