Your Price Is Too High!

Your Price Is Too HighWho in sales hasn’t heard these words?

Buyers have many ways of saying your price is too high:

  • “We are reducing down to only two suppliers. If you want to be one of them, you’ll need to sharpen your pencil.”  
  • “I don’t care about service, delivery or quality.  Price is all that is important.”  
  • “My guys sell what the customers want.  They don’t see the difference.”
  • “I need an incentive to cut off a long-term vendor.  You must be lower if you want me to do so.”

Remember, it is the buyer’s job to discount your value, while simultaneously securing it.

The forgotten elements of price that are part of your value

Overcoming Price ObjectionsMost everyone thinks of the invoice price and terms.

But these forgotten values of price are part of the total picture that you must paint for your merchant.

In other words, this is part of the value you are bringing, not just a price.

  • Growth rebates
  • Promotional allowances
  • Show specials
  • Special buys
  • Advertising allowances
  • Co-op plans
  • Pallet configurations
  • Terms
  • Dating
  • Price protection
  • Rebates
  • Pick-up allowances
  • Guaranteed service cycles
  • Merchandising allowances
  • Service
  • Packaging
  • Stocking allowances
  • Customer accommodations
  • Inventory consignment

And more that are unique to your industry.

Each of these elements makes up your pricing – and your value – to the buyer. Don’t forget them when negotiating and remember they all are eating away at your account profitability.

Your price is too high really means “You haven’t shown your value to me”

I Said Your Price Is Too HighSurvey after survey of retailers, dealers, distributors, contractors and homeowners shows that price is rarely the key driver in the decision process. In fact, it is usually 4th or 5th.

Make sure that the customer has truly earned and justified the price they need. Make sure you are comparing apples to apples and considering all of the forgotten elements of price. Understand what you are up against by asking smart questions and getting all the facts.

Once price is relinquished make sure you have gained something for the value you provided. Finally, communicate thoroughly, professionally and always be reinforcing your value.

Being competitive is more than just price

Lowest Price Is Not Always BetterWhat added value can you offer?

  • What else can we bring to the party other than price?
  • How can we help grow the customer’s sales?
  • How can we lower their cost?
  • Can we use any of our unique capabilities to keep from cutting the price?

Marketing is all about 4 P’s, only one of which is Price

Marketing MixMake sure you spend as much time understanding pricing as any other one of the P’s.

Pricing deserves respect, attention and creativity. You will be rewarded with greater profitability and be more competitive as a result.

Good Selling!

Greg Bonsib is an author of the new Mighty Guides Ebook Data Disruption.

Active Search Results (ASR) is an independent Internet Search Engine using a proprietary page ranking technology with Millions of popular Web sites indexed.

Advertisement

Is Your Sales Team Asking The Right Pricing Questions?

Is Your Sales Team Asking The Right Pricing QuestionsMake no mistake; no customer buys anything just because they like you.

Truth is, you either bring a great deal of value to your customers or they take their business elsewhere.  Your products and capabilities must provide customers an opportunity to achieve greater returns on their business.

The nature of price competition

Competition In BusinessIn sports competition, the more intense the process, the better the game.

The key to success is to put you heart in the game and play it as hard as you can. In sports, the ultimate goal is to WIN.

In price competition, the more intense the process, the worse the game.

The key to success is to weigh thoughtfully the cost of each confrontation against the likely reward. In business, the ultimate goal is to PROFIT.

When pricing, don’t get constrained by tactical thinking

When pricing, don’t get constrained by tactical thinkingTo achieve the greatest profitability, a sales person’s job is to ask strategic pricing questions.

Do Not Ask:

“What price do we need to cover our costs and achieve our profit objectives?”

Ask:

“What changes in our prices or product mix would increase the contribution available to cover our costs and increase our profits?”

Do Not Ask:

“What prices are the buyers willing-to-pay?”

“What level of price will enable us to achieve our market share objectives?”

Ask:

“What level of market share can we most profitably achieve?”

“Which portions of the market can we profitably fight for (with what weapons?) and which should we yield to the competition?”

“How can we minimize the adverse effects of price competition in pursuit of sustainable profits?”

Managing price competition without undermining profitability

Don't THink Tactically About PricingThere are only two ways to prevent price competition from undermining profitability:

  • Develop competitive advantages
  • Manage the competitive process

The ultimate goal in managing price competition is to create stable competitive environment in which you can earn the best possible sustainable return on investment.

Recognized market leaders are likely to initiate price increases but often do not initiate price cuts.  Often, the price leader role is filled by a firm that has technical leadership and low unit manufacturing cost.

The market leader often has the largest and strongest distribution system. Market leaders generally also have technical leadership. Customers are anxious to maintain relations with suppliers who are in the forefront of technology.

As a sale person, your goal must be to implement a pricing plan that provides leadership to the industry and communicates your desire to stabilize the markets and capture your value. It should incentivize your customers to trade up and earn you a reasonable return.

That’s a win-win for everyone.

How do you communicate your value and pricing with your sales team and customers? Let us know.

Are You Pricing with Your Customer’s Profitability in Mind?

Are You Pricing with Your Customer’s Profitability in Mind?How do you determine your pricing?  It’s probably a rigorous process, but is it science or art?

Do you start with your profitability and go from there? Or do you start with the market price and let your profitability fall wherever it may?

Neither approach alone will help you win in the marketplace. Because neither approach puts your customer‘s profitability into the picture.

Use a pricing strategy that considers your customer’s profitability

Use a pricing strategy that considers your customer’s profitabilityDelivering a market price to your customer will certainly be geared toward improving your top line. Here the logic is that your customer will be looking closely at a few high volume, highly competitively priced products to evaluate your overall pricing proposal.

If you price those product “footballs” correctly, everyone seems to wins. You get the business and they get the pricing they need to be competitive in the marketplace.

But that strategy embodies the whole point of pricing – that your customer is competitive in the market. If they are making the money they need to be successful, you will stand out.

But are you making the money you need to stay in business?

Take a P&L approach to pricing

Take a P&L approach to pricing

It’s no surprise that there’s no one sure way to approach pricing. It really is part science and part art.

But do you approach the science part with a fact-based strategy? To do that, you need to be able to answer a few simple questions:

  • What is the product’s market price?
  • What is the customer’s margin % expectations
  • What can we make?

As one senior leader recently commented to us about pricing: “If you manage pricing from only your profitability – you’re going to be dead.”

Which is why pricing is art as much as science.

Inside of a company, pricing is really a continuum

How do you determine your pricing?  It’s probably a rigorous process, but is it science or art?The sales team is, understandably, all about making the sale. They want a price that will help them achieve that goal.

On the other hand, the product marketing team is looking to get credit for the innovation they are bringing to the marketplace. They want to get paid a premium.

Straddling both sides of the fence is channel marketing (also called trade or customer marketing depending on the company). Channel marketing sees both sides of the fence, is grounded in reality, and keeps perspective throughout the process.

Having a group like channel marketing manage your pricing is the secret sauce. They have perspective, collect all the facts, and keep the customer’s profitability balanced with your own profitability.

For other Channel Instincts posts on pricing, see What Does “Your Price Is Too High” Really Mean?, Is Pricing Making You Go Bananas? and Are You Pricing for Volume or Profit?

Good Selling!