Price vs. Value Strategy

Dropping price is that bad habit all sales people fall into from time to time as a way to sell their products and close a deal. Dropping price is a shortcut to building value and in no ways enhances the value of your proposition. Ask yourself, when you drop your price 10%, does it make your product more valuable or just less expensive? When you drop price does it better resolve whatever problems your product or service solves for your customer? A client recently asked me to drop the price of my product $300 and while I am in a position to do so I asked myself these questions and rather than unnecessarily discounting my price I took the time to offer more value and solve the real issues. Let's face it we have all used price to close a deal far too much, myself included. In most cases it is NOT necessary. Does the customer require a 10% discount to afford or pay for your product? Consider the concept that If they can afford 90% of the price they can probably pay the other 10%. If not then they are on an offer they should not be on as they aren't qualified. You are giving price away not because of price but because your buyer is not financially qualified for that offer. The Price Myth as I wrote about in Sell or Be Sold suggest that regardless of how much a buyer talks about price no one actually makes decisions based on price. Your customers never give you money that they think is more valuable than what they are getting. In fact it is completely the opposite. A patient that pays $14,000 for dental implants, $85,000 for the sports car, $1,200 for the purse or $1,000 for a series of chiropractic adjustments believes the service or product received is worth more than than the money given for it. If they did not believe that they would never have given up the money, never! Do you understand this? I just sold my house and during the negotiations I reminded myself that the people buying the house were 1) very qualified and 2) willing to exchange money for my house. This allows me to stay Sold on my proposition and my position in the negotiations and not unnecessarily discount the price of the house. When I realize that this buyer values their money less than they value my house I was able to close at the higher price. Discounting $1million is not what the buyer wanted, even though they were asking for that. No matter how many times they told the real estate agents the price was too high I kept reminding myself of the problems my house was solving for this client which I can not reveal in this article. Bottom line is they wanted my house for reasons much greater than they wanted their money and I knew what that was! To the degree you can make sense of the value proposition demonstrating how your product solves more problems than the money it takes to solve the problem the less you will have to discount your price. This is the Value Price Proposition - When value exceeds price the buyer will give you their price for the value your product or service provides. A 10% or 20% price reduction may make your deal look better for the customer but it is vital to understand that no one gives. Think in terms of a See Saw with price on one side and Value on the other. Value is really how your offer solves their problem. I Instead of lowering price as a way to raise value think about other ways to increase the value and so that your buyer wants your product more than they want their money. The first scenario is where Price is higher than Value and money rolls back toward the price position. Then another scenario is where it is equal and money stays in the middle. The third scenario is where Value goes up and price goes down and money rolls toward the price position. M1 is Price and you are standing next to it - M2 is Value and the customer is looking at it. But what can you add to the equation to make your price more appealing for your prospect? When you take the time to remind yourself of this Price Value Proposition PVP you will find yourself creatively figuring out how to add value rather than unnecessarily discount price. What other things can you offer that increase value other than just reducing price? Your client did not come to save money to solve their problem - keeping their money solves another problem not the one they are interested in. Make a list of ways you can increase value and make your offer more valuable than their money and you will close the deal. Clearly there are those that will only buy when they get the lower price but even those people, when completely sold on you and your product, will be influenced when value exceeds price. One last thing here - before I discount my product I will always attempt to give away something else as a way to add value to the offer. Again, discounting the price or reducing a number does NOT add value. Do YOU really want to improve YOUR sales and closing skills? Source