Price: How Personal Buying Habits
Affect the Sales Process
By
Steve Parry, Sales Productivity Consultants
August 2004 - BEK Best Practices Newsletter
In an industry where margins once were deliciously
fat, a sales person was overheard to say to his frustrated
president, "Of course margins have slipped. The customer
keeps beating us up on price!"
Sound familiar? It is not unusual for a sales
person to blame the customer for price erosion, pleading
to the sales manager to give up another 5% to close the
deal. But why does this happen? Should the blame be on the
customer or the sales person? Let's look at a typical sales
situation and decide.
How Not to Sell
a Widget
A potential customer meets a salesperson to talk about widgets.
The salesperson tells the customer all the good things the
widget will do and about the solid history of the company.
It is a good widget, seems durable, and the company will
back it with good service. Of course, the sales person is
doing his best to convince the customer it is better than
any other widget on the market.
But the customer has budget on his mind. He
asks the price of the widget. Because the salesperson has
not asked about the budget in advance, the $1000 price comes
as a surprise. So the customer says, "Boy, $1000 seems high
for that widget. Can you do better than that?"
The sales person freezes, about to be caught
in a trap of his own making. What is going on in the sales
person's mind?
Personal Buying
Habits Do Affect the Sales Process
At this point, we need to know a little more about our salesperson.
He is a savvy buyer. When he buys an expensive product,
which for him is $1000 or higher, he always shops around.
He visits at least two stores, checks out the Internet,
researches Consumer Reports, and questions his friends.
He always gets the best deal!
When the customer asks him to reduce the price,
he thinks: "Gee, that makes sense. That's what I would say,
if I were buying an expensive product. I don't want him
shopping my competition."
Our salesperson says: "If I could take 5%
off the price, would you buy today?"
Did the sales person get beat up on price,
or did he fold?
Weaknesses in
Selling: It's Close to Home
We need to look deeper than just blaming the salesperson.
He's doing his best, but his own buying habits and beliefs
about money are getting in his way, and he doesn't even
know it! Unconsciously, our sales person just exhibited
a major weakness that often rears up in the sales process,
causing the sales cycle to lengthen, closing percentage
to drop, and margins to decrease.
The Non-supportive
Buy Cycle
The "buy cycle" is the process by which individuals make
personal purchases. Salespeople will tolerate a customer's
buy cycle behavior when it is similar to their own because
it is familiar. If a salesperson has a weak personal buy
cycle, it makes him more vulnerable to stalls, put offs,
lies, excuses, sob stories, and other forms of "think-it-overs."
In addition, if the product or service's price
is outside of a sales person's personal buying comfort zone,
he will agree (subconsciously) with the customer that the
price is too high. He will either allow them to shop or
will drop their price. Procrastinators, price shoppers,
comparison shoppers, researchers, and price objectors can
have their way with this type of salesperson, including
ours.
As we saw earlier, our salesperson's buy cycle
for an expensive item -- in the price range of his widget
-- includes lots of research and talking with friends. Because
our salesperson is uncomfortable spending $1,000 without
major research and rationalization, he expects the same
from his customer. So when the customer asks for a lower
price, the salesperson thinks: "Gee, that makes sense. That's
what I'd do."
Overcoming Price
Issues
There are a couple of solutions to these problems. First,
you need to change the way your salespeople make a purchase.
When their buy cycles support the selling process, the stalls
and put-offs that used to derail their process will become
momentary delays in a sales call.
Second, your sales people need to help the
customer discover their compelling need for the product
or service. It doesn't matter how great the widget is if
the customer has no strong commitment to buy one! If it
is just a nice thing to have, then it isn't worth much money.
In addition, your sales people need to uncover how much
budget the customer has to spend. There's no need to talk
about how great the widget is, if it's out of the price
range to begin with.
Understanding these elements up front will
shorten your sales cycle, increase your closing percentage
and raise your margins.
Steve Parry is President of Sales Productivity
Consultants, Inc., a sales force development firm specializing
in improving revenue generation for established and growing
companies. Steve can be reached at 303-568-1500 or email
Steve@salesproductivity.us.
Next month's topic:
Product Planning- Overcoming the Controversies
For more information, contact BEK Enterprises
at:
Web: www.bekteam.com
E-mail:
Phone: 720-304-3300
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