Amelia H.
( LION ) B2B Marketing & Social Networking" at CN Mould & Plastic Limited / sales@cnmouldplas.com
What if price is the only concern of your prospect ? And your price is higher than your competitor ?
What if you already told your prospect that you are not only sell on price , but also on service and quality ,
What if your prospect already told you that they are very concerned about the quality and not look for the cheapest price. They would prefer to pay a higher price and get better quality and service.
Then they replied : " The price on your part is still too high. We have not made the final decision but we will likely use another supplier to make this part for us".
Seems like you still not Distinguish yourself with that competitor , so the prospect can only see the numbers ,
What will you do to get such deal ?
Good Answers (22)
Carla Sydney S.
Delivering Projects that Change People's Lives Principal at International Development & Technical Assistance, LLC
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Amelia-
While this is often simply a negotiating tactic, in other cases, the customer may not be aware of all of the costs associated with using a cheaper product and the producer may not be aware of all the costs associated with the importation or purchase of a product.
First of all, you need to understand the overall market for your product. Pricing reflects production costs, market demand, and competition in the market where the product is being sold. In addition, terms of payment are important factors in the overall cost to both the buyer and the seller. You need to know more than the buyer about the buyer's market and buyer expectations before you begin to pursue sales in that market. Some years ago I wrote an article stating that while producers may sell in any language, buyers make the purchase in their own language.
Part of your job in selling a product is to educate the customer so that it will have the tools to make a positive decision in your favor. It helps to work with the customer at the outset to define all of the product specifications, including materials, delivery time, maintenance, useful life, training, financing terms and anything else that you can think of for different price points for the product. Give the customer as many opportunities as you can to say yes.
For instance, the a cheaper part may require additional maintenance or have a shorter useful life, requiring earlier replacement, reflecting the lower quality materials being used to make the part. Lower priced products may not be delivered as quickly to the customer because this order will not have the same priority as that of a customer willing to pay a higher price.The product may be shipped via a slower, but cheaper method rather than the more expensive air express.
Regardless of the price point, make sure that you are not promising more than your product can deliver in order to meet the claims of your competitors. No one will be satisfied if the product is unable to perform as claimed and you will damage your reputation and the potential for additional sales in this market. Think about the long term consequences and be prepared to walk away from the negotiating table rather than complete the transaction simply for the sake of making a sale.
In general, one can think about price, quality, and time as three sides to a triangle. If you wish to maintain a constant dimension, then changing the length of one side will affect at least one other side.
I have included two excellent US government sources. While the information presented is geared to the US exporter, international producers also will find the information in the guide and webinar very helpful.
Good luck.
Links:
Hi Amelia,
The case you descrived above is quite common. Though prospects say they seek quality but not price at the end of the day the whhole deal comes to figures.
In such case i would recommend to have strong arguements regarding your pricing. Based on my personal experience, I can say that it is possible to win an "overpriced" (from the point of view of the prospect) deal if you can clearly state why your product or service costs more than about the same product or service at from your competitor. Disclose the prospect the actual economy of your product and this will explain the higher costs as well as it may disclose the value this prospect needs.
Also if the prospect undertands just the language of figures, then give him the figures like for instance:
Our products initially costs more, but it is cheaper to service it or maintenance costs are low.
Our product is x% more effective than competitor's, that is why the cost is a bit higher and etc.
Hope my two pence will help.
Regards
Sergei
Ramesh K.
CTO & Human Search Engine
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This hapens everyday.
The prospects always say that price is not the sole criterion and quality of service is the main issue. That is to get the best quality. Once they know what they can get, they will try to get the best price.
You have a bottom line. You may decide to lower your price, if you can afford. IIf you are in demand or created a niche, dont lower the price as one has to pay for quality.
If some one is offering lower price and delivers, you need to have a re-look at the competitor's pricing and your pricing. You may be doing something wrong.
Ramesh
The Human Search Engine
http://www.computerbasedbasedexams.com
Daniel K.
Executive Vice President / Controller at Shuter Industry Co., Ltd
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Amelia,
This a question of Apple to Apple or Apple to Orange? You need to know where your product and service stand. Also are they the only one buying from you? You can quote their peers who are buying from you too?And why are they buying from you? If you are selling the same product, like for example, brand like nokia NXX and the price will be the same every place you go. Then is the service you need to emphasise, prompt delivery, efficient communication skill, free gift whatever that add value to your services...one more important aspect in selling.........relationship-building...
