How to sell at margins higher than your competitors : winning every sale at full price, rate or fee

265 Pages·2006·1.192 MB·English

by  Lawrence L Steinmetz, William T Brooks

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Winning Every Sale
at Full Price, Rate, or Fee
Lawrence L. Steinmetz, PhD and William T. Brooks
John Wiley & Sons, Inc.
Copyright © 2006 by High Yield Management, Inc. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey
Published simultaneously in Canada
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Library of Congress Cataloging-in-Publication Data:
ISBN-13 978-0-471-74483-2 (pbk.)
ISBN-10 0-471-74483-2 (pbk.)
Printed in the United States of America.
10 9 8 7 6 5 4 3 2 1
Preface
T
his is the thirteenth book I’ve writ-
ten. Every time I write a book, I wait until it’s almost time for page
proofs before I write the preface because I like to reflect on what the book
really is about in order to say a few succinct statements about the book for
the prospective reader.
For this particular book, I am especially mindful of something I wrote
in the preface to my first book in 1992. I wrote:
The perspective I got for this preface came from a vacation I took just a
week ago. I happened to read a piece of advertising literature of a small
(albeit international) manufacturing company in one of the better-known
ski resort towns in Colorado. The first paragraph of that company’s liter-
ature proudly boasts: ‘We are not just running a business, but living a
lifestyle.’ I’m sure the people who are running that company are proud of
that statement; genuinely believe that one need not be too serious about
running their business—that if you produce a good product, the product
will sell itself and one need not worry about the vulgar details of operat-
ing a business in a business-like fashion. Another interesting part of this
manufacturer’s literature is that the enclosure with this literature com-
pared this company’s prices with competitors’ prices and—you guessed
it—this company’s prices were lower than their competitors’. That’s right.
They allegedly have a superior product and, furthermore, can sell it at a
price lower than their competitors’ and (surely?) make money doing that.
Once you’ve read this book, you will appreciate the sarcasm in the above
paragraph. I revisited that Colorado resort town just last week to check out
how the business was doing. At no surprise to me, it has vanished without
a trace. I pointed out in the original book that one cannot run a business
successfully via a series of propitious accidents or in a cavalier manner. We
make that point again in this book: Business is a game of margins, not a
game of volume. Whether one is running a manufacturing company, a
wholesale operation, a distributorship, a retail store, a construction com-
pany, a financial institution, or a professional service organization, all too
many people operate these enterprises with the idea that one can sell at
prices (fees, rates) lower than their competitors and still be successful. Oh,
if it were only true—and that easy. That is not to say that one cannot have
vii
viii Preface
fun running a business or professional organization. Or that there is no
time for a good quality lifestyle. But the basics of running a good (suc-
cessful) business are not founded on a “fun first, the business (practice) will
take care of itself” attitude. Too much water has gone under the bridge
throughout history proving the point that a serious, professional manner has
to be established at the helm by those running the operation.
Fortunately,historygivesusmanylessonsinthegoodandthebadprac-
ticesthathappeninrunningabusiness—admittedly,mostlybad,butthere
are also good examples. The common threads that underpin the good and
successfulexamplesarewhatwehavechosentopresentinthisnewversion
of my original book. We have expanded it in many ways. We have added
chaptersonthingssuchasthecardinalsinsofsellingandhowtotellwhen
a customer is lying about having a sweeter deal “down the street.” I also
added a chapter on how the salesperson can “hang in there” under intense
pressure to cut the customer some kind of deal on the price. These addi-
tional chapters particularly enhance the book because, based on my expe-
rienceconsultingwithcompaniesandconductingmorethan2,000seminars
on this subject since writing the first book, I have found these issues to be
themorevexingproblemsformostsalespeople.Fortunately,giventhetime
period since publishing the first book, I have developed material that pro-
vides solutions to many of these problems.
The original book and this book are about how you sell things at prices
higher than your competitors—not how to give things away. The organi-
zation of this book is much like the original book and essentially runs as
follows: We start with FACTS—and the facts are that most companies do
go broke and business is a game of margins, not a game of volume.
The second dimension of this book has to do with UNDERSTAND-
ING. Selling at prices higher than your competitors requires an attitude and
an understanding on the part of the salesperson. Some of that understand-
ing includes the following: People (customers) don’t buy on price alone.
Furthermore, there are five factors on which one can compete in selling a
product or professional service, and price is only one of the five. Quality,
service, sales capability, and ability to deliver the product or professional
service to the customer, when they need it, where they want it, and on time
are the other factors. Each of those remaining four is far more significant
than price. Another bit of understanding is that buyers really need and like
a lot of things—and low price isn’t necessarily one of them. Sales reps who
intend to sell at prices higher than their competitors need to get inside the
customer’s head and understand how their customers’ needs and likes can fit
with their ability to command a higher price than competitors.
