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Customers Only Care About Price
Conventional wisdom or...
...common misconception?
“I can’t raise prices, the only thing that buyers care about is the price.” That’s the refrain I hear from audience after audience of business leaders today.
Is that really true? Do customers only care about price? Yes, it’s true - because we’ve trained them to focus on price. That happened well before the economy tanked. So let’s not blame the economy for a monster of our own creation.
The reality is that the vast majority of buyers are value buyers. The problem is that we’re not educating them about the value we provide or we’re not really providing the value they desire. Either way we’re causing them become more price conscious.
The typical retort I get is “In this economy buyers are deciding only on price.” Why might that be? Could it be that the vast majority of business owners/CEOs have resorted to heavy discounts to salvage market share? If so, what better question to ask than Dr. Phil’s “How’s that workin’ for ya?”
Not well at all. Most business owners/CEOs report declining sales despite heavy discounting. They see their markets shrinking and they’re afraid to charge higher prices for fear of losing even more sales. What these business leaders fail to realize is that buyers become more value conscious, not more price conscious, in a down economy. What that means is that we, as sellers, have to become even better at communicating value than we were in better times. Here’s an example to illustrate my point.
A steel fabricator for the construction industry said that the discounting had become so severe that some jobs were going for single digit profit margins. I asked him the following questions:
“When your customers choose a low-price competitor, are the materials they get within specifications?” “No,” he answered.
“When the materials are out of spec what are the implications?” “Delays, additional overtime costs, the temptation to make it work.”
“Do those delays cost your customers additional money?” “Yes,” he replied.
“What about the customer’s relationship with his buyer. Do these problems have the potential to create friction with his customer?” “Of course,” he replied.
“In an economy like this, how costly would it be to lose future business from that customer?”
You get the point. A few simple questions can help the buyer see the value of a higher upfront price over the costs, or more importantly, loss of future revenues.
It’s counter-intuitive, but when all of your competitors are discounting heavily in failed attempts to gain business you can distinguish yourself by selling value. Buyers will appreciate the fact that your helping them make an informed decision. They’ll value you even more highly when you show them how to do the same with their customers.
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