Well, hope this much I can help...
Mohammad D.
Independent Mobility & Digital Marketing Consultant
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Hi Amelia,
Most of the sales coaches advice on discovering your client budget or if not feasible probe around other parameter like, income, profitability, other commitments,... to be able to determine how far can the client go in payment.
Always make sure you are offering the clients what they really need, not what they want. This can always help reduce the price. By providing the potential with an offer covering the needs, and offering the wanted items as extras
Sometimes you know your potential can not afford your product or service, yet you still pursue the client for other reasons like exposure in the market, kick a competitor out of the account. and for such reasons you may be willing to compromise your price.
Other times you can help the client finding financing to the service either through support programs, bank loans or even payment terms.
What I am trying to say is, first make sure this potential is a client, and that this client is your client. Do not wait to the last moment and then discover that what you are offering is way beyond the clients financial capability. if you are selling cars and a client walks in, you have to know the clients budget in order to give the client the proper car, as a sales guy you would always be dreaming to sell the ultimate cars but not all clients can afford them. so you have to provide the client with the proper choice suited to the clients needs and budget.
Regards,
M. Dawood
Christina R.
SEO Consultant at DR Adept
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Are you able to offer the product/service at three different prices. Low, Medium, High and clearly show the difference between each. If they want cheap they get a cheap service if the want expensive they get top quality.
The prospect will usually go for the middle price.
Remember that a high number of clients who want cheap normally still want the quality service and can be far more demanding then clients paying the higher prices. Also its harder to get a cheap client to upgrade to a higher product/service in the future, even if they are earning more money.
Bernard G.
Programme, Project & Change expert
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Recognise it isn't the deal for you if you have to throw away your whole strategy to try to win it. For all you know you wouldn't even win then, a customer who adopts this sort of approach is just as likely to be seeking your lowest figure to then take to a competitor and use to beat them down even further.
There are plenty more customers out there, so you need to know when to walk away from a poor deal!
Diane H.
Business Coach l Sales Coach l Social Media Trainer l Speaker l Author l Radio Show Host l Workshop Facilitator
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Amelia, you haven't proven the value for the price. The prospect is telling you that they don't see the correlation between your price and the value you bring. Or they were not truthful when they said that price is not the only issue.
What you can do is ask them to share with you how the competition is providing the same value at a lower price. If they can't show it then price really is their main concern and unless you lower your price you can not do business with them.
Rod W.
Experienced Sales and Marketing Professional, Seeker of Customers, Revenue and Market Share; Entrepreneur
Listen to what people are saying about your product, especially the non-price stuff, and seek to build value around that.
Ryan ".
Independent Sound Engineer at RedSound Live Audio
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I would want to know how they have verified the competitors quality as compared to yours.
Wallace J.
Multimedia Producer, i3D Programmer, Acrobat 3D PDF, Android App, Virtual World & iTV Design, Kindle, Nook & Sony eBooks
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The best way around this in the long run is to do a better job for their competitor! ;)
John K.
Direct Response Copywriter: Telling YOUR customers in dollars and cents language why it PAYS to do business with YOU!
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There's a specific reason your competitor's product is cheaper than yours. Your task is to discover that reason and exploit it to your advantage.
For example, did they cut corners with materials? If so, how, and what does that mean to the the customer in dollars and cents language.
The word quality is meaningless ... if you beleieve your product is superior, then you'll need to be able to explain reasons why that's so, and just as importantly, why not choosing you is a big costly mistake in the long run.
For example, I heard an Enagic rep, that was selling Kangen Water Ionizers says something like, "Sure you can get a cheaper water ionization machine for about $1,200, but they use platinum sprayed "screens" to ionize the water (when electrified), where we use "plates" that are dipped, so the ionizing surface is greater and the platinum isn't likely to wear-off like with a screen, and that could lead to poisoning the water ..."
Something like that, but when he was done, if you had any interest in a water ionizer, you'd think twice about getting one that might poison you ... and he gave a very good explanation or reason "why" his device was superior and worth the additional investment.
So much better than simply relying on "quality" or that your product is "top of the line."
Best of luck,
John
Clarification added July 15, 2010:
Excuse the typos ... my apologies.
J
Madan Kumar M.
