PRICE: HOW TO DIFFERENTIATE YOUR PRODUCT WHEN IT’S PRICED HIGHER THAN THE MARKET EQUIVALENTS
Your product will not be bought or sold on its price.
Let me say that again: prospects do not use a money criterion when deciding what product to choose….. unless they have no other way of choosing. If two things seem the same, money is the only deciding factor. If the choice is clear, then money is the secondary factor.
Looking at this dispassionately, here’s an analogy: If your beloved grandmother were having a huge celebration for her 90th birthday and wants a black sweater, would you buy her the $30 cotton one or the $180 cashmere one? Of course you’d get the best for her. Price would not be the issue. Yet if you needed a new sweater for a jungle trip, you’d probably take the cheaper sweater.
It’s about the choice criteria, not about the product.
The question then becomes: how do buyers decide to choose your product when they have other – probably less viable, less effective, cheaper – options? And how will they know that your product is worth your price?
Follow me through the logic here: your product was priced high for a reason. Your company has carefully weighed your product value against its manufacturing cost against the competition and placed a fair value on its price tag.
That leaves you with the job of developing a market that is willing to choose your product over other possibilities because of its greater value.
How do you create that when the product appears to be similar to the competition? And when the competition is cheaper?
Here are some market assumptions:
- the competition has lower prices because it offers fewer features.
- on paper, your product seems similar to others that are priced lower.
- features that make your product more expensive may not be what your prospects think they need, making the price inexplicable.
- there will always be buyers who only choose on price (although not nearly as many as you think).
As a result, you probably spend a lot of time ‘educating’ your customer, believing that an educated customer will know why and how to choose you.
But let’s look at the facts. I assume that you have a good, fairly-valued product, and are a professional seller. I also assume that you have learned how to position your product effectively, and educate your customer efficiently.
If your buyers buy soley because you have educated them (and have the appropriate need, obviously), you would close every prospective sale.
But you’re not closing every sale. Why not? It’s easy to blame the price; your prospect might even say that. But it’s not true: they mention price because they don’t know what other criteria to decide with.
By helping your buyers decide how to choose your product, you won’t need to educate them – nor will you hear a money objection. It’s not the price, it’s not the product, it’s not you. It’s their decision criteria. By
teaching your buyers how to include your product in their solution design
while meeting their internal, human, decision criteria, they will not have a
price objection. It's not a money decision. It's a criterial decision.
I have another story to share. When I was living in London I ran a computer support services company. We provided ‘bodies’ – programmers who joined teams as systems analysts, programmers, project managers – and ran user-training programs. Our prices were approximately 50% higher than our nearest competitor, sometimes for the same person. We ostensibly had a similar product.
And, to add insult to injury, I made clients sign a sole-supplier contract, to use only my company for all their needs and they weren’t even allowed to interview the candidates I sent (I sent them the exact right person each time after a very thorough interview in which I discovered not only their specs, but their criteria around how the candidate would fit into the team, or behave professionally in front of colleagues, or be self-starting and creative, etc.).
Why did clients pay 50% more – for the same person they could have gotten from another agency at 50% less? Because I met their criteria for solving their business problem. Anyone who hires a ‘body’ wants that body to not only complete the necessary tasks, but fit in as quickly and as seamlessly as possible. They want the learning curve to be short, and the agency/vendor to take responsibility for any problems that occur at the moment they occur. Price was not their criteria.
To that end, I hired a full time ‘make nice’ guy whose sole job it was to ensure that people were happy (both staff and clients), that all code was up to snuff, and that client-vendor issues, relationship issues, company politics issues, and any other potential problems were handled quickly: clients learned to trust that whatever we handled for them was handled quickly and professionally, and there was always someone they could call - day or night - with any problems they faced. A bonus was that I heard about new sales opportunities from the regular communication we all had. Best of all, I was freed up from fighting fires. All I had to do with my time was to bring in new business.
But I had a problem with new prospects: they did not know how to buy me – especially since I was so much more expensive and made clients sign a sole-supplier contract.
