We set ourselves up for failure, we set our customers up for failure when we focus on the price–even the costs of our products and services.
Sadly, most selling and much buying focuses on the wrong thing, “What’s the price?” We train our customers to focus on price, by the way we sell. Early in their buying process, we bring up our price, “We are cheaper than the competition….” “We are willing to discount….” “If you buy by the end of the quarter….”
As a result of the way we sell, we’ve changed the way customer buy. We’ve shifted their focus from business outcomes, to the cheapest price.
We lose, our customers lose!
Our customers shouldn’t be buying on price, but we keep driving the conversation, often from the very first encounter, to focus on price.
Sometimes, we compete on TCO–Total Cost Of Ownership. We recognize, that it’s not just what it costs to buy the product, but also the costs to operate the product.
For example, our product may be more expensive, based on the price, but we might make the argument, that over the life cycle of the customer using the product the total spending is less than with all the alternatives.
We look at the cost of the product, training, support, maintenance, upgrades. The customer may have to buy other things to support their usage of a product. For example, software (cloud or otherwise) isn’t very useful without a device.
We get the customer to look at Total Cost of Ownership, TCO. We get the customer to look at the overall TCO, not just the price of the product.
For those whose price is higher than the alternatives, TCO is a technique we use to justify our higher price. “Yes, our price is higher, but over the life cycle of your use of our product, you will spend much less than what you will spend with the competition!”
Too often, sales people don’t look at TCO. Usually, it’s only when they know their price is more than competition, so they try to reframe it looking over the lifecycle.
It is an important consideration, it is helpful for the customer to understand this, but it’s still wrong for the customer.
Selling on price or TCO keeps the focus on us, our product, and the competition. Yet we create the greatest value by focusing on the customer!
The customer is not–or should not be buying–because of our price! They should not be buying because of our TCO! Customers buy because of the outcomes we enable them to achieve.
I’ll repeat that. Customers don’t buy—and we shouldn’t let them buy—because of the cost! They should buy because of the outcomes our solutions create.
It’s our job to help the customer understand this. We create the greatest value with our customers by helping them focus on the business outcomes and how to achieve them.
We need to help the customer understand the total business case, the change/risk management issues critical to achieving the outcomes. We must help the customer develop and execute a plan to achieve their business goals.
The magic of this is that it moves the focus from us, to the customer and their success—which is all they care about. And in doing this, we demonstrate how they achieve that success through us.
Don’t let your customers buy on price!
Don’t let your customer buy on TCO!
Focus on the total business results, the business outcomes we create with our customers.
Focus on the customer success!
Well, there will still always be that type of customers though
Actually, I don’t buy that. That customer exists because we have trained them to behave that way. If you are talking to a customer that only cares about price, the probability is you are talking to the wrong buyer. Get to the buyer that cares about business results.
The cheapest product, is very expensive if it doesn’t produce the results and outcomes expected.
Hi Dave,
I totally agree. The price is like the virus. Always there.
Do you have practical tips to change it ?
The price is like a virus because we, sales, keep focusing on that. Change the conversation. Focus on business outcomes and results. In most cases, the price becomes irrelevant to the business outcome.
As an example, I was closing on a consulting project. It was going to be $1.5M. The customer, for some reason, thought he deserved a $300K discount. I responded, “Every month you wait on this project you are losing $46M in revenue. I can wait.”
I closed at $1.5M in the next 5 minutes. The customer said, “I’m being silly, aren’t I.”
I knew the business outcomes our solution would enable. Price became absolutely irrelevant.
This is pre-internet thinking (at least in my business of equipment sales) Many tens of thousands of marketing dollars wasted has taught me that. Today’s shopper comes in armed with prices from an average 500 mile radius. They will buy from the lowest price company and then expect great service from you. The old adage “80% of shoppers will spend more if you show them more value” is no longer true.
Great service isn’t valued, it’s EXPECTED.
Lance, I agree and disagree. From the context of business equipment sales, largely I agree, but not completely. Some things, I suspect we agree on: In the absence of any real/relevant differentiation, price always wins. Any solution on the customer’s short list can solve their problem, so unless something changes, price always wins.
The issue is the customer doesn’t perceive differentiation that is important and relevant to them—and that’s the sales person’s fault. But we have to change the perspective from looking at the product price to the business case of what they are trying to do. The customer is looking for the best life cycle business case. We have hundreds of examples of customers buying “more expensive” solutions because the overall business case is much superior.
A simple example is a customer that sells electronic components. The cheapest alternative had major quality and warranty issues. The result was the cheapest product “cost” the customer 3 times more in total life cycle cost than my client’s. And this doesn’t include lost customers.
The post suggests moving from the cost of the product to a broader look at the total ROI on the project/investment. There the best business case wins.