Clarity Tip Sheet...

How to avoid the price trap

Pricing is always an interesting subject but many sales persons make it the overriding theme. Frequently, this is because they do not realise the crucial distinction between selling and negotiating - or that they are simply not good enough at negotiating.

The four barriers to a sale
In business-to-business markets, there are four hurdles you must overcome before you get the order...

- The customer must know of your company
- The customer must perceive that your products and services (soft factors) meet the customerís requirements
- The customer must trust that you are a suitable supplier
- The price must be right.

The order of these phases is important. Naturally, the customer must be aware of you (or you wouldnít even be in contact). Crucially, the customer must accept your product and your company as a supplier before price becomes an issue.

Who would want to negotiate a price with you if they donít have faith in your company and your offerings. This is where the marketing and sales approach has to be tuned in to the process. Itís no use discussing price with the customer too early in the process and thereby making price the overriding theme.

Selling versus negotiating
Looking at these four hurdles, itís clear that itís particularly important marketing task to facilitate awareness; that is, to make sure prospects know of your company and your offerings. Then, the sales effort becomes increasingly important.

Note thought, that ďsellingĒ would concentrate on making the customer recognise that (a) your products meet his/her requirements, and (b) that they can rest assured using your company as a supplier.

ďNegotiatingĒ, on the other hand, relates to agreeing on a price and conditions which are fair for both parties.

Itís important to understand this difference. Otherwise, your sales team ends up negotiating instead of selling and thatís when pricing issues override the interaction.

Selling is about recognising needs
Too many sales people overwhelm prospects with too much talk. Listening is essential.

Consider the sales person who shows up for the first presentation and proceeds with the standard presentation and the standard sales pitch. Itís very unlikely that this will make the prospect recognise the need for the sellerís products and services.

Instead, the professional sales person asks the prospect some carefully chosen questions. These questions are designed to highlight the prospectís situation, issues, and business problems. Once you know these, itís not that difficult to make the prospect realise that he or she can utilise your products and services (assuming that thatís the case).

Negotiating is about reaching agreement
Once the prospect has realised that the product can help his/her organisation cut costs or increase earnings, youíve got a good basis for negotiation. Price, which will have been kept in the background, can now be part of the discussion.

If the sales process (making the customer realise the need for your offerings) hasnít gone well, the prospect will only pay a low price. On the other hand, the prospect should be more likely to accept a higher price if itís clear that he or she can increase earnings or cut costs significantly.

You could say that, the better you are at selling, the more straightforward it is to negotiate.

Equally, you should not throw in rebates and special prices before the customer has recognised the need. That would only lead to increased price pressure - even in the negotiation phase.

7 points for successful negotiations
Here are seven things to bear in mind when you negotiate...

Be clear about what you want to achieve. Itís crucial that you make clear what you want to accomplish. How low a price you can accept, what you would require to accept that (payment terms, deliver times, number and sophistication of options...)
Recognise what the prospect is likely to want to achieve. Once youíve helped the prospect recognise needs, youíve god a good picture of what theyíd like to achieve.
Be fair. Youíve probably heard this before, but that doesnít make it less important. A deal is for two parties, not for one. Particularly in business-to-business situations this is important because you want to aim for longer term relations.
Believe in your product. If you donít have faith in the value of what youíre offering, find something else to do.
Listen carefully. Let the prospect speak as much as possible. This gives you a better understanding of their situation and youíll undoubtedly also spot opportunities you can develop.
Avoid confrontations. Itís far easier to reach a deal in a constructive manner and you should never assume an inflexible standpoint.
Be patient. Experienced buyers know that they can pressure an inexperienced or ďhungryĒ sales person, but donít fall for that trick. Give yourself time because that also signals that you believe in yourself and your product.

More inspiration...?

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