Selling Your Price: How to escape the race to the bargain basement
Epilogue – Are you earning your keep?
Christine placed her notes on the podium and looked out past the stage lights at the sea of faces in the hotel ballroom. Partner Dental sales reps from all over North America gazed back at her expectantly. She adjusted the microphone and took a breath. Here goes, she thought.
“Good morning. I’m Christine Cooper, branch manager in Los Angeles. Matt Simon, our CEO, will address you in a moment. But he asked me to kick things off because I’m the one who lobbied him to schedule this training event. If you’re looking for the guilty party, I guess I’m it.”
The line drew the polite chuckles she expected.
“Last year, in this same venue, we introduced a new sales system called Action Selling. The feedback we’ve received from all of you says that you have found it enormously valuable. Our North American sales figures say the same thing.
“As you know, Action Selling is a systematic approach to managing and conducting the entire sales process, from initial contact with a prospect to following up after the sale. But Action Selling offers another opportunity that isn’t necessarily obvious. Some of you recognized it the first time around. For you, this two-day training event will be a chance to hone and refine skills you’re already using.
“Others, however, are in for a major revelation. You’re going to be especially happy that you came here today.
“What is the hidden opportunity I’m talking about? It’s that Action Selling doesn’t just give you a dependable way to close more sales, gain new business, and wind up with more satisfied customers. That you already know. What some of you don’t quite get yet is that Action Selling also gives you a way to protect your margins in the face of brutal price competition.
“Action Selling isn’t just a better way to sell your products. It’s a way to sell your price — both to new customers and to established ones.
“Like a lot of industries, ours is engaged in what I think of as a race to the bargain basement. Alot of factors play into it. There’s the increasing commodification of products and services — including ‘value-add’ strategies such as our Partner Plus program, which looks a lot like other frequent-buyer programs. There’s the consolidation of suppliers into fewer, larger competitors. And let’s not forget the Internet, which makes price shopping much easier. The upshot is that every day we are under intense pressure to match or beat our competitors’ lowest prices.
“Tell me if this sounds familiar: You make a call on a regular route customer. The office manager shows you a brochure or a catalog from one of our competitors. They’re running a special on some of the items we sell — cotton rolls, surface disinfectant, or whatever. There they are, in black and white: the very same products, a few bucks cheaper.
“Well, what can you do? If you want to keep the business, you figure, you’ll have to discount. So you match the competitor’s price.”
Some uncomfortable shuffling in the audience told Christine that, yes, that sounded familiar to a number of the reps.
“I know a Partner salesperson who gave away $50,000 in profits last year, a buck at a time, by doing exactly that. He thought the solution would be to improve his negotiating skills somehow.
“He doesn’t think so anymore. And he isn’t discounting to keep his business anymore. Because he figured out that the answer isn’t to get better at haggling over price. The answer is to get out of the price-negotiation game altogether. The solution is not to run faster or run smarter in the race to the bargain basement. It’s to withdraw from that race altogether and start running a different one.
“The answer, he realized, is Action Selling.
“Why? Because Partner’s business strategy is to compete on value, not on price. If you want to compete on value, you must offer the customer a valid reason to pay a little more to deal with you instead of with your competitors. In a world of commodified products, commodified services, and now commodified value-add strategies, you cannot differentiate or add value to your offerings based on what you sell. You can only do it based on how you sell.
“What my friend realized is that the salesperson who wins is the one who does the best job of executing a process in which the salesperson and the customer walk arm-in-arm toward a solution that will best serve the customer’s needs. That process is the whole ballgame. Executing it better than the other guys do is the only sustainable way to differentiate ourselves and to add lasting value in the customer’s eyes. It’s the only thing our competitors can’t copy.
“My friend knew, of course, that the Action Selling system puts ‘price’ in its proper context as only one of five major elements in the customer’s buying decision. But he didn’t quite get the implications. Now he does.
“He had a few other revelations as well. He realized that every time he caved into pressure to discount his products to match a competitor’s offer, he was actually teaching his customers to object to his prices. He was encouraging and rewarding them for focusing on the price of each individual item he sells. He wasn’t just a victim in the race to the bargain basement; he was helping to perpetuate it. That was not a pleasant discovery.
