You shouldn’t talk price until you’ve established value, but sometimes that’s not always possible. If you feel compelled to provide price information prematurely, as often salespeople do, follow these steps:
1. Don’t apologize for your price (“I know this might sound a bit expensive but…”). Apologizing only reinforces the sense of low value and may send signals that you are prepared to negotiate.
2. Unless you know the correct price, always quote high. It’s easier to adjust a price down than to move it up.
3. It’s always wise to give the customer a ballpark price instead of a single price. And when you give that ballpark price, always add 10 to 20 percent to your upper end. If the prospect is going to choke on the artificially high price, she will choke at the normal price.
4. Don’t be hesitant when talking price. Your price is your price. What’s wrong with that? If you hem and haw at this point, you’re opening the door to price negotiations again.
Lowering your price may seem like an easy way to make a sale but it’s costly strategy. Every dollar you give away comes directly from your profits and it’s your profits that keep you in business.
In addition to making less money, dropping your price without gaining an offsetting concession lowers the value of your product and can lead to long-term price erosion where the prospect never gives you the true value of your product.
Dropping your price means you have to work harder to make the same amount of money. For example, if your product has a 20 percent gross margin and you drop your price by 10 percent, you have to sell twice as much to make the same profit.
Here are three more reasons not to lower your prices:
1. Low prices don’t create customer loyalty. Businesses that rely on price to make the sale are vulnerable to price-cutting competitors and price wars.
2. Low prices don’t build customer satisfaction. Customers who buy on price still want the best service and are quick to complain when they don’t get it.
3. Price-sensitive customers are the worst source of referrals because they only refer other price shoppers.
Think Twice Before Lowering Your Price.
It is often challenging to talk price but by following these tips will help you to be more successful and will help increase sales.
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Salesforce Training & Consulting is a professional sales training firm and registered Salesforce.com Consulting Partner based in Toronto, with offices in Boston and Chicago, providing sales coaching, sales management consulting, salesforce implementation, sales training and sales personnel assessments.