Preface ix
The third section of this book concerns REALITIES. Many business
and professional people, as well as many salespeople, simply do not under-
stand the economics of pricing. Most think they do; very few do. For ex-
ample, have you ever asked a business or professional person or a salesperson
how much additional volume of any product they have to sell (or service
they have to provide) to make up for a price cut? Usually you’ll get some
vague answer, or some wide range of answers like: “Twenty to forty per-
cent more, I guess.” And, once in a while, you even get an honest answer
such as, “Gee. I don’t know.” Business and professional people are their
own worst enemies, as are sales representatives. They tend to blindly believe
that somehow, someway, if they get price competitive (i. e., cut the price)
that they will “make it up in volume.” This section of the book, devoted
to the realities of the marketplace, is absolutely essential for the business or
professional person to understand if he or she is to sell at prices higher than
competitors.
It is difficult, if not impossible, to cut price and make it up in volume
while, on the opposite end, it is often possible to raise price, lose volume,
and make far more money. People who have attended the seminars that I
do on “How to Make Your Prices Stick” and “How to Sell at Prices Higher
than Your Competitors” have, over the years, related numerous testimoni-
als concerning the fact that raising prices is not the end of the world. Doing
so does not cause sales to plummet, and often simply means that the com-
pany or the professional organization just makes more money with less ag-
gravation and heartache for those endeavoring to earn a living in that
business.
The newer part of this book is the material I added on how the sales-
person can avoid being victimized by the hard-charging, demanding price-
buyer who puts the salesperson in as awkward a position as the buyer can
in an effort to get the salesperson to cut the customer some kind of deal on
the price (or other terms of the sale). Many salespeople don’t understand
either what to do with an extremely demanding customer or how to tell
when a customer is lying, fabricating, or not being 100% truthful with the
salesperson about having “a sweeter deal down the street.” In my extensive
experience in dealing with these problems as a seller of my own companies’
products and professional services and/or presented to me as a problem that
a trainee needed help with, I have had the luxury of time to develop an-
swers to these types of questions and issues. I make the particular point that
one does not, as a salesperson, want to call a customer a liar. But customers
do lie, or fabricate stories that are not fully true, in an effort to get a sales-
person to shoot him/herself in the foot and unnecessarily cut the price or
x Preface
squander away the possible profitable side of the deal. This all new section
of the book is an especially valuable addition to the manuscript.
The final and major portion of this book has to do with WHAT TO
DO ABOUT IT. Thus, the bulk of this book addresses such things as how
to handle price pressure, price resistance, and price competition. We spend
a lot of time talking about how to face up to and handle price cutting by
your competitors, as well as how to determine if it really is price that is the
problem in the mind of the customer. We devote attention to understand-
ing the basics of this statement: Your customer will tell you when your
prices are too high—as well as tell you when your prices are too low. By
analyzing those indicators of overpricing and underpricing which we de-
velop, the sales rep can determine very accurately whether or not he/she
should be able to realize a higher selling price in the marketplace.
Yet another very fundamental system of coping with price pressure in the
marketplace is the material that we develop in this section on tricks used
by those serving in the role of procurement officers, purchasing agents, or
buyers in attempting to get the sales representative to cut his/her own
price. From the feedback I have received from my seminar attendees, iden-
tifying these tricks has given salespeople strong support in foiling the at-
tempt of buyers to get salespeople to cut their prices.
In this section of the book, we also discuss closing sales in the face of
price resistance, as well as sales techniques to use in facing down price re-
sistance. Finally, we address the question of “Stoppers”—the methods and
techniques that sales reps use to stop customers from beating on them for
additional price reductions.
All in all, I’m very pleased with the end result. I’ve been doing semi-
narsonthissubjectforsomanyyearsIhatetothinkaboutwhenIstarted.
In this book we have assembled a hard-nosed, let’s-face-life-with-reality
look at how those companies and individuals who make a lot of money
selling at high prices manage to do so. They don’t do it by cutting prices,
fees,orrates.Theydoitbyknowingtherealitiesofsellingatpriceshigher
than one’s competitors. They face facts, they understand customer buying
motives, they face the realities of the economics of selling products and
services, and they know what to do about the customer who says, “Your
prices (fees, rates) are too high.” Furthermore, they do not become duped
bytheoverlyaggressiveorout-and-outunscrupulouscustomer.Theyface
reality, work professionally, and have a good time running their business
(or practice) AND enjoying life to its fullest because of their success.
