B2B Sales: I Want a Better Price

hi guys ian johnson from drive to success calm today I want to talk to you guys about a topic that I covered I think it was a year or two ago about when a customer uses price in order to force salespeople to capitulate and this is this is a statement that you know customers use all the time and it immediately disarms salespeople that makes them nervous puts them on the defensive and it's that statement of your price is too high and I covered this in another video but I don't think I'm really covered as well as I should have so I wanted to revisit that today and the reason why I wanted to cover this today is because when a customer expresses concern about your price when they start off a conversation with you know your price is way too high first of all accept the fact that in most cases customers are going to claim that your price is too high and the reason why they're doing that is to gain control of the buying process okay but in the end their concern about price is really a concern rooted in costs what they're basically saying is your higher price for that product may be justified but your higher price is going to increase my costs because I haven't seen any reason to justify buying from you at that price I haven't seen any reason to say that it's worth that price because at this point in time you haven't shown them the features and benefits so I what I want to do today is basically give you guys some strategies on how you can move your customer away from being concerned about price and on to talking about cost and then you can move it how to how your product reduces those costs by longevity and increased yield costs produce benefits better quality and these type of things so we want to move the customer away from a concern about price and on to cost so the first rule we're just going to say here is that a price concern okay is a cost concern okay your customers concerned about your price is rooted in their cost going up and you know if you're a business I wondered you know right off the bat nobody wants to see their cost going up nobody wants to see their cost going up in fact I've worked for several companies where we've never made a decision to move forward on a higher priced product or raw material unless there was definitive benefits in terms of savings and money and all these other things so your customer in essence he's concerned about price or she is concerned about price but invariably that concern about cost going up so it's very bit easier to answer that you can say mr. customer I understand your concern about price but is it really a concern about price or are you really saying that you're more concerned about costs that our higher price is going to increase your costs they're always going to say yes they're gonna say yes your higher price is gonna increase increase my cost and then you can follow it up with well what if I were to show you how this product while it's a little bit more expensive is actually going to decrease your cost in the long run would that be interesting to you so you're taking this price concern and moving it over to a cost concern and then focusing the discussion about how your product can reduce those costs so we're going to go over a couple of strategies today that you can use for that okay number one we're going to talk about cost per use okay or longevity now if your product lasts longer than your competition's then you need to basically define a dollar value in terms of that savings okay you need to be able to say to the customer yes our product is a little bit more expensive that's gonna last twice as long it's gonna last forty percent longer and that 40% increase in life typically equates to this kind of savings for our customers okay and you need to be able to define what those savings are so that your customer is no longer concerned with the price of the product but he's more in tune or more aware of how the your product can actually reduce his costs okay so this would be an example of how you can reduce the costs for the customer by defining what this forty percent increase in life in terms of longevity or cost per use means to the customer okay yes it's a higher price but we're gonna we're gonna we're gonna extend the life of this product by 40 percent okay that's so basically that's the first thing the second thing I want you guys to think about is the quality of your product okay now the best way to define the quality of the product let's say someone buys 1,000 units from somebody okay and is his price per unit is $10 per unit all right so he spends $10,000 all of a sudden he gets to the last 50 units in the last period fifty units are defective well this price is no longer ten dollars it's now ten thousand dollars divided by nine hundred and fifty so which it means as price is now ten dollars and fifty two cents this is a perfect example of how quality issues it's a great price maybe you're offering ten twenty five maybe you're offering ten thirty maybe you're offering ten forty okay so you got a higher price and he's really interested in that ten dollar price but if you know that your competition continually falls short with defective product and failure rates well then help your customer understand what their actual costs are and in this example you know yeah he's paying tens at ten dollars per unit he places in order for ten thousand dollars he gets the part all sudden fifty and it affected well his cost has gone up because it's now ten thousand units divided by nine hundred and fifty good units means his cost is now ten fifty two so this is a perfect example of how quality equates to a higher cost okay in the sense that your customers failure on quality let's let T naught to your customers or your competition's failure on quality led to your customer paying a higher price at the end of it all okay this is not a cost that your customer can see right off the bat alright so your competition is offering ten dollars and you're offering ten dollars and twenty-five cents but if you don't have the ability to define this example to your customer that he's never gonna know the impact of this 1052 when he finds out that 50 units are defective okay so just keep that in mind cost per use you talked about quality and then we're going to talk about increasing yield let's say you're you're selling material to manufacture okay so three increase yield okay now let's say you're selling a powder a resin or some kind of adhesive that allows most of your customers to achieve an unheard-of 98% yield in terms of manufacturing which means 98 percent of their product is good every time they run your material 98 percent of their other of the product that comes out as good with only a 2% failure rate but the industry standard is 95% okay so in that case your pricing price is higher but your cost to manufacture with your material are lower all right so what you need to focus on is what does that 3% mean to the customer in terms of savings yes mr. customer I understand our price is more more expensive however most of our customers but 90% of it our customers achieve 98% yield the industry standard is 95 that's an increase of 3% that increase of 3% in terms of yield means and average savings of such-and-such over a day a week a month okay so just basically justify exactly how you're doing then another thing you can do is cost of freight right okay if you have a local warehouse close to your customer all right okay or if you can offer a VMI agreement a vendor managed inventory like a blanket order a Kanban agreement okay to the extent where you say yeah we're a little bit more expensive but you know what will reduce your cost of inventory so in that case the price is higher but you're going to lower your customers cost of inventory by holding inventory for them by shipping to their location at the moment they need it by holding it until they need it so you're reducing their cost of inventory in terms of financing cost of damage and obsolescence because none of those things happen as long as you're holding the inventory for the customer so look at the VMI agreements costs of Frank local warehouses maybe you can offer a duty delivery paid okay and in that case you're saving your customer money you're reducing their cost of the duties and any taxes okay brokerage so understand you may have a higher price but lower the cost okay and I think the fifth thing that you can do is to focus on terms prepayment options these type of things or even use loss leader pricing strategy okay you know the Xbox ps2 ps3 and and the for well the companies that sell these consoles don't make any money on okay they sell those consoles at a loss because they know they can make money on the on the software and that's their whole focus every one of these sales is a loss so get your customer away from this price concern and on to a discussion about how your products can reduce their cost so that's it this is a business sales handling those times when the customer declares that they want a better price Ian Johnson drive success calm bye bye

2 thoughts on “B2B Sales: I Want a Better Price

  1. Great video ! I'm sharing on social media ! What about when all competitors offers same products specs almost equal quality ? How to justify high price. I'm into selling lights for a big MNC electrical company – the biggest challenge comes to us are pricing. No one wants to listen about products specs ..

  2. Luckily for marketers, customers' sense of a fair price is subject to manipulation. There's a whole branch of literature on this subject. Booth professor, Richard Thaler's work is highly recommended.

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