When Sales Cooke first interviews new clients and their sales teams, one of the first things they attempt to explain to me is that price is very important to their clients. No kidding. Price is not only important, it is essential. Price is one of the last components in establishing that business relationship. No one can buy anything from anyone without finalizing a price for the goods or services they are buying. That said, if price becomes the determinator of whether you get the business or not, you probably have a problem.
Your clients buy from you for one of four reasons: it makes them money, it saves them money, it solves a problem, or it fulfills a need. The amount of time you take to relate with the customer, learn about their business and their needs, will most likely have a direct influence on how important your price is. If you have not learned enough to link the value of your product to their business issues, you can always fall back on giving them a quote and hope that your price is attractive enough to get you the business. If you have taken the time, successfully uncovered a value proposition and can effectively link your product to adding that value, price will not be as important–the solution will.
The trap in the price vs. value game is set when the client says “give me a quote” or “why don’t you give me a proposal.” Price based transactions are filled with lots of proposals and quotes. This is where sales people get to spend their time chasing the clients and try to land a deal. And, even when they catch the client, there is always some other reason why they haven’t given the order yet–the chase continues. This is what makes price based deals seem so difficult, hence important–there are so many of them and very few close.
In value based selling activities, a proposal is more like an agreement. The sales person and the client have established what they want to accomplish, when they want to accomplish it, how they view the product will help them, plus there is some understanding of budget expectations. Even more importantly, the sales person is making certain that the decision maker is involved in the process. In this scenario, the quote process is more of a formality toward reaching agreement. Closing the deal is more likely to be the outcome of the meeting.
Remember, price is always part of the equation. The difference between the two sales approaches is that in one, price is the determinant, in the other, it is a formality. One is largely unproductive and requires a lot of deals in the funnel. The other is highly efficient and has a high close ratio. Sales Cooke invests his time in building value based relationships with a longer selling cycle. Besides, he closes more of those. This is a lot more efficient than spending his sales time chasing customers to try to close price based deals that never close.