A sales consultant shares how to cut a deal without cutting price
BY Monica L. Rausch, Associate Editor
What was that figure on the trip to Austin?...You charge how much for one hour in a 152?...I can get a better deal from your competitor across the fieldÉ
These sticker-shock reactions from customers can batter the confidence of almost any salesperson. But the knee-jerk response — slashing prices — could mean going out of business.
According to Larry Steinmetz, a sales and management consultant and former professor at the University of Colorado's School of Business, 16 out of 17 businesses that open in the U.S. fail, and the majority of those failures come from cutting prices, in the mistaken belief that profits can be made up in sales volumes.
"If you cut your price by 10 percent, you will have to sell twice as much products in the same period of time to break even," says Steinmetz. "It is precious difficult to cut price and make it up in volume. It is even more difficult to do it and make money."
On the other hand, he adds, if a company hikes its prices by 10 percent, the company would have to lose some 28 percent of sales before losing any money. Those salespeople who fear losing sales over high prices — and worry about getting the sticker-shock response — can follow some simple sales techniques, says Steinmetz.
Stand Behind a Price
When customers hammer a salesperson on price, it's usually because, whether a salesperson realizes it or not, that salesperson is encouraging it, says Steinmetz. Steinmetz points to car salesmen as examples. With phrases like "Let's make a deal," "We will not be undersold," and "We'll give you a bargain," he says, "Car dealers have trained you to beat them up on price."
"Our research shows clearly that if you feel your customers really hammer you on your cost, there's a pretty good chance you're inviting and encouraging that to happen," says Steinmetz. He points out two ways salespeople encourage price negotiations:
1. Wowing: A salesperson opens the door to price negotiations when he or she "wows" in front of customers, as in "Wow! Can you believe these prices?"
"Wowing is when
you communicate to the customer that you feel your prices are high,"
says Steinmetz. He notes that most salespeople do believe their prices
are too high, which causes many of them to wow. When salespeople wow,
they use phrases such as:
• "Are you sitting down?"
• "Man, can you believe these prices?"
• "Do you think $200 would be too much?"
• "These prices may look a little high."
What a salesperson avoids saying can also be a form of wowing, says Steinmetz. When salespeople evade talking about price, they are telling the customer that they are not comfortable with it or are afraid of the customer's reaction. According to his research, 94 percent of salespeople won't bring up the issue of price until the customer does, and then 46 percent will change the subject when the issue is raised.
"You have to present the price credibly, comfortably, and confidently," says Steinmetz. "If you don't come back credibly, comfortably, and confidently when talking about your price, then you just wowed big time."
In fact, the way a salesperson handles his or her price largely determines the probability of that salesperson getting that price. Adds Steinmetz, "If a customer believes that you don't believe you're going to get your price, you're not going to get your price."
2. Cracking: Salespeople "crack" when they let the customer know that they are willing to negotiate on price, says Steinmetz. Some phrases they use when cracking include:
• "Now you know I want to work with you on this."
• "Tell me where I need to be."
• "Let me talk to the boss and see what we can do for you."
• "What do I need to do to get your business?"
Building a Market Finding students, setting rates, and securing instructors are among flight school challenges BY Monica L. Rausch, Associate Editor May 1999 OSHKOSH, WI...
Find a New Box Need to be motivated? Try this ... By William Blades, CMC, CPS, William Blades, L.L.C. July 2000 Do you remember when we were younger, we used to run and jump into...
Understanding the Customers You Don’t Have Asking the right questions will reveal answers about your operation’s strengths and weaknesses By Bill de Decker May/June 2001 It’s...
Retailers explore the changing complexion of the passenger experience