The Age-Old Battle
Price versus cost: Who loses?

Price is the fair market value (amount of money) one is asking for goods or services. Cost refers to the money it will take to do business over the lifetime usage (total value) of a product or service.

Master sales trainer Ron Karr says, “If your sales presentation revolves around price (or the false fear that the customer is only interested in the price), then your prospect will focus on price, too – and misperceive what you’re selling as being price-based, and/or too expensive.

Karr continues, “If your sales presentation centers around the future and current challenges facing your customers, and the solutions you have to offer, then they will perceive your solution as being an investment in solving their problems.”

Here’s a big opportunity: Many salespeople have the right products and services – Yet, they struggle on the price vs. cost issue. But take heart, there’s a way to get rid of the price issue. However, it requires hard work and creativity. Rats!

Here’s a big mistake: Often the customer will play right into your hands and ask “how much does it COST?” And you erroneously give him the PRICE as an answer. Never give the price until the value and the cost have been established.

And here’s a big secret: It’s harder to sell this way – that’s why so few salespeople rise to the top. There is no quick answer to this situation. Sorry. But there is good news. Not many salespeople can handle it, so if you become the price/cost master, you win. The secret is to be the master of how your product is used – and be able to communicate that value.

We learn a success strategy when we consider the price vs. cost factor. Go out in the field and watch your products and services in use. Get real world examples of how the value of what you sell is employed. Become versed in how your product is used – not what it does.

Here’s a tactic for success: Ask “value driven” questions. Determine how the customer uses what you sell, and how its use impacts the long-term cost of your product or service in his business. Questions will draw out real issues – as opposed to the stated issue, “How much is it?”

A Big Reality Check: The difference between making a commodity sale vs. a value-added sale is the difference between making a low-profit sale vs. a good-profit sale. Sales people get paid on profits, not sales. If there is no profit, there is no money left over for bonuses and commissions.

An Even Bigger Reality Check: Many companies and salespeople will dub themselves as a “commodity sale” just because there’s a lot of competition and price cutting. When the word “commodity” creeps into the sales language, you are branding yourself, and establishing an internal mindset that lowers the morale of the sales team and discourages creative solution selling.

The Biggest Reality Check: A sale based on price has no loyalty attached to it. If you make it on price, you’ll lose it in a heartbeat to the next lowest bidder.

The Challenge: Leave the word “commodities” where it belongs – in the corn and cattle markets.

Time is money. It takes a little more time to make a (value driven) profitable sale than it does to make a (price driven) break even sale. Invest a little more time, and you’ll earn a lot more money.

Think “use of product” and “value over time” when you enter the sale, and you’ll leave with your own commodity – the order.

Jeffrey Gitomer is the author of The Sales Bible, and Customer Satisfaction is Worthless, Customer Loyalty is Priceless. He can be reached at 704/333-1112 or e-mail to salesman@gitomer.com.

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