What If You Couldn’t Discount?
I always worry starting a post with, “When I first started selling…..” I fear that I sound like one of those grizzled veterans living in the past.
But when I first started selling, the company did something somewhat unique. The price was the price—period, exclamation point. The quantity purchased didn’t matter, the unit price was the same. It didn’t matter if you were the largest most important customer or the smallest, the price was the same.
To make things worse, our products, while very good, seldom had the latest greatest technology, we were also usually much more expensive than our competitors.
Some of you would look at those daunting circumstances and say, “How could you possibly sell?” It was challenging, but I couldn’t go to my management complaining, “We need to give them a discount,” or “We are just too expensive.” They were both unsympathetic and couldn’t do anything about it.
If I was to be successful, I had to figure it out. I had to learn how to sell without depending on pricing to win the day.
Some things I learned, pricing had little to do with the total costs our customers incurred in implementing solutions. The price was an element, but there were implementation costs, ongoing support costs, all sorts of things. I started to focus on TCO, total cost of ownership, recognizing, that even if I could do some discounting, often these had a relatively small impact on TCO.
I learned to look at risk. The company I worked for did as much as it could to minimize the risks of project success for the customers. Sometimes our competition had a far lower price, but they didn’t have the same track record of helping customers be successful, often project would fail or be delivered much later than expected. As a result, there was significant value in our solutions because there was very little risk in implementation.
Sometimes it was still tough, I had a good handle on the costs side of the challenge, but sometimes that was not enough. I started learning more about my customers’ businesses, I looked an their strategies, the performance objectives, and things critical to their growth and success. After all, my customers weren’t buying stuff just to do projects, they were buying stuff to achieve their objectives. Soon I started building business cases based on improved productivity, improved quality/customer retention, accelerating revenue growth, gaining share in their markets, improving their ability to differentiate their offerings for their customers. Soon, I started to learn that whatever I might have been able to offer in discounts (if I could have), were absolutely lost when you started looking at the business value.
Sometimes, my competitors would say, “We can do that too, but at a cheaper price.” Often, my customers would say, “But you aren’t the person helping us understand this and building the case.” But sometimes, the customer would come to me, saying, “They are cheaper….” Then I had to stretch myself and my team even further, I had to really understand the differentiation of our solutions, the difference in risks, and all sorts of things. I knew I was fixed in pricing, but I needed to narrow the gap in perception between competition and others.
Then there was a whole bunch of stuff we leveraged, sometimes a little heavy handed, to justify the difference. Things like the long relationships, the continued ideas to enhance their business, the resources to help solve their problems, the fact that we genuinely cared. But we got the customer to actually value us and our involvement in their company. They wanted us working with them. They knew that was part of the reason for our higher prices, but they found great value in our collaboration.
It was never one thing that caused us to win, it was always a combination of things. On reflecting, I don’t ever recall losing because of price. I lost because competition had a better solution, perhaps my competitors did a better job understanding the customer than I, perhaps they could offer capabilities we couldn’t offer. Sometimes, I was just outsold. But I never recall losing because of price.
Some of you might say, “Well Dave, the good old days are long gone, buyers are more demanding, things are different.”
I’m not sure that buyers are more demanding, the one’s I faced early in my career always sought the best deal possible, they wanted to maximize the return of their investments. They were sharp and savvy business people. Buyers are the same way today.
In the “old days,” buyers focused on overall business value, they do so today, as well. Though sometimes they slip and we have to teach them about total business value and not price
Back then, they wanted sales people to come to them with ideas about their businesses. Sure they were also interested in learning about products, since the internet was less mature, we still taught the about the product, but what justified my higher prices was they value my team and me helping them grow their businesses, becoming more effective and efficient. Customers value the same stuff today.
When I started selling, I had no choice. Discounting or taking pricing actions was not an alternative. I had to figure out how to win without discounting.
Today, there are many companies that actually have similar practices. Some don’t discount–at least current product. Try getting a deal for Apple products. Some discount only as a very last resort–and the discounting decision is made by very senior sales management.
But today, I see far too many sales people not leveraging everything they can to keep their normal price. Or worse, in their very first prospecting call, they say, “…..of course we can always look at discounting.”
It doesn’t take a lot of talent to win at the lowest price. You don’t have to learn the customer’s business, you don’t have to know much about the alternatives, you don’t have to create any value. All you have to do is be the lowest price.
It’s a difficult strategy for our companies to maintain—always winning on price, margins will continue to erode, ultimately many are driven out of business.
In many ways we are also cheating our customers. By competing on lower price, we can’t afford to create the value, we can’t help them understand and grow their business, we can’t help them manage the risk, we can’t help them be successful. Customers want these things! They tell us over and over by challenging us to create great value with them.
Even though you might be able to discount. Use that rarely and cautiously. Sell as if you could never discount.
You will be a far better sales person, you will win more, you will create greater value with your customer.
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