At its core, price pressure is the absence of perceived value to the customer. In other words, the value they believe a product or service will provide them and their company doesn't justify the price they must pay.
It's a serious roadblock faced during the sales process, so naturally salespeople spend quite a lot of time and energy obsessing over it, and maybe learning different ways to respond to this price pressure. We'll discuss some of those in future blogs, however they're all fixes to a preexisting problem. But what if you could seriously diminish the problem altogether? Because that's exactly what the best salespeople do: they don't deal with price pressure by reacting to it... they preempt it.
Think of the early stages in any sales process. Despite what the customer thinks, or how much you would like to think they know, many customers generally have no more than a superficial understanding of the product or service; rarely do they understand how it could be of unique value to their situation and business. Therefore, there's less perceived value on their part, and usually not enough to clearly justify the price. So you have a gap between two positions: perceived value and price.
The best salespeople know how to effectively address these positions. But they don't do it just by closing the gap – that's what you do when you have to react to price pressure. They do it by ensuring there is less likelihood of a gap.
There can be no gap if, when the sales process starts, there is no defined product or defined price. You start with a blank slate, because just as the customer doesn't understand how your product or service could be of value to them other than as a generic expectation, you also may not know much or enough about the customer! So before discussing the product, and certainly before discussing price, you must build the relationship with the customer to understand their business situation, problems and opportunities. Only then can you begin to consider what configuration of your product or service can meet their needs and how you can frame it as a solution, ultimately elevating the customer's perception of value.
Furthermore, while it's not always possible, price should be one of the last things discussed. This is not only because you first want to create value for the customer, but also because you simply can't determine an accurate price until you know what solution – and therefore, what product/service configuration – is best for the customer. Quote a price before then and you run the risk of setting inaccurate expectations, whether they be too high or too low.
Stop worrying so much about how to react to price pressure; it's nothing more than an uphill battle that you'll repeat over and over again. Try turning the tables and preempt it instead.
Posted: 21/12/2010 6:06:24 PM
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As the year comes to a close, it's a great opportunity to take a step back and think about our year of blogging. What an interesting, enlightening and fulfilling experience it's been to bring our programs to life with stories from clients, personal anecdotes or recent news and research. We hope you've gotten as much out of our blogs as we have!
The feedback you've shared directly with comments, in emails or in person has been invaluable in shaping the direction of our content, and we encourage you to continue to provide it.
Next year promises plenty more of the same. There will be more sales insights to help guide you through the sales process and create value. Likewise we'll continue to write on leadership topics in the anticipation of helping you improve your leadership effectiveness and increase employee engagement.
Until then, everyone at Fortune would like to wish you and your family the best this holiday season.
Posted: 20/12/2010 11:40:56 PM
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When discussing their product or service, effective salespeople will often ask prospective customers, "What do you have in mind?" It's a simple question, usually asked with simple intentions, maybe just as a conversation starter. But salespeople who can 'see' and learn from 'what the customer has in their mind' are better able to help influence what the customer has in mind. As a result they are usually also the most successful.
When people buy something, they actually are buying a picture that they have in their mind. For example, when you shop for a new suit (man or woman), you don't simply look at suits in the fabricated conditions of the store, hanging on the rack or even how they look while trying them on. Instead, you look at a suit and imagine how it will look in the environment you will wear in, such as the office or a new business pitch. And along with that picture comes other emotions, such as how wearing the suit will make you feel and even what outcomes that may help achieve.
This is of course a simple example, but a powerful one because it illustrates the perceived psychological value that customers attach to products or services – for their business and for themselves – during the sales process. Customers start with a picture in their mind (their initial position), and it's up to the salesperson to understand how to shape their solution so that the customer can visualise how it uniquely applies to addressing their business opportunity, pain or frustration to create a desired outcome... for both the business and individual. This change creates what we might call a customer's altered position... it's why salespeople at their best are really change agents!
Do you know what your customer has "in mind"? Are you effectively shaping that picture? Start asking the question with this new intention and you'll learn valuable insights that will significantly increase your chances of success.
Posted: 14/12/2010 7:14:00 PM
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High performing salespeople know that creating value for customers is an integral part of every sales process. But some salespeople interpret this to mean that they need to offer more and charge less. Advancing this theme, a thumbnail definition of value (as it relates to sales) could be described as the difference between what the customer believes they will receive versus what they believe they have to give up.
Of course this outlook drastically oversimplifies the process because to truly increase the first half of that equation and create real value for the customer, we have to first understand what is it that the customer values.
So what do customers really value?
Sorry, but you're not going to get a simple answer to that question here, nor will you get it from any other reputable source.
The truth is there's no blanket, one-size-fits-all, definition for value; all customers value different things based on their own circumstance and perceptions. You've heard that 'beauty is in the eye of the beholder' and that 'one person's trash is another's treasure'. The same goes for value: what's of value to you could be worthless to another, and vice versa.
So the seductive shortcut to "creating value" by simply offering more product features, functionality, etc for less money is neither a viable nor sustainable approach to increasing sales effectiveness. Instead, the key (as it is through the entire sales process) lies in building customer relationships. This is the foundation that unlocks the essential (and invaluable) insights into what each customer considers to be of value... to them. And solving their 'problems' is the key in this relationship building process!
When you have this clear understanding of the customer, you're able to frame your value proposition not just as a solution to fit your customer's needs, but as the solution. And remember the second half of our thumbnail definition of value – what the customer believes they will have to give up? When the customer is compelled to truly want your product, its price is now framed from a different perspective. Price becomes less critical in the decision mix and your prospects of a sale become that much greater.
More on value creation in upcoming blog posts...
Posted: 7/12/2010 8:15:50 PM
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When facing negative feedback from a customer, whether it's with the best of intentions or simply mean-spirited, human nature can often cause people to respond in a similar, negative fashion. In these moments, some preach the mantra that the customer is always right, meaning you should feign agreement with their objections and apologise for whatever has caused them to feel wronged. But we all know that's not true; the customer is not always right.
What is true is that the customer is always... the customer. That means that no matter the situation, however bad things get, remain courteous and don't burn bridges. Fighting fire with fire won't make anything better, and you never know how a little civility will pay off down the road.
Posted: 30/11/2010 8:18:11 PM
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