To drop or not to drop; that is the question... Now, what's the answer?
With the news from the Bank of England that the double dip recession is biting ever deeper, what better time than to introduce a blog about reducing your price to get a sale - with just a hint of caveat emptor!
Once in a while, (and it really should be just once in a while,) there comes the time when you absolutely have to lower your price to close the sale.
While this may seem like a simple and easy operation, it is something that sales people get wrong all the time. Done correctly, a small price drop can indeed help close the sale.
However, done incorrectly, the smallest price decrease can cost you the sale, the trust of the buyer, many other sales and possibly your reputation in the industry.
Handle With Care
Price dropping, reducing your price or offering discounts, however you call it, is an extremely delicate issue requiring skill and practice. Also, keep in mind that reducing your price is not a practice for EVERY type of business and product, so the following may not apply. However, if you are in such a business where a small price inducement may help clinch the order, then read on!
The Proper Way to Lower the Price
Follow these critical steps:
1. Stand firm
2. Build value 3 times
3. Find a justifiable reason
#1: Stand Firm
This is where most sales people blow it. The sales rep made a great presentation and then proposed an offer that he / she claimed was their best recommendation, the best price and value. They told the buyer, that this is exactly what they need and this is the best price.
Then the buyer hesitates and barely objects, and instantly the sales person is ready to change the offer or lower the price! The customer says, Boo! and the sales person says, Ok, how about THIS price instead!
Will the REAL Price Please Stand Up?
Was the first price just a ruse? When you immediately begin to reduce your price or change the offer, you tell the prospect that your original offer was not in their best interest. You are effectively telling the buyer that the first offer was just a test to see how much you could get, and your credibility and any trust for you goes out the window.
You should close and ask for the order at your original price, a minimum of three times before you even THINK about changing anything. Stand firm on your original price and offer for as long as possible.
If you believe your offer was the best thing for the buyer, then why would you change it?
If you do NOT believe your offer was the best thing for the buyer, then why did you offer it?
Make your offer, ask for the order and stand firm.
#2: Build Value 3 times
Second; in effectively offering a discount, you have to build value. Most price objections actually have nothing to do with price or even the money. A price objection is usually about VALUE. In fact, almost all objections, one way or another, ultimately come back to a question of value.
Is it the Price or the Value?
In the mind of the prospect, the total value of the benefits received from the purchase, do not yet equal the value of the price or fee to obtain that product or service. In the prospect's mind, the price is greater than the value. Therefore, you get what sounds like an objection on price.
"No... that's too much..." The prospect is not saying that the price is too high. They are telling you that the price is higher than what it is worth. The value is too low.
The normal reaction to this is to reduce the price. However, since the objection is actually about the value, when you simply reduce the price; you simultaneously LOWER the value - even more!
Therefore, before you lower the price, you MUST INCREASE THE VALUE. You should have a plethora of value building statements and proofs and testimonials.
"Steve, everyday your business is losing money through poor data integration. Our software solution will stop those losses and put more money back in your budget!"
"Sarah, this plan will actually increase the value of your property..."
Build the value, build the value and keep building the value.
#3: Find a Justifiable Reason
So, first stand firm on your offer as long as possible. Lowering your price should be as a last resort. Then, build the value of the offer repeatedly. Now, if you have still not closed the sale, then and only then you might begin to offer a price inducement.
You must have a VALID REASON to justify reducing the price. If you can just take out a pen and magically change the price, then what is the REAL price? IS there a real price?
Understand that today's modern buyer is educated and perceptive. If you just change the price with the wave of your hand today's consumer is not going to buy it! (Literally)
You need a real and justifiable reason to offer the discount, and it cannot be that you simply want the sale. There has to be some benefit to you and your company, to offer a discount. If it is REAL money, then how can you freely give it away? What is the motive and justification for the discount?
"Fred, if you could be a point of reference for me in this area, it will help us make more sales. If you will do that, I will give you a referral fee in advance by reducing this offer..."
Have a reason for the reduction and show how it helps you and your company. This is also a great time and reason to BUY referrals...
"Susan, every person you recommend that I can demonstrate our product to, is worth a lot to me and my company; it is great word of mouth advertising. If you can give me five referrals, I'll pay you the equivalent of 400 which I'll take right off of our initial fee..."
So, first, stand firm. Then build the value at least three times. Then present a justifiable reason for the price drop. Do this and you can actually lower the price and RAISE the value at the same time!