Prospects who would buy solely on price were gun-shy, believing (rightly) that I might charge more. Prospects who couldn’t trust that they would get the right person without an interview were very uncomfortable. What I was suggesting was out of the normal consideration in my field.
My job was to help them make their best decisions (How would you know that any agency could supply the best person for the job every time, and save you the time/trouble of searching and interviewing? What would you need to know about working with my team that would lead you to believe that we could manage your solution and bring in the project on time and on budget?).
Not everyone chose to work with me. I had only 10-15% of the market. But my 24 competitors fought for the rest. I took the ones that were mine, put myself in a quality competition rather than a price competition, took only my share of the market, and I ended up with a 42% net profit year after year.
What does the story say about how buyers buy? Buyers want what works. Buyers want to solve a business problem. If they have a business problem to solve, and your product will help them solve it effectively, and
you can support them in managing the elements that are a part of the impetus
and implementation around change, they will pay what you ask. Note: if they
still only want to buy on price, you must decide if this is the client you
HOW TO HELP BUYERS DECIDE TO BUY YOU
What needs to happen for buyers to recognize that spending more for your product will give them what they want?
Help them decide how they will understand what a business solution will look like and help them design it using your product. Too often, the technical or functional specs are the initial determinate of the type of solution they are seeking. But the specs don’t manage the internal, political and relationship issues they must manage before they can make a change and add something new.
Here are the issues a buyer must decide on, before they choose a solution:
- What are the elements that have maintained their status quo until now? How will they know when it’s time to do something different (This is not an easy answer, since if they truly needed your solution they would have purchased it already.);
- How do they plan on integrating your solution into their current solution/provider/product?
- Who is currently working within the solution space that your product sits in, and how will they know that your solution would be the best one to resolve their problem? How do you know that these are all the people necessary to design a solution that will manage the politics and relationship issues of internal change?
- How will the entire team of decision makers know that they can work with you over time and ensure an easy implementation and appropriate follow through?
- Who in your prospect’s organization were the decision makers that developed the current ‘fix’ that your product would replace, and how do they know that they would agree on a different fix? How are they actually being included now? How will you be able to entertain any degree of control over how this historic/political minefield will be managed over time and brought into the fold?
Your prospects need to ask themselves these questions – with you or without you. And the time it takes them to come up with their own answers is the length of the sales cycle. They have to do it anyway. If they do it with you, you can help lead them through their internal criteria that needs to be managed prior to them making a product choice.
The Buying Facilitation Method® is a sequenced decision facilitation model that leads your prospects through all of the decision criteria they will need to address prior to making a buying decision. It will teach the buyer how to include all of the people, policies, historic decisions, future initiatives, market factors, software issues, management issues, etc. that buyers need to address to ensure that they won’t face massive disruption when the new solution is purchased.
Your job is to help the buyer design a solution that will address all of their criteria – not just the functional criteria that your product seems to manage, but the elements within their buying environment that created and maintain the problem. Your product is merely the solution that will address their problem. And price won’t be an issue once you lead the buyer through their decision criteria and help them design the best solution and choose the best product. Which they will do, without making price the major criteria.
After all, do you want to sell? Or have someone buy?
You might want to learn more about the model by reading Buying Facilitation: the new way to sell that influences and expands decisions (www.buyingfacilitation.com) or by purchasing Buying Facilitation in a Box and get introduced to the process itself.
ABOUT MORGEN FACILITATIONS, INC.
TRAINING OPPORTUNITIES WITH SHARON DREW
Sharon Drew is running a European 3 day Buying Facilitation Method ® training in with Sensa Consulting in Budapest, Hungary, December 4 - 6. Go to NewSalesParadigm.com/register.html to sign up. She is also running a 7 day Buying Facilitation Method® training and trainer-licensing program starting January 22 2007 in New Dehli, India. Details of this program will be available in late November.
Sharon Drew is also running a small public training program in Austin, TX during the week of November 6. Please register/contact at: NewSalesParadigm.com/registertx.html
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Copyright 2006 by Sharon Drew Morgen. All rights