The High Price of Loyalty
What do you do when your customer demands a price reduction?
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The High Price of Loyalty
Roger, an Account Manager who works in Florida, sent us this message
I have a customer who has been with me for several years. Me and my company have provided them with excellent products and service and our customer satisfaction scores back that up. Recently my buyer came to me and said if we don’t reduce our prices he is going to go to my competitor. I don’t see how I can go any lower and losing this customer would really hurt my income. Any ideas?
Roger, in today’s economy, businesses are constantly looking for any and every way to cut costs. In many cases executives issue blanket orders to their buyers and purchasing departments to reduce expenses by some arbitrary number like 20%. Unfortunately, most of the time, these rash expense cutting measures end up costing businesses much more in the long run. But salespeople don’t help themselves out much either. When the cost reduction call comes in, many salespeople panic. Their plan, bonus, and career pass before their eyes. The first thought that comes to mind is where they can reduce their price.
In fact, rather than consider any other way to meet the buyer’s demands, they think solely about price. They never consider that the buyer was given instructions to reduce costs by 20% and price is just one part of the complex cost equation. I am a visual person so I like to create ways to show how total program cost impacts to my customers. I believe that, as Sales Professionals, our job is to educate our customers on the difference in “the PRICE” of our products the “total COST” of the program. You must quantify and show these differences to your customer so you can justify the prices you are charging.
You must demonstrate that while your price per product may seem slightly higher than your competitor, the TOTAL COST of the program is less, making your products and services a higher value.
Start first with listing the unique benefits of your products and services for this customer. What solutions do you provide, and what financial impact does that make. Make sure not to miss the impacts of soft costs that might otherwise not be taken into consideration. For example, if you provide an easy to use, closed loop customer service process, this may save your customer time when they have a problem or a question. Time is money and should be considered in the total cost equation. Next, gather testimonials from the users of your product or service within the account. It is always amazing to see how disconnected buyers are from what is happening in the real world. Be sure to use internal coaches to back up your message to the buyer. Likewise, use surveys, customer service logs, documented process improvements, sustainability, and waste reduction, to demonstrate and reinforce your great track record.
Finally, make it personal. After showing the value you bring to his business, and proving your past performance, tell the buyer the impact it will have on you personally if he buys from your competitor. I am a huge believer in letting customers know the impact they make on our lives – the good and the bad. This makes the buying decision personal, as it certainly is for you.
It also shows the customer that you care about their business, which most of the time makes it personal for them. Once you have completed this process with your buyer it is rare that you won’t find them moving into your court. Because of that the conversation about reducing costs changes from adversarial to consultative. Perhaps there is nothing you can do to reduce costs and in that case the buyer will often move on to easier pickings. However, in many cases you can offer solutions that include process improvement, alternative products, inventory management efficiencies, waste reduction, or other opportunities to reduce overall costs without impacting price. Most sales people are surprised at how easy this is and how receptive buyers are to their suggestions.
In the end, if you do all this and your customer still makes price the only issue, take solace in the fact that you have made it very difficult for the new vendor to live up to your performance record. Chances are in 3 to 6 months, if you maintain your relationship, your customer will have had time to see that the grass is not always greener and return to you more loyal than ever.
This is Jeb Blount, the Sales Guy. You can subscribe on iTunes and on QuickandDirtyTips.com
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