5 Ways to Keep Prospects from Picking Your Pocket
As I moved from sales into management, I also moved from the sell side to the buy side of the proverbial “street.” And as a buyer I became involved in a strange ritual. At the end of each month my phone would ring incessantly as sales reps desperate for business eagerly tried to outdo each other offering me discounts.Usually price had little or nothing to do with the fact that I was not ready to make a decision, but since these reps never bothered to ask, I felt no obligation to tell them. Instead I played along and usually negotiated an even lower price than they initially offered before finally telling them that the timing was just not right. Each month I would repeat the process with one critical distinction: the negotiation would start at the discounted price from the month before. I often engaged in this exercise several times, and by the time negotiations began in earnest a repeatedly discounted price had magically been transformed into a retail price primed and ready for yet one last round of discounting.
What I did was “shop” these reps, and letting prospects shop us is a critical, even fatal, mistake that all too many sales reps make. But remember these five things and you will never get shopped.
1) Never Sell Price. Price is seldom if ever the real reason why the prospect is not buying. Some research suggests that price falls as low as seventh on the list of the ten biggest reasons why clients don’t buy. (See my article, 3 Keys to Competing, for the primary reason.) Repeatedly discounting often has a negative impact: It cheapens the product in a prospect’s eyes and makes the rep and his company appear desperate. If a salesman offered you a new Lamborghini for a $100 would you be more likely or less likely to buy it?
2) Remember the price/value relationship. In my own company our products were always the highest priced in our space. Not just because they were worth the money, but because we realized that buyers associate higher prices with higher value. For example, I know nothing about wine, so when I buy wine for a dinner party I determine the value solely on price. I assume that the higher the price the higher the quality even though the marketer in me knows that this is not always the case.
3) Only Offer Discounts to Decision Makers. One of the oldest tricks is having a non-decision maker do the shopping. When the deal fails to close both parties have plausible deniability for misleading the sales rep. The messenger never had the authority, and the decision maker never actually said that he would do the deal at the right price.
4) Wherever You End Today is Where You Begin Tomorrow. Most sales cycles are long. If you allow yourself to be drawn into repeated price negotiations you will find that every time price comes up the buyer will start at the discounted price you offered before. A discounted price is like a joke: It only works the first time around.
5) What Have You Done for Me Lately? Discounting has its place, but only discount to close a deal. One value added feature every buyer wants from a deal is to feel special. The problem with early discounting is that when it comes time to close you may have long ago offered your best price leaving the client feeling cheated. Only talk discounts when the prospect has specifically promised that the only thing standing between him and a deal is price.
After being shopped and burned several times early in my career, I developed a strategy to make sure it would never happen again. Early in the sales cycle when price came up I would quote rate card prices including standard volume discounts. Hearing this, my prospect would invariably say,
“Yes, but we’re X corporation. What is our price?”
“Wow,” I would reply, “You like to move fast. Correct me if I’m wrong, but what I think you’re saying is that if I am willing to sharpen up my pencil, you’re ready to whip out your check book. Is that what I’m hearing?”
Of course at this point the prospect would quickly back off by citing any number of obstacles yet to be overcome.
“I understand completely,” I would say, “if my product is not a great fit for your organization you wouldn’t want it even if it was free. Let’s make sure we’ve got a fit first, but I promise, when you’re ready to pull out your checkbook I’ll offer a price that will make you happy.”
This strategy effectively took price off the table and allowed me and my prospect to focus on uncovering and addressing the real objections holding up the deal. Only when every one of these objections had been overcome and the prospect had clearly stated that the only thing standing between us was price would I come down off rate card.
Nothing is more demoralizing to a salesman, injurious to a commission check, and damaging to a company’s profit margins than being shopped. As someone who knows how it feels, there is something particularly painful about offering a steep discount that doesn’t result in a sale. However, this all too frequent occurrence is also something that is easy to fix. Just remember to get a commitment to close before offering a discount.
Want more sales secrets? Find posts like this featured on my Forbes.com blog.