I was having a conversation this past week with a firm in our industry when they told me that they had implemented a rebate program as a way to build and reward client loyalty… and to also have something new and interesting to catch prospects’ attention.
And to no one’s surprise, it was working pretty well. Existing clients appreciated the ‘free money’ (credits against future purchases) and it also got them in front of several new potential clients. I told them that I was happy for their success, but that they needed to be careful. That selling on price is a very risky B2B sales strategy. And for a whole host of reasons:
- Selling on price teaches clients (and the entire market, for that matter – word gets around) that buyers can ask for discounts/rebates/lower prices from your firm… and get it.
- Selling on price may have existing clients questioning their relationship with you… and wondering if you’ve been overcharging them on past projects.
- It can have a negative impact on your brand. I’m guessing you don’t want your firm to be known as the ‘low-cost provider’ in the marketplace.
- Selling on price hurts your bottom line. Businesses exist to make a profit and selling on price erodes that.
- But the bottom line is this: if a client buys from you because of price, they will leave you because of price. Guaranteed! Just as soon as another provider comes along with a deeper discount, better rebates or a lower price.
Why they say “It’s too expensive”
A client or prospective client can give you the “too expensive” response for any number of reasons – maybe they really don’t have the money, or your contact isn’t authorized to make a decision on a project costing that much or they’re using you to negotiate with their current supplier. But more than likely, the reason you hear “too expensive” is actually your fault. During the sales process, you talked about what you were going to do for them, not how they would benefit and why you recommended what you did. That is, the buyer only saw the ‘price’… they never understood the ‘value.’
Responding to “It’s too expensive”
So, what happens? Most salespeople and seller-doers will cave in and lower prices because they feel the pressure to make the sale. And when that happens, the five issues above kick in!
But there is a way to respond to the buyer who wants to pay less (assuming you have reasonable pricing to begin with). And it’s something like this… “John, if you want me to reduce my price by 20%, I’m happy to do that… but I’ll also reduce our services by 20%.” It really is a fair and reasonable response. If John accepts your reduced pricing/services plan… great! You keep the client and maintain your profit margin. But the more likely response is “No thanks… we really need everything in your proposal. I was just trying to save some money. Let’s proceed as originally planned.”
Bottom line
Selling on price generally results in a short-term bump in sales activity… but it is not a sustainable practice. Better to establish pricing that’s fair to you and your clients, then stand firm should they make a request for lower pricing. And most importantly, when you’re communicating with buyers… focus on what’s important to them – the value of what you deliver. When they understand the value, they won’t even look at the price.
Good luck and good selling.