“But he also got a very pleasant surprise. He learned that some of his clients — maybe most of them — were as unhappy as he was with the price-shopping game. They saw the endless cycle of bargain hunting as a frustrating waste of time and energy. They were glad to find a reason to justify opting out of it. All my friend really had to do was to give them that justifiable reason.
“Like my friend, I am a salesperson, management title or not. I love this profession. But price competition has brought our profession to a critical juncture. Because if customers see our products and services as commodities, and they make buying decisions based solely or primarily on price, it’s hard to see a reason why a company should continue to maintain a professional sales force. There are too many cheaper ways to match or beat competitors’ low-price offers. If that’s all salespeople do, then they just become extra overhead. They’re not earning their keep. If Partner Dental or any other company is running a race to the bargain basement, salespeople’s salaries and commissions are nothing but a drag on performance.
“As salespeople, we must find ways to add value that gives customers a reason to buy from us on some basis besides price. Otherwise, what are we doing on the payroll?
Christine paused to let that sink in.
“Here’s the good news: We know for a fact that how you sell is the key factor in winning your price. Top salespeople not only sell more than average ones, they also generate higher margins. We can prove that with breakdowns of our own sales figures. It’s also demonstrated by research.
“The Sales Board recently conducted a National Price Competition Study. A white paper describing the complete results is included in the handouts you’ll be receiving. But let me cite just two key findings.
“First is the one I just mentioned: Overwhelmingly and across all industries, respondents agree that top salespeople drive higher margins than average ones. That can only mean there is a significant difference not in what they sell, but in how they sell.
“Second, respondents say that the No. 1 reason why customers choose them over their competitors is because of a relationship with a salesperson. That relationship is more important than product characteristics. And it’s more important than price.
“To protect our margins and win our price, what kind of relationship do we need to cultivate with our customers? I like the way my friend put it. ‘When they see me coming,’ he said, ‘I don’t want them to say, ‘Oh, here’s what’s-his-name. I wonder how much he’s charging for cotton rolls this week.’ Instead, my friend wants his customers to say, ‘Oh, good, here he is. I’ll bet he has another idea that will help us run our business.’
“It doesn’t matter whether the problem involves inventory or some other business issue. What matters, my friend decided, is that he doesn’t want customers to see him as a salesman peddling wares and negotiating prices. He wants them to see him as a consultant with a purpose — the purpose being to help them run their business more effectively. And he knows that the way to get his customers to see him as a consultant with a purpose is to act like one.
“He now knows what some of you have already figured out: Action Selling is not just a sales system. It’s actually a blueprint or a set of stage directions that tells you how to act like a consultant with a purpose. And it doesn’t apply only in situations where you’re starting the sales process from scratch with a new prospect. It applies equally to every regular route customer you’ve got.”
From his seat near the back of the ballroom, Scott sent silent encouragement toward the stage. You’re doing great, Christine, he thought. You deserve this moment. He returned the name she had given to him. My friend. You won’t be my boss much longer, because this company would be crazy not to move you up the ladder. But you might be the best friend I ever had. He leaned forward in his chair, willing the people around him to listen and learn as Christine wound up her speech.
“We’re going to show you how to win your price, protect your margins, and opt out of the race to the bargain basement. Some of you are going to kick yourselves because you didn’t see it sooner.
On the management side, we’re kicking ourselves because we didn’t make it more explicit the first time around.
“Very soon, though, the kicking will stop. You’re going to learn that the way to sell your price is not to be a great negotiator but to stop selling on price. I mean really stop it, once and for all. The way to win your price is to ‘sell yourself.’ Action Selling told you that was your first and greatest task, but you don’t quite get it yet. You soon will.
“It would be an understatement to say that I think you’ll find these next two days eye-opening and productive. Partner Dental is going to make more money — and so are you. I’d wish you good luck, but when you leave here you won’t have to depend on luck. So let me just say, Good Action Selling!”
ABOUT DUANE SPARKS
Duane Sparks is founder and chairman of The Sales Board, the authoritative source of practical and leading-edge information about the art and science of selling. He has created Action Selling sales training products and learning systems that transform sales organizations. Duane is author of these best-selling books: Action Selling, Selling Your Price, Questions (the Answer to Sales), Masters of Loyalty (How to turn your sales force into a loyalty force), and Sales Strategy from the Inside Out (How complex selling really works).
Discover how the best sales training process can make spectacular improvements in sales skills. Action Selling: How to Sell Like a Professional (Even If You Think You are One).