The Misconception of Low Price

I recently had the opportunity to engage in another client discussion about the notion of “low cost” or “low price” buying behaviors as being a growth obstacle.  This is one of the biggest misconceptions as it relates to successfully growing a business.  It is not about low price.  It is about a failure to define value. If you think your growth efforts are being thwarted by low cost buyers, it is because you have not succeeded in connecting with the real buying behaviors and needs of your prospects.  Nothing more, nothing less.

For those who think that low cost is an obstacle, here is the process issue that you are missing.  You meet with the client.  You have a high level discussion about what they want and need.  Your next step is to begin “telling” them everything they need to “know” and “do” to accomplish what they “need.”  You impress them with your knowledge, expertise, and capabilities as it relates to their needs to the point that they ask for a proposal or a quote.  Looks like they are interested in buying from you, right?  Not quite.  Unfortunately, you did not talk to them in depth enough about their drivers, their decision making process, or their “budget.”   Instead, you started talking about their vision and their big picture goals and how you can help them get there.  Next, you crank out a proposal.  Then, reality hits and they decide they cannot afford what they are dreaming about, need more time, need to get someone else involved, etc.  Eventually they tell you they cannot afford what you are offering.  “Low cost?” Not really.

This process is very analogous to buying a car: I want a 4-door sedan that goes 150 mph and 0-60 in 4 seconds.  My auto expert has just what I need.  Unfortunately, it costs $65,000.  I can only afford a $35,000 car.  They never asked my budget and I didn’t know or really realize how much my “car” was going to cost.  Once reality hits, I decide that I cannot afford the car I thought I needed.  In the meantime, another auto expert has an extensive discussion with me about budget, criteria, process and priorities.  And, he proposes a $35,000 car that does not do 150 mph or go 0-60 in 4 seconds.  But, it is quite fast and very sporty.  It is not exactly what I originally “dreamed” about; but, it does reflect a great fit with all my defined criteria, including budget.  Was my purchase about “low cost.”  To the auto expert that did not get the deal, yes.  In reality, no.  It was about a total fit with all my needs.

This is a traditional issue that exists in all industries—we are too quick to jump to the solution once we think we know what someone wants or needs.  It leads to a huge misconception about “low cost.”  When we do not ascertain value, prioritize needs, determine or discover the budget, define their buying criteria, and understand their decision making process, there will be a disconnect.  That disconnect is later justified by the business development person as the result of “low price” behaviors by the prospect.  When it actually is the result of insufficient listening, learning, and engagement on the business development person’s part at the beginning of the discussion.  Most of this frustration can be avoided if we simply stopped treating proposals as though they are part of the sales process.  They aren’t.  If you had to completely negotiate a final business agreement with a prospect before providing a proposal, your conversation would be entirely different.  In that process, you would discover that cost is a very real criteria.  But, it will not be the sole reason why I would, or would not, do business with you.  It would be simply one of the many determinators as to how they do business with you.   To eliminate the misplaced perceptions around “low cost”, spend more time in the discovery and consultative activities and avoid the “get to the quote” mentality.  You will find that by engaging in this process effectively, your customers will have a budget, though sometimes a limited one, for your product offering.