I didn’t start my career wanting to be a salesperson, or to be in the business of persuasion at all. In fact, I wanted to have as little to do with selling as possible, so I got a degree in finance and went to work for a commercial bank in south Florida where I could happily crunch numbers without having to have much to do with people. At that time the banking industry was very heavily regulated, so we didn’t have to compete too hard for customers. In fact, we joked that banking was subject to the “3-6-2” rule—pay 3% on deposits, lend it out at 6%, and hit the golf course every day at 2.
In an unfortunate masterpiece of poor timing, I entered the industry just before Congress passed a whole new set of laws deregulating the financial industry, which soon forced clueless hotshots like myself to go out into the real world and try to bring in customers. I had to figure out how to sell, and quickly. I had no formal sales training and no way to differentiate my product (what’s more of a commodity than money?). But, because I like to eat and have a roof over my head, I went out and gave it a go. I’m sure I made every mistake in the book but gradually I got better at it, although with no method or systematic approach.
One day this all changed.
In Part 2 of this series on dealing with the price objection, we saw that the first key to getting out of the commodity trap is to find points of differentiation and then connect those to customer benefits. Thus the two most important words in sales are: “SO WHAT?”
Suppose I say, “Our product is engineered to be the most reliable in the industry.” I might instead say, “This means that you know it’s going to work when you need it.”
Notice something subtle about that last paragraph. Thinking “so what” changed the pronoun from the first person to the second person. They don’t care about you—they care about themselves.
The next step is to get the right people in the customer’s organization to agree to the value. So, ask the next two critical selling words are: “HOW MUCH?” And, just as we saw that there are many ways to differentiate when you take a broad look at the offering, we will also see that there are many ways to assign value to these benefits.
There is no such thing as a commodity. Whenever I make this statement in a classroom, it’s usually good for an argument, and I expect to start one with this article.
First, a couple of definitions: A commodity is an offering that is only differentiated by its price, so that customers would be silly to pay a penny more for one offering over another. The word offering is also important, because no product exists by itself—it’s always part of an offering. Offering comprises every possible aspect of the buying and ownership experience that will affect your customer.
We’ll begin with your offering. For the price your customer pays, they get much more than the physical product itself. That’s why even products that are physically indistinguishable can command price premiums. When is the last time you bought bottled water? You can get it as much as you want from a tap for about three-tenths of a cent per gallon, or you can drive to a store and pay up to $4-5 per gallon. Is it worth it? Apparently people are willing to pay for the “difference”: global bottled water sales are expected to top $86 billion in 2011, about equal to the GDP of Bulgaria.
People are willing to pay the difference because sellers tout differences in purity, taste, packaging, and image—even when those differences are undetectable in blind taste tests. If they can do it with water, you should have no problem.
One of the most vexing issues facing salespeople is how to win a sale when their solution is not the lowest-priced alternative available to the prospect. Some of them positively dread the moment in the sales cycle when the buyer says: “We like your product, but we can get the same thing cheaper somewhere else, so you’re going to have to sharpen your pencil if you want the deal.”
Often when that happens, the salesperson goes into high-gear selling mode—but this time they target their manager, trying to get a pricing exception to win the business.
Although there are no foolproof ways to defeat the price objection, there are so many avenues available to you that discounts, if any, should be a last resort. It’s such a big topic that I’m going to break it up into a series of articles, but let me start the discussion by addressing the psychology of pricing, as it affects the mind of both the buyer and the seller.