In this article we are going to take a closer look at an all-too common problem: what you can do to close an existing customer when your competition keeps lowering their price.
All sales reps face competition. And nothing is more frustrating than having your competition offer to sell to your existing client base at dramatically reduced prices.
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Consider the following scenario: Your biggest client calls to tell you that they’ve been offered a cut-rate price on the very same products you’ve been selling to them for years. They like doing business with you, but with the pressure on to save money and increase profits, this new lower price is just too attractive to pass up. No matter how much you preach value to the customer, they continue to come back with the lower price and tell you they are working from a strict budget.
To make matters worse, your competition is also trying to offset the lower price with a longer contract, which will hurt your chances of ever getting the client back if you lose their business now. You know this is a risky move for your competition, and that they will probably lose money on the deal.
What can you do to close this business without taking a huge bath on your profits?
Step One: Focus on testimonials.
Testimonials are the most powerful weapon sales people have to prove their value to their customers.
Clients tend to believe other clients more than they believe you. So find customers who already switched for a lower price and then came back to you because their experience with the competitor was less than satisfying. Or find clients who were considering moving their business, only to change their mind when they realized that the long-term implications were less than positive.
These client stories will add firepower to your case and help you convince your customer that doing business with you truly is a better and more profitable solution in the long run.
As a side note: you should be collecting testimonials from every client you do business with regardless of how well your business is currently doing. Testimonials are your most profitable selling tool, and you can never have too many.
Step Two: Learn from history.
As your team’s manager, show your sales people that prospects who only buy on price are not the best customers for your business because, in the long term, they are not profitable customers.
If your sales team is confident in selling based on the quality of your service, they will seek out prospects who value quality over those who only care about price. Your team may have to be willing to endure the short-term pain of letting a customer go, in order to make long-term gains with other, more profitable clients.
Step Three: Reward loyalty.
Show your long-term customers how much you value their loyalty by creating an account management process that rewards them for keeping their business with you.
Most companies make the mistake of only offering discounts and bonuses to new customers. Instead of devising a scheme to reward new business, create a program that rewards loyalty. For example, perhaps your customers can receive a lower price after two years of continuous ordering. Or maybe longer-term customers can be the first to receive special new products or access training at reduced prices (or maybe even free).
Take a look at your current client acquisition plan, and make sure it’s not “sweeter” to become a new customer than it is to stay an existing customer. After all, long-term customers are far more profitable than new customers. Some studies show that acquiring a new customer costs as much as 15 times more than it does to sell more to existing customers.
Ask yourself: can you increase your profits by spending some of the money you currently allocate for landing new customers, towards keeping your existing clients instead?
Step Four: Give yourself some breathing room.
Make sure you’re never in the position of having to save an account at any cost, simply because it’s the ONLY account you can close this month. If you don’t have other options, you will feel enormous pressure to close business at any price.
What can you do to avoid this scenario? Always be prospecting. The best sales people manage a full funnel of leads (at least 3-4 times your quota of active qualified leads) at all times. This gives them the freedom to be able to walk away from an unprofitable deal, and focus their attention on a profitable one instead.
Step Five: Do your research.
A company’s website is a great place to do a little pre-sales call research. However, most companies only put what they want you to see on their sites.
If you’re trying to save a deal, you might want to dig a little deeper to find out more about your client’s past, present and future, what their customers think of them – and their reputation in the industry.
Start by using Google or any of the other countless search engines out there. You may be surprised how many blogs, message boards or other websites you’ll find that may provide you with some deeper insights you can use to ask your clients about the price issue. Just be sure to consider the source. After all, most message boards are unfiltered, and you can’t trust everything you read online!
Step Six: Don’t add value if your customer won’t value it.
Last but not least, don’t randomly add value unless you know for a fact that your customer will appreciate it.
Sales people often make the mistake of piling on extras that the client may not want or need. The result is that it will cost you more to give the customer something they couldn’t care less about in the first place – a perfect lose-lose proposition.
When I ask many of the sales people I coach why they do this, they usually tell me it’s because they “think the customer will like this.” Thinking the customer will like something is the same as assuming they will like it. You only need to think back to grade school to remember what happens when we assume.
Value, like beauty, is in the eye of the buyer. Ask questions to find out what, besides price, would keep the customer from giving their business to someone else. Then set to work to provide them with as many of those concessions as you can.
If the client doesn’t want any extras, then you can’t use the value vs. price argument to win this business. Quit trying and go on to something else.
In today’s highly competitive marketplace, pricing pressure is a constant menace. If you want to be successful, you need to make sure the deals you are closing are profitable ones. Although your first goal should be to keep your existing customers, be careful of offering so much that the client actually ends up costing you money. If your client base is too price sensitive, go out and find new clients that want the value you have to offer – not just the lowest price.
It’s not easy, but it is simple to do if you have conviction. The first step to finding better clients – ones that focus on value and not price – is making sure you are 100% confident that you are delivering such a high value to the marketplace, that all buyers will want to own it at full cost.
Colleen Francis, Sales Expert, is Founder and President of Engage Selling Solutions (www.EngageSelling.com). Armed with skills developed from years of experience, Colleen helps clients realize immediate results, achieve lasting success and permanently raise their bottom line. Start improving your results today with Engage’s online Newsletter Sales Flash and a FREE 7 day intensive sales eCourse: www.EngageNewsletter.com.