Great service or terrific quality won't get you anywhere in a price negotiation

Great service or terrific quality won’t get you anywhere in a price negotiation

A constant problem in business today is being able to justify a price and not have to discount it to stay away from a race to the bottom. Ultimately, it’s all about proving the value in what you’re offering. The challenge is to come up with value that really is valuable to the customer.

Great product quality or exceptional customer service

So many times people tell me they want to charge premium prices because they have ‘great product quality’ or ‘exceptional customer service’. That sounds good, but sorry, it’s just not going to work. The problem is the great quality and exceptional service are concepts – not tangible facts. Nobody would argue they are nice to have, but described in those terms, they certainly aren’t essential. (And therefore by extension, not worth paying a premium for).

Value is only value in the eyes of the customer

Value only has value in the eyes of the customer. Here is an example I came across just this week. A printing company is offering a three year warranty on the promotional banners it is printing, and they believe that justifies a price premium. But when you ask the customers how they use the banners, typically they have a life of maximum three months before the next promotion comes along and renders the old banners outdated and on their way to landfill. So what value does a three year warranty have to the customer?

It’s a great example of value being in the mind of the supplier, not the customer. It easy to come up with an internal perception of value, much harder to come up with the customer perception. But if you want to avoid having to discount, that is what you have to do.

So how do you find out what your customers value, and then how can you build that into what you do day-by-day to enable you to both sell more and avoid the discounting trap? It sounds simple, but all you have to do is ask them.

People want to solve problems

Keep in mind that generally people buy things to solve problems they have – it’s a proven fact people are three times more likely to buy to solve a problem rather than to gain a benefit. So the obvious question is, what is the problem your customers have that your products and services are a solution for? And an obvious second question to that becomes is there any part of the customer’s problem your products and services don’t solve? That is a very productive area to look for ways of adding to the scope of the products and services you sell to increase their value to your customers – and of course you.

Another way of thinking about this is if you can attach a financial impact to the problem the customer has, you can use that amount to determine the value and therefore the price your solution will command in the customer’s mind.

Cost price and sell price are NOT linked

Many businesses make the mistake of assuming their cost price and sell price are in some way linked. They are not. The only thing your sell price is linked to is the value of the products and services to the customer.

Being able to demonstrate a strong link between the customer’s problem, how your products and services address the problem, and the benefits of their use is a sure fire way to be able to justify your price and have great answers to the “I want a discount” question.

Yes it takes a bit more work than adding 30% to your cost price and then telling everybody about your excellent customer service. But the work is justified, simply because it works. It will help you sell more, and it will help you justify the pricing and margins your business deserves.

Here’s what to do next

If you’re interested in how this could help you, or feel I may be able to help you with some of the challenges you’re facing, please get in touch for an informal discussion.

There’s no commitment, we’ll just discuss your situation to see if working together might be a good fit.  Contact me now.

Best regards

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