From SalesDog.com:
Is Your Customer Giving You the Price Squeeze?
by Kim Duke
Use this advice to stand up to price-squeezing customers.
A nasty little insecure habit I see in many business owners and salespeople is their fear of losing a deal. So, how does this habit show up?
It's simple.
You have a customer or potential customer who asks for a proposal from you. By the way, you really want the deal and you'd love to work with this customer. In fact, you want it so bad you can taste it. (And you're already buying the new car with the commissions that you're going to make!)
So, you provide the proposal, quote your rate and then something happens that honestly makes you quiver with fear.
It's when the customer says, "Company X said it could do the same thing for less money. Can you match those rates?"
Your vanishing commissions flash before your eyes. You see your new car drive off into the sunset without you and your revenue projections plummeting and crashing into the ground.
In a heartbeat you say, "Yes, I can," and you proceed to drop your rates as quickly as if you were holding a hot potato!
Handling a price-squeezing customer
Years ago, I sold advertising to a local high-end furniture store. The owner was a likeable guy and he was very proud of his expensive furniture line. He was also a notorious negotiator and had a reputation for bringing salespeople to their knees.
He wanted to do television advertising with me and he asked for a two-month airtime proposal and he wanted me to produce a new 30-second commercial for him.
No problem, we had worked with each other before. I knew what he liked and we had rapport.
The day I presented the proposal, we sat on some fabulous leather furniture. We discussed how it would benefit him and then he wrinkled his brow, and said:
"Kim, this looks wonderful but the other TV station has given me a proposal that's much cheaper. I need you to throw in the commercial production for free in order for me to go with you."
I paused for a moment, looked at him, smiled, and said, "Bill, may I ask you a question?" He replied, "Sure."
I said, "If we take the price of the proposal off the table, which proposal meets your needs the best and will bring you the most customers?"
He replied, "Yours does. However, they are cheaper and they will throw the commercial in for free."
My gut was telling me something.
I then asked him, "Are your furniture prices artificially inflated or are you providing the best offer to your customers immediately?"
He replied sternly, "My furniture is top quality and I don't negotiate. We offer a fair price right away to our customers."
I then asked, "So if I were to come in today and ask you to give me this gorgeous leather chair for free because I was willing to buy the leather sofa––would you do it?"
He said, "Absolutely not."
I asked, "Why?"
He looked at me intensely and said, "That's one of the finest Italian leather chairs. It's worth every cent."
I looked at him and shrugged. "Bill, I'm a business person just like you. I offer a fair price immediately to my customer. What we're offering you can't receive from the other TV station. The production of the television commercial is not included in my price. So my proposal rate stands firm."
Bill looked at me and didn't say a word. (I think he was in shock!)
Then he said, "I have a confession to make. The other station brought back a second, lower proposal when they knew they were competing against you. So I guess they were planning on overcharging me the first time weren't they?"
No words needed to be said.
He signed a yearlong deal with me and I totally shut out my competitor.
Are you failing the squeeze test?
Listen. Do you know why customers buy on price?
They don't see any noticeable difference between you and your competitor. So, they start squeezing your proposal and the competitor's proposal just like they were standing in the grocery store squeezing oranges.
This is also reinforced when you drop your prices after being squeezed. In fact, your customer may even feel that you falsely advertised to him.
You've basically told your customer that:
- Your initial proposal was a rip-off
- You're desperate for his business
- You aren't to be trusted in the future
- Your first proposal means nothing
So what should you do in this type of situation? Follow these easy steps:
- Understand the hot buttons of what your customer is looking for and establish his budget ahead of time, if possible. (Don't be bringing in the Package A, B or C plan––that's for wimps.)
- Position your company with something unique that will actually mean something to your customer.
- If you know your rates are fair, then don't fold when faced with the price squeeze.
If you drop your rates to win the deal, you'll actually resent your customer because your profit margins have been slashed. This isn't exactly going to give you the warm fuzzies and you'll end up providing second-rate customer service and an inferior product.
If the deal is worth negotiating, then make sure your customer gives up something in order to receive a discounted rate. Or else he has to make a commitment to something bigger or longer term.
You also have one last choice (which happens to be my favorite). I stick with my rate (which I know is fair), I tell my customer why my rate is higher than my competitor's price and then I tell him how I can solve his problem in a unique way.
And then? I also show him that I'm willing to walk away. Remember in the world of selling, walking away shows confidence, honesty and that you have a backbone.
You'll lose a few customers for sure, usually the ones who weren't going to be good customers for you in the long run. However, you'll end up attracting a much higher level of customer (and more of them) in the end and no one will feel like he's been in the juicer.
Sales Diva, Kim Duke of The Sales Divas helps women biz owners and entrepreneurs attract amazing clients and customers, effortlessly! To learn more about increasing YOUR sales - and to read her FREE how-to-articles, visit her website www.SalesDivas.com.
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