Industrial Distribution’s 67th Annual Survey of Distributor Operations identified 17 areas of concern for distributors, but the number one is price competition. This comes as no surprise to me. Price competition prompted me to write the first edition of Value-Added Selling in 1984 and Crush Price Objections in 1999. Price objections have always been a top concern of business people.
In our recent survey of 300 salespeople, dealing with price-related issues dominated five of the top six challenges salespeople face. The problem most folks have with price competition is that they accept it at face value — believing that their price is the problem. Our research shows something else. Earlier this year, we announced our findings in surveying 500 buyers and consumers. We identified the key driving forces behind price resistance. These findings may surprise you.
Why Customers Push Back on Price
The number-one reason customers push back on price is equity. This finding is reflected in these statements: “I want a fair deal,” and “I do not want to feel that I have been taken advantage of.” This tells me that salespeople are doing a poor job of communicating the value of their proposition. When buyers perceive an equitable exchange of price for value, they do not complain about price. Value happens when the return is greater than the investment.
The number-two reason customers push back on price is fear or scarcity. This finding is reflected in these statements: “I don’t want to spend more than is necessary,” “I am afraid of spending too much for something,” and “I do not want to waste valuable resources like money.” Fear is a powerful emotion. It is so powerful that it trumps other emotions including, and especially, greed. So, why are your customers afraid of paying your price? Where is this fear coming from? Have your salespeople said or done something to trigger this fear reaction?
The number-three reason customers push back on price is limited resources. This finding is reflected in these statements: “I have a budget I must work with,” or “I have limited funds to work with.” Salespeople must qualify buyers early in the sales process to determine the viability of a prospect — the need and the ability to pay for a solution. Are your salespeople chasing the wrong business? Do you have a way to help this buyer find the funding? Are your salespeople really calling on the high-level decision maker who can create funding for an idea he or she likes?
The number-four reason customers push back on price is lack of differentiation. This finding is reflected in these statements: “I can buy the same thing online cheaper,” “I do not see much difference in the product for the difference in price,” or “I do not see the difference between suppliers.” Your failure to differentiate (products, or your company) is driving your customers to make the simplest decision of all — price.
Winding Up with a Fair Deal
Collectively, these four reasons comprise 65 percent of the reasons customers push back on price. If you prepare your salespeople to deal proactively with these reasons, you can eliminate most of the push-back that you get. Look at this through the customers’ optic.
The number-four reason customers push back on price is lack of differentiation. This finding is reflected in these statements: “I can buy the same thing online cheaper,” “I do not see much difference in the product for the difference in price,” or “I do not see the difference between suppliers.” Your failure to differentiate (products, or your company) is driving your customers to make the simplest decision of all — price.
Winding Up with a Fair Deal
Collectively, these four reasons comprise 65 percent of the reasons customers push back on price. If you prepare your salespeople to deal proactively with these reasons, you can eliminate most of the push-back that you get. Look at this through the customers’ optic.
If you fail to offer a fair deal, causing the customer to spend more than necessary, squandering their valuable resources, and delivering commodity solutions to their products, you deserve price resistance. On the other hand, if you offer an equitable exchange of value for their money, help them invest wisely in a solution, assist them in protecting their valuable resources, and offer a differentiated product-solution and unique customer experience, you deserve the difference in your price vis-à-vis the competition.
Your company and your salespeople are not victims to price competition. You are complicit in it. Our research has found that 72 percent of salespeople and their managers will cave in to price resistance when buyers push back. If you tell your salespeople, “Get the business at any price, and we will figure out a way to make money on it internally,” you are complicit as a manager. Mixed messages confuse the market and frustrate your salespeople. Commanding a higher price for a differentiated product and unique customer experience is heavy lifting. Are you up for the challenge or will you go down for the count?
Tom Reilly is a professional speaker and sales trainer. He is the author of Crush Price Objections (McGraw-Hill, 2010). You may visit him online at www.TomReillyTraining.com.
Your company and your salespeople are not victims to price competition. You are complicit in it. Our research has found that 72 percent of salespeople and their managers will cave in to price resistance when buyers push back. If you tell your salespeople, “Get the business at any price, and we will figure out a way to make money on it internally,” you are complicit as a manager. Mixed messages confuse the market and frustrate your salespeople. Commanding a higher price for a differentiated product and unique customer experience is heavy lifting. Are you up for the challenge or will you go down for the count?
Tom Reilly is a professional speaker and sales trainer. He is the author of Crush Price Objections (McGraw-Hill, 2010). You may visit him online at www.TomReillyTraining.com.
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