I hope the reader will find this book every bit as productive as those
who have heard me speak these words in public and private seminars—and
Preface xi
I wonder what the people who worked for that manufacturer in the moun-
tains in Colorado are doing now . . .
LAWRENCE L.STEINMETZ,PHD
Boulder, Colorado
In 1992, Larry Steinmetz graciously asked me to write the introduction
to his original book on this topic. Not only was I thrilled to do so, but
also I became hooked on his concepts and the breakthrough ideas that his
book offered.
Now, more than 13 years later, I have had the privilege of co-authoring
the newest, most up-to-date, cutting-edge version of those original ideas
in this, its latest version.
This book is intended to deliver to you, the reader, ideas, strategies, tac-
tics, and concepts not available anywhere else in the world. After selling
for well over 35 years and speaking, training, and consulting with sales or-
ganizations for more than 27 of those years, I am fully convinced that the
single biggest issue confronting most sales organizations and salespeople is
how to defeat lower priced competitors. Period.
Whether you are a business owner, executive, sales executive, sales man-
ager, or salesperson, this book has great value for you. Dr. Steinmetz and
I approached this book with the premise that whether you sell tangible
products, an intangible service, large or small ticket products, or anything
in-between, there is great value for you within its covers.
Having said that, I invite you to prepare to learn things that can and
will deliver great margins to your business. However, please be warned:
The ideas you find here could revolutionize your business. They could also,
however, cause you great concern as you examine some of your current
pricing, selling, and business practices. However, if you face reality and take
action, your entire career will be revolutionized. I guarantee it.
WILLIAMT.BROOKS,CSP,CPAE,CMC
Greensboro, North Carolina
Contents
Chapter 1
Employers Can Fail or Go Broke—And Yours Can, Too 1
Chapter 2
But Competition Keeps Cutting My Price 12
Chapter 3
Determining Your Competitive Advantage 21
Chapter 4
Service as Your Competitive Advantage 30
Chapter 5
Why You Really Shouldn’t Mess with Price-Buyers 35
Chapter 6
WhatBuyersandCustomersReallyNeed—Hint:ItIsn’t
LowPrice 46
Chapter 7
Things Buyers Would Like Besides a Low Price 56
Chapter 8
YourCompetitors’DeliveryProblemsWillGetYou
ProfitableSales 63
Chapter 9
Yeah, But I’ll Make More Money If I Cut My Price—
And I Don’t Care If My Employer Does Go Broke 73
Chapter 10
How to Face a Competitor’s Price Cuts 83
Chapter 11
The Two Cardinal Sins of Selling 91
Chapter 12
Buyers Make Good Liars . . . If You Let Them 105
xiii
xiv Contents
Chapter 13
Howto“HanginThere”underIntensePressuretoCutYourPrice 121
Chapter 14
Indicators That You Are Underpricing 136
Chapter 15
Indicators That You Are Overpricing 157
Chapter 16
How Prospects Will Attempt to Get You to Cut Your Price 167
Chapter 17
How toFinalize a Transaction When You’re Faced with
Price Resistance 197
Chapter 18
General Guidelines on How to Price 211
Chapter 19
FinalThoughtsonSellingatPricesHigherThan
YourCompetitors 225
Appendix
The Premium Price Seller’s Ready Reference Guide 233
Notes 241
About the Authors 243
Index 245
CHAPTER 1
Employers Can Fail
or Go Broke—
And Yours Can, Too
Our basic problem has been our 14 quarters of losses. And that’s because
the price of the equipment we build has been less than the cost.
—Norman J. Ryker
I
t is, indeed, an unfortunate fact: Most
businesses fail. They start off, expand a lot or a little, and then they die.
Statistically, 16 out of 17 businesses that start in the United States will fail
and/or go out-of-business—most of them in the first two years of their
existence. The average life expectancy of all businesses in the United
States is estimated at 7.5 years. In fact, one of the headlines used to pro-
mote a series of highly successful business management seminars has been,
If your business is not 8 years old, the odds are it never will be! No less a
business giant than Thomas J. Watson, the builder of IBM, in the very
first paragraph of his book, A Business and Its Beliefs,1 wrote:
Of the top twenty-five industrial corporations in the United States in
1900, only two remain in that select company today. One retains its orig-
inal identity; the other is a merger of seven corporations on that original
list. Two of those twenty-five failed. Three others merged and dropped
behind. The remaining twelve have continued in business, but each has
fallen substantially in its standing.
Figures like these help to remind us that corporations are expendable
and that success, at best, is an impermanent achievement which can always
slip out of hand.
Watson wrote that in the middle of the last century. As we enter a new
century, the situation is potentially far worse.
1