It's nothing new...ever since the days of barter, the consumer has been asking for a lower price. Once, when trying to sell a television on the retail floor of my store, the customer was beating me up over the price, which was $499 for a 25-inch color console with remote control. After investing more than an hour with that customer, I excused myself and went to check my cost sheet. There, I discovered a mistake had been made in tagging the item. That television was priced $100 below our cost.
The experience taught me four things:
1) The importance of double checking price tickets;
2) The need to code price tags so I would know my exact cost during the sales presentation;
3) That customers typically have little idea of a product's value; and,
4) I had done a poor job of selling benefits that help build value and solve the customer's particular problems.
When you don't build value in the customer's mind you're usually faced with the alternative of having to shave your price in order to make a sale.
Customers have their own perceptions of the value of your products and services. When they won't pay the price you're asking it's usually because the value of purchase is perceived to be less than the cost.
What they are telling you is: ``Based on the benefits you have told me I will receive from purchasing your product or service, I don't feel it is worth the price you are asking.''
Therefore, it's necessary to build value in the purchaser's mind by stressing the benefits of your products and service.
Begin by listening to customers. They're trying to tell you about problems they want solved. When you solve those problems with the benefits of your products and service, customers will pay the price you're asking.
Moreover, not all benefits that help establish value in the customer's mind are concerned with the product itself. Some are the benefits offered by your operation in the form of superior quality and service, store cleanliness and the knowledge and friendliness of the staff.
Knowing what benefits competitors offer—and don't offer—greatly increases your chance of outselling them.
Once while attempting to sell four truck tires, the customer said he could buy the same size tire for $20 less elsewhere. I responded by asking what the terrain was like where he operated his truck. When he replied, ``limestone,'' I not only sold him the set of tires at my $80 higher price but also gained his future business as well.
Reason: The tire I was selling came with a road-hazard warranty whereas the competition's tire did not. I sold the customer on the benefit that if he should cut one of my tires—a not unlikely possibility since limestone cuts tires easily—he would be protected by a warranty. In that case, the customer stood to save much more than the $20 per tire he was paying up front.
Offering related add-on items also is a great way to increase the value of the customer's purchase. When selling satellite television systems, my price always was $40 higher than the competition's. But I offered customers an $89.99 remote control add-on for only $39.99—a savings of $50 which cost me $36.
That made my product's perceived value $10 better than my competitor's. Not only did I made a sale but $3.99 more. I did cut the price on the add-on, but it was an item most customers never would have purchased otherwise.
So before you cut price, add value to your products and services by selling customers on the:
1) Benefits they'll receive directly from the product or service;
2) Benefits in service they'll receive only from purchasing at your store; and,
3) Benefits they will get from add-on items.
Mr. Janet is president of Bob Janet Marketing Consulting & Retail Advising, an agency in Lock Haven, Pa.