Productivity -- Value-added -- Information

How to add value without cutting prices

by Marsha Lindquist

Salespeople are motivated to earn commissions. So when they enter a sales situation, they naturally think of money, and they think the customer is thinking of money, too. Unfortunately, this money mindset often causes the salesperson to drop prices just to make a sale, even when they don’t really need to.

However, when people buy things, they aren’t necessarily basing their purchase on price, especially when making a decision on something they really care about. For example, a consumer may not care where their next toothbrush comes from, because they just need something to keep their teeth clean for the next couple of months. But a person shopping for an MP3 player, an infant car seat, or a lawnmower might research several products before making the decision to buy one over the other. Often, things like safety or reliability trump price during these buying decisions.

Customers are looking at many factors besides money and wondering, “What additional value can I get out of this product?” “How does this spin off into other things I’m currently doing?” “How quickly can I get it?” and, “How easy is the vendor to work with?” While price may play a part in the decision to buy, your reputation as a company and the value you add to your products or services are often more important. So dropping price in a sales situation—before investigating the customer’s true issues—isn’t always the best decision a salesperson can make. Rather, the salesperson needs to find out the customer’s real hot button. When you fail to find out what makes your product or service special for that client, then you’ll never be able to satisfy the customer’s requirement.

Are your salespeople dropping the price just to get the sale? If yes, then you need to differentiate yourself from your competition beyond price. When you aren’t focused on delivering just a competitive price, your customers won’t view price as an issue either. So rather than focus on what a person will or will not pay for your product or service, you must focus on making a difference. That’s what sets you apart.

You can use the following strategies to differentiate your product or service beyond price and avoid becoming just another commodity.

Create a culture of creativity
Further differentiating your product or service from the price of everyone else’s allows you to see many things about who you are and what you deliver. For example, if people look to you as a source of trust and you drop your price, how can people really trust what you’re providing? But when you focus on the benefits of working with you, you remove price as the deciding factor. You begin to appeal to the person’s real needs and wants, but you have to find out what those are first.

To not become a commodity, you must engage your sales and marketing people in making the differentiation. Both groups need to be involved; otherwise you’ll always be a commodity. If you ask salespeople to do what they’ve always done, then they’ll go out and drop the price. But if you ask them to participate in distinguishing your product or service, then you’ll have a better chance of discovering your true differentiation. After all, the salespeople ought to know what the customers really want because they are on the front lines. Your salespeople are in touch with the customers the most and really know what they want.

Encourage your sales and marketing teams to share their ideas, crazy as they may be, and reward people for bringing new ideas to the table. This open, reward-based environment will bring out good and bad ideas, but eventually you’ll have lots of good ideas that will help distinguish you.

At first, you should reward every idea to encourage your team to talk about everything that comes to mind. Then as time goes on and your brainstorming sessions become more focused, you can be more selective about the ideas you reward. Encourage them to get closer and closer to your true differentiation.

Keep in mind, by creating this kind of environment, you’re asking your team to take on new and difficult challenges that require them to think in a different way. Essentially, you’re asking them to make mistakes. But if you’re asking them to brainstorm your differentiation, you have to let that creativity come through. So set up an environment where their ideas can flow freely.

Your differentiation in the future
Salespeople often think of cutting prices to win business, when in most cases, lowering price should not be the first card they play. While price is important, people also consider a number of other factors in their buying decisions. Therefore, you must differentiate your products and services so you can address the real needs and wants of your customers. When you use these strategies to differentiate your products or services from your competition, you can win more customers without reducing your prices.

Marsha Lindquist is a successful business strategist, author and speaker. As CEO of The Management Link, Inc., Marsha has over 20 years experience as a business consultant who works with her clients to transform their organization through her Value Advantage formula. She has enhanced communication, facilitated change management, and improved overall strategies with companies including BP Amoco, Fleishman Hillard International Comm., and Northrop Grumman. For more information on her speaking and consulting work, please visit: www.MarshaLindquist.com or email her: Marsha@MarshaLindquist.com.