Marketing Professional | Social Media Enthusiast
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There are two ways to look at it. One, its a negotiation tactic used to bring down your prices and still get a higher quality output from you.
Two, you need to relook at what is your competitive offerning vis a vis your competitior. There definitely be a utility score for your product quality at the price your offering. Find out where the consumer for your product's utlity score lies, and play the market there.
All the best.
Dream ur Dreams
MKMK
Cliff R.
Sales Manager at iVolve Industrial Technology - technology for mining and industry
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The key here is not to focus on price ay any part of the negotiation, but on customer value. In other words, your focus is not on the product/service that you provide, but on the financial business case this generates for the customer - after all, the product/service is what it is, and there are only so many ways you can cover the features and benefits. Much better to get this understood by the customer early, and then start talking ROI, and what negative impacts NOT buying from you may have on their business. Always handy to have a couple of tame existing ciustomers you can put up as references for the prospect to chat with as well.
Hope my 2 cents worth helps.
Cheers,
Cliff
Eric W.
Senior Network Engineer at Hill Top Information Technology
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If money is the bottom line, then total cost of ownership (TCO) is your only valid argument. Otherwise, walk away; sacrificing quality on the negotiating table is bad business.
Allen C.
Mobile | Social | Local Marketing ★ Lead Generation ★ Online Marketing ★ ROI Tracking ★ Speaker ★
Hi Amelia,
There have already been some great answers provided but I would like to advise you on something you touched on in your question, "Seems like you still not Distinguish yourself with that competitor, so the prospect can only see the numbers." You're absolutely right.
Now, some prospects are only concerned with price no matter what they say and are so blinded by it that nothing you say or do will matter to them. They are willing to sacrifice "quality" and "service" to get the lowest price, no matter how well you justify your price. The good news is not every business is like that.
Very few businesses can thrive with a low price proposition. Think Walmart. The low price guarantee is their unique selling proposition (usp) and it's work it perfectly for them.
Now consider this, you usually find Target stores located very close to Walmarts, usually right next door. Does Target have a low price proposition? No! If they did it's likely they couldn't survive. What makes Target unique from Walmart? Part of the answer lies in who their target market is. They don't try to take Walmart customers. They target customers with alittle higher annual income. Customers that can afford paying alittle more. What do the customers get in return? Personally I think they get a better shopping experience, better selection, higher quality, etc. Look at the Target commercials and ads. They focus on trends and fashion. They're saying if you want to be trendy and fashionable at a reasonable price, shop with us.
I suggest NOT using "quality" and "service" as your differentiators. The truth is everyone or every business expects that from whoever they choose. Whether they'll get it or not is another issue. I bet your competitor is communicating that they have superior quality and service as well.
You need to uncover and communicate effectively your Uniqueness. What is your USP?
Your most unique and relevant advantage is your strongest ally in attracting first-time customers. This is what gives you an original perspective and a strong competitive edge in the marketplace. Your Unique Selling Proposition, is what sets you apart from everyone else — even if they happen to be marketing the exact same products to the exact same people.
Your USP needs to be something original… something that gives you a special advantage over others, thereby minimizing the appeal of competing products and businesses, even the appeal of "lowest price".
But just having a Unique Selling Proposition isn’t enough; it should be part of every communication you have with your market.
You simply must make it easy for people to understand your advantages. That’s why free samples, test drives, and trial offers work so well; they give the prospect a “hands-on” experience, essentially providing an actual demonstration of the advantages of your product. How can you apply this to your situation?
Sometimes uncovering and developing your USP is easier said than done but I encourage you to take the time to develop a compelling USP that will differentiate you from your competition.
I apologize for such a long answer but I hope you find value in it.
Much Success!
Eufémia S.
Experienced Manager, MBA - Looking For a New CHALLENGE - Willing to Relocate!
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Well, this is normal in tough negotiation processes. Your prospect is trying to get a bargain deal from you by creating a war price between you and a second supplier (an imaginary one or not).
I propose you the following steps:
Step 1: question yourself if you have the right info about your prospect and about the deal in itself. If not do your homework first and negotiate only when you have quality info. Try to understand if the presented arguments are true. Is it looking for quality or price? With whom is it dealing besides you, if any?
Step 2: define your limit your lowest price for the deal and do not disclose it to your prospect. Understand if you are willing to enter in a price war or not, and how strategic this client is for your portfolio.
