Dropping price is that bad habit sales people, entrepreneurs and negotiators have all fallen victim to from time to time in order to make a sale. Dropping price should NEVER been considered the way to sell your products and close a deal. That does not mean that you wouldn’t use a lower price to advertise, promote or create urgency in a product offering.
When coming to an agreement about the value of your product or service to a prospect, dropping price is a shortcut to building value; it in no way enhances the value of your proposition and in some cases can actually devalue your offer.
Try this exercise:
- Ask yourself, when you drop your price 10%, does it make your product more valuable or just less expensive?
- Ask yourself, when you drop price does it in any way resolve the original problem or motivation that caused your customer to reach out to you?
A client recently asked me to drop the price of my product $300. While I could agree to drop the price I first asked myself those questions and rather than unnecessarily discounting the price, I took the time to offer more value and resolve the real issues for which the client originally sought us out.
Let’s face it, we have all used price to close a deal far too much, myself included. In most cases lowering price is NOT necessary! Does the customer require a 10% discount to afford or pay for your product? Does the discount make your product solve more problems? Consider the idea that if your client can afford 90% of the price they can probably pay the other 10%. If that is not true you have them on too much product to begin with. You are giving price away not because of price but because your buyer is not financially qualified for that offer.
The Price Myth, as I wrote about in Sell or Be Sold, suggests that regardless of how much your buyer talks about price, no one actually makes decisions based on price. In a negotiation the buyer never offers an amount that they think is more valuable than the product or service they are receiving. In fact it is completely the opposite. A patient that pays $14,000 for dental implants, $140,000 for a car, $1,400 for a purse or $14 million for a house, believes the service or product being negotiated is worth more than what they are paying for it. If they did not believe that their offer was worth less than what they were getting they would never have offered it, never. So if a person is paying $1,400 for a purse, that purse brings more than $1,400 worth of gratification to that person. (This point should be drilled over and over until is real to you.)
Do you understand this? I just sold my house and during the negotiations when price became the issue, I reminded myself that the people buying the house were 1) very qualified and 2) wanted my house more than they wanted their money. This allows me to stay logical (Sell or Be Sold) and maintain my position in the negotiations. This prevented me from unnecessarily discounting the price of the house as I knew a lower price only lowered the price it didn’t increase value.
When you realize that your buyer values their money less than they value what you offer you will be able to close at the higher price. The buyer of my house didn’t come to get the lowest price they came to get the house! No matter how many times I was told by real estate agents that my price was too high I kept reminding myself of the problems my house was solving for their client (whom I cannot reveal in this article.) Bottom line is the buyer wanted my house for reasons that far outweighed their money and I knew what that was!
To the degree you can make sense of the value proposition, demonstrating how your product solves more problems than the money it takes purchase it, the less you will have to discount your price. This is the Value Price Proposition – When value exceeds price, the prospect will buy.
A price reduction may make your deal look better for the customer but it is vital to understand that no one buys a price. Think in terms of a See Saw with price on one side and Value on the other. Value on one side, is really how your offer solves their problem and price on the other side is what they have to pay for your product.
Instead of lowering price as a way to raise value think about other ways to increase the value, so that your buyer wants your product more than they want their money.
But what can you add to the equation to make your price more appealing for your prospect? When take time to remind yourself of this Price Value Proposition (PVP) you will find yourself creatively figuring out how to add value rather than unnecessarily discounting price.
What other things can you offer that increase value other than just reducing price? Your client did not come to save money to solve their problem – keeping their money solves another problem not the one they are interested in. Make a list of ways you can increase value and make your offer more valuable than their money and you will close the deal. Clearly there are those that will only buy when they get the lower price, but even those, when completely sold on you and your product, will be influenced when value exceeds price.
One last thing here – before I discount my product I will always attempt to give away something else as a way to add value to the offer. Again, discounting the price or reducing a number does NOT add value.
Do YOU really want to improve YOUR sales and closing skills?