Helping Manufacturers And Distributors Improve Sales Performance And Profitability • 800-867-2778 • Issue No. 47



Robert Nadeau
Managing Principal
How to defend your prices in difficult times

The global economic crisis is on everyone’s mind. Nearly every day brings more troubling news about the turbulence unfolding around us.
 
We would all like to know where our economy is headed. We seek out information that will tell us what to expect next and how to prepare.
 
There are many uncertainties now, but you can be sure of this: your customers will demand lower prices.
 
How you respond to this price pressure will impact your business for years to come.

When your customer asks for a lower price

Imagine a hardworking salesperson named Bill. Bill sells replacement parts for industrial production equipment. His company, a value-added distributor, maintains a large, local parts inventory and provides same-day delivery.
 
His prices are a little higher than some of his competitors. But when his customers’ equipment breaks down, he can quickly get them the parts they need.
 
Most of his customers are hurting from the economic downturn. One morning, Bill’s phone rings -- it’s the purchasing manager for Bill’s second-largest customer.
 
The purchasing manager tells him that a low-cost, out-of-state competitor is aggressively trying to win their business. “We want to keep doing business with you, Bill,” the purchasing manager tells him, “but we need you to match their pricing by giving us a 10 percent discount.”
 
Bill knows that the easiest way to keep this account is to just give them the discount. After all, times are tough, and he needs to do what he can to keep the business.
 
But he also knows that if he lowers his prices, the customer will be very skeptical of any price increases when the economy turns around. Lowering his price will also create a false perception in the customer’s mind about what his products and services are really worth. Bill may be stuck with the discounted price indefinitely, and this could seriously damage his company’s bottom line for years to come.
 
And that might be the best-case scenario. It’s also very possible that an even cheaper competitor will come along, resulting in another phone call from the purchasing manager -- and another price drop.
 
Bill needs to give the purchasing manager an answer. He tells her that he’ll follow up. Then he gets to work on defending his price.

Find the dollars-and-cents value of your products and services

Many salespeople would find themselves in a very tough spot here. For one thing, Bill’s products and the out-of-state competitor’s products are exactly the same. The only difference in the products themselves is the competitor’s lower price tag.
 
Luckily, Bill knows how to sell dollars-and-cents value to his customers. He knows that he is doing far more for his customer than simply selling them products. But he also knows that it’s not going to be enough to just tell the customer about all the “extras” they’re getting and the value-added services he provides.
 
Instead, he’s going to demonstrate this value in dollars and cents. He’s going to show how his products and services, in spite of their higher price, actually save the customer money.
 
How can Bill do this? Is he a math whiz? Hardly -- Bill barely made it through high school algebra!
 
His secret weapon is that he has learned how to calculate dollars-and-cents value for the customer.


Show financial benefits to financial people

The customer already knows what they can save by switching to the competitor.
 
But they do not realize that they are saving much more by using a distributor with a large inventory and same-day delivery.
 
Bill meets with the customer’s plant manager, and together they look at how Bill has saved them money over the past year. Prior to doing business with Bill, the plant had downtime costs totaling $70,000 a year. But by getting them the parts they need when they need them, Bill reduced the plant’s equipment-related downtime by 85 percent -- a yearly savings of $59,500.
 
Armed with these facts, Bill schedules a meeting with the purchasing manager and the plant manager. He opens the meeting by reviewing how much the customer could save with the competitor’s 10 percent discount. Total savings: $15,000 a year.
 
Then he shows how his large local inventory and same-day deliveries are reducing downtime. This information is credible, because it is coming from the customer’s own plant manager (who also happens to be sitting at the table). Total savings: $59,500 a year.
 
To close his presentation, Bill shows that while his competitor may offer slightly lower prices, they cannot provide same-day delivery of needed parts when the customer’s production equipment breaks down. Therefore, the savings the customer gains from Bill are nearly four times what they would save by going to the competitor.
 
Two days later, the purchasing manager calls Bill. They’ve reviewed the numbers, and they’ve decided that Bill will be keeping the account -- at his current pricing. 

Prepare your salespeople with the right training

Can your salespeople do what Bill just did?
 
To succeed in today’s price-sensitive marketplace, salespeople must learn to show customers the dollars-and-cents value of their products and services. This is the best way to defend prices, especially in difficult times. All it takes is the right training.
 
For more information on how salespeople can learn these skills, call 800.867.2778.


Click here to learn more about our training.

About the Industrial Performance Group
The Industrial Performance Group has a proven history of helping manufacturers and distributors increase sales volume and improve profitability. We provide sales training, meeting facilitation, management seminars, consulting and other services, as well as a wealth of information at www.indusperfgrp.com. For more information, call 800.867.2778


Return to Top



©1996-2009 Industrial Performance Group