Step 3: schedule a new meeting and try to negotiate. Start by asking questions and try to understand what the maximum price your prospect is willing to pay is along with other insight info (info that helps you closing the deal in a better position). Never disclose your limit price.
Step 4:
A) Move away if your prospect's price is lower than your minimum price, the price that you defined in step 2. Even if it is a strategic prospect, be careful. By going to fare in decreasing your price you can end up with a bigger problem, never forget that a deal price is also a signal to the market. Be sure that you are sending the right signals to the market, that the signal is aligned with your strategy and client value proposition. Or,
B) If you can believe that your prospect is willing to pay at least your minimum price than negotiate and introduce a package deal with several items to be negotiated: cross and up-sale, delivery deadlines, minimum quantities, packaging formats, discounts, etc. This will bring you a bigger negotiation power and can help you balancing your final result.
Do not “fight” for a prospect just because you want to win it, put a lifetime value on it and try to understand why you should, or shouldn't, do business with it. Never forget the 20/80 rule and that 20% of a company's clients bringing a lost.
Good Luck.
Regards,
Eufémia Santos
Amit S.
General Manager (CG) - Oracle Fusion Middleware at Oracle India
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Hi Amelia,
If the customer is concerned about the quality and not on a look out for the cheapest price, but still finds our prices on a higher side.
In such scenario, the best thing is to MULTIPLY your advantage and DIVIDE the price differrence.
MULTIPLY Advantages:
Along with the customer, I would list down the advantages/benefits my product has to offer and will prepare the seperate list for wht my competitor' product has to offer.
I will try to multiply my advantages and will prove to the customer how my product meets to their requirement.
DIVIDE the price difference:
I will divide the price difference difference between my price and customer's expected price) and try to make it as small as possible.
For example: customer says that I like your photocopier machine, but the price you have quoted, $ 1000 USD is higher by $ 300 USD.
In this situation, I will list down all the features of te machine and proveto him that how my machine meets their existing requirement as well as can take care of their future requirements. Will also explain him our After Sales Service.
Then I will start dividing the price difference... I will tell him since the life of the machine is 5 years, which means 360 days into 5 = 1800 days.
If we divide $300 USD by 1800 days, we get 16.67 cents.
If we divide $ 300 USD with total no. of hours (1800 * 24 = 43200), we gets the price difference of around half a cent per hour.
I will then convince the customer, that keeping in mind the quality of the prduct and quality service, paying half a cent extra per hour is not much difference.
I have won the deals at high price trough this logic. I am sure this time also customer will be convinced by this logic!!
Happy Selling!!
Regards, Amit
The solution to this is quite simple. Ask the potential client what value they put on their product or service. Most, if not all will value their product or service very highly. Planting this question in the client's mind, will set them thinking that cheaper or low cost goods and services will not do their own goods/services any justice.
You have two customers here one is your client and the other is your factory/supplier. Put pressure on both of them the Client to give you a little better price and your factory to give you better costing. Pricing is only a strategy if diffrentiation with competitior doesn't work.
Stephen H.
Director Project Management at LCMB (Low Carbon Maintenance & Buildings)
Hi Amelia,
I feel so close to and passionate about this subject i thought i would write and article about entitled 'Ow Much'?
http://www.thepacepartners.com/articles/407-ow-much
Hope you enjoy
Steve
Links:
Jason C.
Jason Croyle is an Analyst with MECLABS
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Initial price is often what is weighed by the consumer or business decision maker. What most don't take into account is the total cost of ownership. For example a recent client of mine provides video post production equipment. A client went with a competitive product but within six months switched back because they lost work flow added 1,000 hours of time to their books. Another recent client helped a large client reduce archive searches from 300 to 1 and save $16 million last year. And a third client earned $6,330 per hour in confirmed revenue from my services. My cost is 3-4 times that of hiring a traditional in house phone centric lead generator. So basically you need to work with existing customers to determine how much time and money you help them save. When you can prove that you save your customers time and money or are more productive than your competitor you can win. I spend my day on the phones with decison makers and I have for the past 13 years. I'm well aware of what both the consumer and business decision maker are looking for and need to hear before they make a purchase. Ultimately though you need to remember that relationships matter. So your customer service and loyalty earns their loyalty. People don't buy from companies - they buy from people they like.
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Jon B.
President at Circulation Service America, Inc. - CircServ
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If your business is cyclical, you will likely have that customer come back to you next time.
