(843 words – 7 min)
Your salespeople discount too much. They want the sale. They often want the sale at any cost, including the cost to your bottom line.
When you talk with them, they claim to do what’s best for your company, but you don’t really believe that. The vast majority of salespeople are not indifferent, incompetent or lazy. Yet they discount too much. Why?
Discounting is a tool in their toolbox. Sadly, it’s very easy to use, so it frequently gets used. Salespeople want to please the prospect. They want to be liked. They want to earn trust. All buyers want discounts, so salespeople offer them, hoping to build their reputation.
A Difference In Perspective
Here’s the big problem: Salespeople don’t understand value the same way their buyers do.
Buyers trade money for perceived value. They only buy when they believe the amount of value they will receive exceeds the price of the item.
Notice the only two variables in the buyer’s purchase decision are price and perceived value. This means salespeople have only two levers: Either lower the price, increase the perceived value or both. Reducing the price is easy. Selling value isn’t.
A Question Of Perception
The key to minimizing discounts is for salespeople to learn to sell value. In fact, the skill of selling itself is the ability to increase the perceived value of your solution in the buyer’s mind.
But there is a major problem. Most salespeople don’t know how their buyers perceive value.
Don’t believe me? Here’s a challenge. Ask a salesperson who just won a deal what the buyer valued. What were the most important reasons that buyer had for making their purchase? Then, call the buyer and ask them the same question. Rarely will you get the same answer.
Obviously, that salesperson was good enough to get the buyer to purchase, but what if sales communicated value in a way that deeply resonated with that specific buyer? The buyer would have wanted that solution more and as quickly as possible. The deal would probably have closed sooner with less of a discount.
So what is value? How do customers perceive value? As a pricing expert who has studied and taught value-based pricing for three decades, I devote much of my mental energy to this single question. I want to know how much a buyer is willing to pay. In order to get close to that answer, I focus on how a buyer values a product.
The Presence Of A Competing Alternative
Let’s jump to the end. Without a competitive alternative, a buyer will pay you $100 for a product if they believe it will make them $1,000. The 10X multiple is an oversimplification, but you’ll find it to be fairly accurate in many cases.
When a competitor is involved, a buyer will choose between your products, calculating which one might offer the most “bang for the buck.” In other words, which product has the better ROI for them?
In both situations, with or without competition, B2B buyers make financial decisions. Great salespeople know how to help these buyers translate features into expected future profits.
When salespeople can get buyers to express a desired quantitative result, they are helping the buyer make the financial calculations that can translate a result into value (or future profit).
Value-Selling Through Problem-Solving
Now, let’s look at this process starting at the beginning. Salespeople need to start with a list of all of the problems their products may be able to solve. They are looking for scenarios on this list when they are prospecting or building a relationship with a potential customer.
Once they know the problems that resonate with a buyer, they can ask about the results the buyer hopes for when they solve that problem. Finally, each result or outcome will make the buyer more money either in cost savings, increased revenue or reduced risk. Salespeople can help the buyer put a dollar value on each of those results.
Notice in this scenario, a salesperson hasn’t talked about your product (or service). Your product is simply the way you solve a problem. Eventually, the buyer will need to believe your product solves their problems, but first, buyers need to know you understand their problems.
Eliminating Discounts With Value-Selling
As a general rule, you’ll find buyers will undervalue your products. They are often focused on solving a single problem and aren’t aware of the many benefits your solution might deliver. Great salespeople help buyers perceive more value by finding additional problems, results and future expected profits.
Buyers trade money for value. The more value they perceive, the more money they will spend. The single most powerful skill you can teach your salespeople is to understand and communicate value the same way your buyers perceive it. When salespeople do that, they can minimize or even eliminate discounting.