Tuesday, October 28, 2008

Sell on Value, Not Price

I came across this article in a colleague's newsletter. Ron LaVine runs a company called Accelerated Sales Training and specializes in B2B cold calling. You may be wondering what that has to do with retail. One of his clients, Mark Norato of Infomentis sent Ron this story about a retail experience.

I recently visited a local hardware store to purchase several gallons of paint for a remodeling project my wife and I had undertaken. After I found the color I wanted, a clerk walked up and asked, "Can I help you?"

I answered “I’ve found the color that I want, but honestly, your prices are higher than the Wonder-Mart super store down the street.”

The clerk immediately replied, “Sir, you’ve selected our premium brand paint. It comes with a five-year warranty against fading and peeling and will cover in one coat. Because of the way it s blended, scratches and other surface marks will wash off easily. I’m very familiar with the Wonder-Mart brand, it s a good, lower-end paint but it has no warranty, and you will probably need at least two coats depending on the color you re painting over, so it s not really the bargain it appears to be.”

I nearly fell on the floor! This 20-something year old clerk working at a hardware store in Conyers, Georgia understands what most sales professionals don’t...it’s not the price, it’s the value!

The clerk could have chosen to defend his price, which would have been a losing battle since his product was already higher priced, and I was convinced based on my limited knowledge that paint was paint. He could have offered me a discount, which would have only reinforced my opinion that his product was no different than the Wonder-Mart brand in addition to depleting his margins. Or he could have bent himself into a pretzel like so many sales professionals do by using some sort of manipulative sales tactic to overcome my price objection. Instead, he simply chose to sell the value of his product in a straight-forward manner that helped educate me on the fact that paint was not paint.

This exact same scenario takes place every day in B2B sales, only in most instances the sales professional almost always falls back to selling price. Consider this fact & regardless of the product or industry segment you re selling into, when customers are presented with price versus value decisions, 73% of the time the purchasing decision will be based on factors other than price.

This is not to suggest that price is unimportant obviously is however, it's typically not the primary driver in the purchasing decision, although most sales professionals seem to believe otherwise. This principal should not seem all that extraordinary. If price was the only thing that mattered, we would all be driving Yugo automobiles and purchasing our clothes at Wal-Mart. The fact that Toyota commands a premium for its automobiles and department stores such as Nordstrom’s thrives on selling premium-branded products proves otherwise. The key point here is that unless you explain what value your product or service brings to the table, the client is left to think that price is all that matters, in which case the cheapest will always win.

I have always been a believer that there is more involved in a buying decision other than price. But...this concept is difficult for many retailers to grasp. The key is to find your differentiating factors and make sure that your customers are aware of them. AND, make sure your staff know how to tell your customers about these differentiating factors.

Read my article, The Myth About Price.


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