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A Technology risk that the new technology will not be mainstream two or three years from now

A Loyalty risk, in that a customer may feel disloyal if he doesnt give the business to his friend

Interestingly, although customers often say that price was the reason they went with a competitor, in many cases the real reason was some other risk factor.13

PRICE DOESNT EQUAL COST

What could Heather have done differently? She could have recognized that toward the end of the decision process, customers begin to weigh risks other than just price against the benefits and value. Heather should have probed for these risks rather than focusing on price. She could have asked questions such as:

A Are there any particular concerns or issues besides price that might factor into your decision that I havent addressed or answered satisfactorily?

A Are you totally comfortable with our implementation strategy?

A Do you see any particular political barriers that might prevent us from getting the business?

A Does our new technology raise any concerns in your mind regarding its effectiveness or its leading-edge benefits?

To summarize, value is your solutions benefit offset by its total cost, as defined in the eye of the beholder, the customer. Therefore, salespeople who want to create value would do well to (1) investigate and explore their customers needs thoroughly, and (2) ask about potential risks, other than price, later in the sales cycle.

ACTION POINTS

4 Sell value versus total cost, not value versus price. In the value-versus-cost equation, price is a subset of cost. Its important to determine which costs are important to the customer. Ask the customer about perceived risks, extra effort, or hassles if the customer moves ahead with the buy decision.

4 Sell the decision criteria. The salesperson should ask the prospect to define and agree to objective and measurable decision criteria in such areas as service, reputation, expertise, convenience, dependability, quality, image, productivity, responsiveness, flexibility, and relationship. (For a full discussion, see Sales Trap 10, Rank Decision Criteria Relative to Competitors. )

4 Help customers distinguish between price and cost. Todays customers look at total cost, including both direct and indirect costs. The correct way for salespeople to look at price is to see it as one of many factors the customer perceives. Other factors include benefits, savings, and solutions on one side, and hassle, risks, effort, extras, and price on the other.14

SALES TRUTH 12: You re selling value versus perceived total cost.

sales trap 13:

Lower Your Price to Make the Sale

Real estate agents say that value in real estate boils down to location, location, location. Salespeople say value in selling boils down to price, price, price. In reality, its usually not necessary to lower the price. Unfortunately, salespeople arent sure what to do when the customer says, I cant buy because your price is too high. They believe that the price is in fact too high, not that they didnt create enough value, and thereby fall into this sales trap. They lower the price.

Theres a great temptation to lower the price to close the sale, but that leads to sellers losing value. Are salespeople right to lower prices? When customers say its price, is it really? Actually, no. Research has shown that almost two-thirds of the time the customer tells the salesperson that price is the reason for not buying, price is not the compelling reason.15

Heres an example:

Jennifer, an architect for Boards & Lumber, has bid on the job to design the new corporate offices of Thunder Bay Limited, to be located in Vancouver, British Columbia. She is expecting to get the go-ahead from David, the senior vice president of operations at Thunder Bay Limited.

As Jennifer sits down in Davids office, she is anxious but optimistic. But then she hears those dreaded words Jennifer, I have some bad news. We decided to go with Able & Abler as our architectural partner. Its nothing personal, you understand, just business. Their price was 12 percent less than yours, says David.

Jennifer is almost speechless. David, if we were to reduce our price, would you re-evaluate your decision? she asks.