By Joe DiDonato & Ted Baird | Baker Communications
We see it all the time. Salespeople with better products and services get eliminated because a competitor showed up with a lower price and turned the deal into a pricing conversation. It’s what we call that getting “commodity sliced.”
The cause? In sales, you never want to talk about price without first establishing the value. In coaching sessions with sellers on cold call prospecting, when they are trying to qualify a prospect, it’s easy for them to get their conversation hijacked. It usually goes like this, early in the seller’s call.
The prospect says something like this, “You know what? Can you just send me some additional information?”
Excited for the seemingly positive movement, the rep will usually say, “Of course.”
But it’s here where the hijacking occurs. The prospect says, “Before we hang up, can you tell me what the price of your software is? I don’t want to look at information if the price isn’t going to work in my budget. For sure, I don’t want to waste your time on something that I don’t have the budget for.”
The seller usually thinks about it for a second, decides it’s a reasonable request, and then just gives in to the ‘ask.’ The person will then say something like, “Yeah, you know, it ranges usually around $XXX-$XXXX, per year.”
Big mistake. The seller really doesn’t know anything about the prospect at that point, including budgets, how the application is going to be used, the number of people using it, or anything concrete to base the pricing on.
The seller just felt obligated to respond because he or she was being pressed by the prospect, and what the prospect said seemed reasonable. The salesperson simply relented and potentially gave the sale away.
Why is this such a bad strategy? After all, the prospect is eventually going to find out the cost of your product or services anyway.
The answer is this. When you talk about price with a prospect – before establishing the value that your solution can create, and before understanding even the value that you are able to create once you’ve understood the prospect’s needs – you’ve essentially turned the sale into a cost-only deal. Your solution is now a pure commodity, and at the end of the day, you’ve lost control over the sales interaction and conversation, and you have no chance to differentiate yourself or your solution.
There are really a host of things that could impact the cost to a client, and all of them must be taken into consideration. Without understanding the ‘outcomes’ the prospect is looking for – the quoted price could be a magnitude too high or too low. And because most reps are afraid of being too high for a prospect’s budget, chances are the price they quote is going to be on the low side. BUT even being on the low side can be problematic in more than profitability terms.
Let’s say you’re going to replace all the windows in your house with a much more energy-efficient model. You’ve already gotten a few bids, so you pretty much know the going rate being charged. Let’s say that it’s about $10,000 for your needs and your home. If the seller now throws out a $3,000 quote, what are you likely going to think? For sure I’d be wondering if the actual energy efficiency is going to be even lower than what I already have, or if I’ll be able to see outside into the yard through the cracks around the windows.
That seller would have lost the deal because he or she gave away a price that’s too cheap. It’s sort of like that old parachute story. Which would you choose if you’re going to jump out of a plane for the first time? The parachute that your jump buddy picked up in a surplus store for $29, or a new one for $2,400?
What the seller should be doing is asking some questions to determine the size of the implementation, what the expected ROI is, and what the other expected outcomes are before getting into a discussion on price.
You and your company are going to have to craft your own answers to these attempts to throw your sellers into a commodity war. Your answer may be to start explaining some of the factors that would have to be considered to give them even a reasonably accurate answer.
The key to surviving the commodity slice is to use the “bounce back” technique to refocus the conversation back to the customer and their desired outcomes. This simple process of shining the light back on the customer allows us to take ourselves and our solution out of the limelight.
The “bounce back” can be a validation and questioning response to the commodity slice and could sound like, “It sounds like the price is a big consideration for you. Can I ask you what one or two other important outcomes you are looking to achieve for this solution?” Now we have returned the focus of the conversation to the customer by not taking the commodity slice bait and gone to an immediate conversation about our company or solution.
Just think of all the questions the window salesperson would have had to know before they could come even close to the right number. There are at least 18 different window styles, plus a variety of energy efficiencies that can produce very different savings. Single pane? Triple-pane?
But there’s also one more way to escape the “price black hole” that I’ll share with you in this short blog. Tell a story.
While I don’t have a story about windows, I thought I’d use our CEO’s 12-year-old testimonial for an EchoSign solution to show you how a value-sell might work. It wasn’t his intention to teach their sellers how to do value-selling when he agreed to do the testimonial, but you’ll probably guess that his 6-minute testimonial was played over and over again as a training video on how to do value-selling. It’s just how he thinks…
Take a listen:
If you would like to learn more about using competency data to drive your hiring, training, and coaching efforts, we invite you to watch a recent webinar: How To Implement Data-Driven Sales Enablement. View the webinar for free here: https://www.bakercommunications.com/webinars/How-To-Implement-Data-Driven-Sales-Enablement.html.
