Each week I get at least one person asking me if they should reduce their price as a way to increase sales.
My first response is “no.”
Under almost all situations, it does not make sense to reduce your price. (With this comment we have to exclude the bids and the RFP process. Reducing your price in these situations is an entirely different issue.)
If the strategy is to reduce your price to close more sales, you first have to ask if price is even an issue with the prospect. More often than not, the issue regarding price resides in the mind of the salesperson far more than the mind of the customer.
Salespeople are far too quick to use price as the reason the customer isn’t buying.
The first question I ask anyone who thinks they need to lower their price to close a sale is if they know at least 3 needs the customer has and if they have been able to measure the real value of those needs with the customer.
The majority of the time, the person with whom I am talking stammers through trying to answer this question. What this tells me is they don’t know — and they have not developed their sales relationship with the customer enough to even find out.
If you can’t objectively answer this question, my immediate answer is no way should you even think about reducing the price. If you can answer the question, I still lean toward “no” on lowering the price.
My direction to the salesperson is to work to position their offering to the customer to allow them to see enough value that either equals or exceeds the price.
This same strategy applies even when the salesperson is working in an environment where what they’re selling is a commodity. Even though the item the customer is looking for might be considered a commodity there are still numerous other needs the customer has. This is where the focus of the sales process needs to be.
It’s easy to cut your price. Anybody can do it. But but what I guarantee when you cut your price for the first time, you’ll do it again and again. I’ve yet to meet a salesperson who has reduced their price only once.
For more insights on pricing, visit this article section of my website or invest in yourself by getting my book High-Profit Selling: Win the Sale Without Compromising on Price.
I would love to receive your questions on this vital topic of pricing. I am committed to helping salespeople and companies understand why discounting is a bad sales strategy.
Copyright 2012, Mark Hunter “The Sales Hunter.” Sales Motivation Blog.