How a client perceives prices and how much they are willing to pay are exercises in psychology to some extent.
Think of it this way: a customer’s decision of whether or not to buy something at an offered price depends upon more than the tradeoff between benefits and price. It depends on customers’ expectations as well as their experience with how their behavior affects the price they are expected to pay.
Unfortunately, many sales people operate in a fashion that gives buyers much reason to believe that if the buyer just does this or that, they will be rewarded with a substantial price break. Periodic predictable discounting is just one of many ways that sellers undermine their pricing power by making decisions for short term sales gains which adversely affect buyers’ future behavior.
The key to overcoming this goes back to creating value. What is (or isn’t) value?
- It’s not product-centric. Remember that products have no inherent value. Products possess features, they do not possess value. Value is a relative idea that is all about fit – the fit between the customer’s needs and your solution. If the product does not address a customer need, then it has no value to that customer. This is why developing an understanding of the customer and the customer’s business is absolutely critical.
- Value is situational and positional. How a person holding a particular position defines value may be different across organizations; likewise, individuals holding different positions in the same organization may have conflicting views of value. There are some commonalities, of course, but there are also differences. Understanding those differences is what enables you to effectively sell value.
- Value migration is common. Whether you analyze it from the perspective of the individual, the company, or an entire industry, the expectations about value tend to be dynamic in nature. Business history is full of examples of companies that had very viable value propositions but failed to accurately judge the shift in the market’s value expectations.
So, in the end, how do you manage price expectations? First, stay away from behaviors that drive customers towards expecting discounts. Second, sell value, sell value, sell value.
Interested in receiving more sales training tips? Join us for the free web seminar, The Fundamental of Selling, Tuesday, June 19th at 12:00 pm EST. This one-hour web seminar will cover the 5 attributes of highly successful sales professionals, managing price expectations/price objections, and understanding your potential buyers (and their roles). Register here.