Why You Should Not Cut Your Prices

January 7, 2014 | By | Reply More

price cut

In today’s marketplace, offering discounts seems to be the number one technique people are using to try and get business. Management has bought into the age-old argument that the only reason their salespeople can’t sell more is because their price is too high. It’s time to put this to rest. This argument of cutting prices actually reveals the lack of selling skills by the salespeople who are using it. It also indicates a management team failing to provide necessary strategic planning and direction for the company.

Rarely does a salesperson say that the reason for a lost sale was their inability to uncover the customer’s true needs or to create a sound price/value relationship. Salespeople are by nature confident people, so they automatically assume the loss of a sale couldn’t have anything to do with their own skills. The natural progression in their logic is that “it is management’s fault” or “the price is too high.”

I am not offering specific steps a salesperson can do to alter a customer’s behavior. Rather, I’d like to focus on the steps a salesperson must take in how they view their role in the sales equation. It starts with the salesperson no longer going into a selling situation believing they are all-knowing in terms of how they will handle any situation. Too often they walk into a situation and within 30 seconds believe they’ve summarized how the sales call will go, and that their incredible selling expertise will allow them to close the sale. Here is where I start to laugh, because the solution the salesperson always comes up with is the exact same process they used yesterday. In fact, it’s the same sales strategy they use on nearly every sales call. Then, as if on cue, as soon as the customer starts to show any signs of resistance, the salesperson immediately starts to think the only way to save the sale is by cutting the price.

Behavior modification on the part of the salesperson is the only way to get around this problem. Many people believe if they just give the salesperson some new marketing materials, some really great testimonials, or a proven list of questions they can ask, they will be able to overcome the urge to offer a discount. Yes, I agree that each of these do help, but the problem is they tend to be short-term solutions.

When a salesperson is given new tools like these, many times they will go out and find some success in closing more sales and doing so without offering a discount. Eventually, however, the newness of the sales tool wears off. The salesperson before long is facing a hesitant customer, and they fall back into their old habit of offering a discount.

Long-term behavior modification comes only when the salesperson truly believes in their pricing strategy. This seems obvious, but I have often found that salespeople don’t believe in their company’s pricing strategy. This perception is then reinforced (sometimes subconsciously) by emails from management about the state of the business and the pressure to make a number. A key behavior killer is when management puts out a report detailing sales results. Many companies release reports stating why certain sales did not occur. When companies do this, they encourage (or expect) the salesperson to provide reasons. The salesperson is often going to point to price. Do you see the vicious cycle that occurs? Price cutting becomes the “go to” method to keep bringing in sales (but quantitatively, profit is going down).

In my 10 years of sales consulting, I’ve watched this single report do more to kill the behavior of salespeople than anything else. There is a stigma that prevents the salesperson from admitting that the reason they didn’t get the sale was because of their own doing, not because of price. To eliminate the effect of this stigma and the “price is too high” excuse, management needs to stop compiling reports that require a salesperson to say why they didn’t get a particular sale. There are other far more effective ways to measure the value of a salesperson than by creating a report that encourages a salesperson to not state the truth.

A second matter that requires management’s attention is to stop cramming every cost reduction technique into the laps of the sales team. When the majority of correspondence a salesperson sees from management has to do with how and why they need to cut expenses, it only winds up reinforcing in the minds of the salesperson that they too need to cut the price they’re charging customers.

Yes, this is a challenge – finding ways to hold down expenses without deflating the pricing perception of the sales team. It might be a challenge, but this is what management gets paid to do – to make the tough decisions without impeding the end goal of making quarterly sales and profit numbers. This is no different than a parent/child relationship. There are many times a parent will make a decision that impacts the child but doesn’t tell the child in a way that leaves the child feeling upset or scared. For example, a parent tells their child to fasten their seat belt while in the car. They do this to protect the child, but they don’t go into detail about all of the things that could occur to them should there be in an accident. An approach like that would leave the child feeling scared about riding in the car. When we apply this same concept to the environment of sales, I think we would all agree that management doesn’t want their sales team “scared.” Fear is not the greatest motivator for long-term positive results.

A third behavior change is one the salesperson must do themselves. It starts with removing from their thought process that offering a discount is even an option. If a salesperson knows a discount is an option, they’ll take it. I call this the “last-dollar principal,” which says it’s amazing how fast your money will go until you suddenly find yourself down to your last dollar. When you have only one dollar left, it’s amazing how far you can stretch it. You could have handled your money more frugally when you had more, but because you had more money at the time, you didn’t feel the same pressure to save and protect it. When you get down to your last dollar, you sense that pressure more acutely.

Management can help their salespeople steer clear of discounting price by not allowing salespeople to have control over price discounting. In my years of sales consulting, I’ve worked with many companies that have taken away from the field all pricing flexibility. After the sales force gets over their whining about the loss of control and their proclamations that the world will end, it’s amazing what happens to the bottom-line. In each case, the bottom-line profit has gone up. Many times profit has increased not because of more sales, but because the sales that are made are more profitable (no price discounting has occurred).

Finally, a salesperson needs to believe in their pricing as much as they believe in their selling skills. Management and a sales team need to work together to continually reinforce why their pricing is correct. It’s no different than a coach and team working together to achieve the highest potential possible. Discounting is for losers, and there’s not one person out there in sales or management who wants to be a loser. We all want to be winners, and that means we are proud of what we provide our customers. In the end, it’s not the price that matters. The quality of the salesperson will determine the outcome.

Recommended Books on Why You Should Not Cut Your Prices:

 Mark Hunter, “The Sales Hunter”, is a sales expert who speaks to thousands each year on how to increase their sales profitability. For more information, to receive a free weekly email sales tip or to read his Sales Motivation Blog (http://www.thesaleshunter.com/blog/), visit http://www.TheSalesHunter.com

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Category: Sales

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