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Price Objections – Can You Handle Them?

Learn how to effectively handle price objections and you’ll increase the percentage of customers who realize the value in your product and services and purchase from you without focusing on price! Remember, only seventeen percent of your customers truly understand value is not embodied in price alone. That leaves fifty-six percent who can’t decide between price or value and the other twenty-seven percent who seek only the lowest price.

How does today’s businesses live with price objections? A keen staff who knows how to effectively sell products and services based on value and not price will bring the “price giant” down to size. Not an easy task when today’s market is flush with people who have money, but are constantly barraged with price-busting campaigns from every discounter in sight, all scrambling for a piece of the pie. In addition, since customers have so much available to them in the market, there’s little to stop them from talking to your competitors, who, of course, will offer them the same thing – only for less. The critical key here is can your sales staff step to the plate and deliver the presentation that will teach your customers what the difference is between price and value?

PRICE – WHAT IS THE RIGHT EQUATION?
What does it really cost to purchase an item? Most people will think the answer is reflected in the price tag. They have been “mis-educated” to believe that price equals value when in reality the savvy business person knows that price minus cost equals value. We must be able to teach our customers that price is merely the money they pay up front. Cost is what it takes to keep the product whatever it may be, in peak condition, season to season. Value then is anchored in the comparison of price to the cost of maintaining it over time.

If a customer purchases a lawnmower, for example, from you but can’t get it serviced promptly or effectively, then the cost of the mower shoots right up. Customers who spend most of their time waiting for their items to be serviced or repaired do understand that cost is escalating. If it wears out faster than expected, cost is more than they expected. They may have paid less up front, but quality, durability and reliability affect the actual cost. Those customers who are looking for merely low price tags from your discount competitors will find that their cost over time is actually greater than the price. Our challenge is to effectively define the difference between price and cost for our customers. A HVAC dealer with a clean, bright attractive showroom, a top-notch service department with uniformed technicians and a knowledgeable staff may present a higher price, but if his products last longer and service response is exceptional, cost, in the minds of the customer, deflates and value escalates.

UNDERSTAND THE ELEMENTS
Price objectives do not have to be the giants we allow them to grow into. Understand that most customers base the cost of making a purchase on several elements. Learn to incorporate these elements into your sales presentations and you will find that the successful response to objectives is not to cut price.
Ease of making the purchase:If you want people to buy your products, goods or services, they must be readily available to them and easy to purchase. Do you have the latest models and styles in your showroom and are they available? A customer who purchases a snowmobile and then can’t have it delivered until mid-season will think the discount dealer is more attractive the next time around.
Reliability:Reliability to directly related to cost. Customers want to know if their snowmobile will provide years of enjoyment for their family. Is it durable and safe? Is it easy to trailer?
Predictability:Many promises are made in selling that aren’t kept. An unmet promise is a cost on its way up. Make everything you promise anchored in reality. If you offer the best service in town, then be the only dealer who services your products overnight with free delivery.
Satisfy needs:Customers have multiple needs. A customer may purchase a motorcycle for fun and enjoyment, but he may also be looking for an opportunity to take his wife on a special cross-country trip. If you can offer information on motorcycle clubs and and put him in touch with a trip consultant then you have met another need. Value goes up.

Customers want to save money, but not every customer will demand the lowest price.

Saving money is not always related to lower price. Saving may be represented in the ease of transaction or the comfort level in shopping or the risk factor. You can purchase almost anything over the Internet today – but the risk may not be worth the savings. Who do you talk to if you have a problem with something you purchase from a computer-generated image?
Response: How you handle your customers after the sale has a great effect on value. Do you respond promptly to questions or problems? Can you offer effective solutions in person and not with a form letter? How do you respond to the customer who is not satisfied?

There even more elements involved in making a powersports purchase than I can discuss here. The greatest challenge we face is to support our uniqueness and difference when faced with price objections. Whatever that is for you, find it and present it to your customers instead of defending price.

Attention Independent Business Owners! Do you have a question that you would like Thom to address in a future article? Fax your questions to Thom at (612) 896-9784 and he will offer a strategy-based solution in the next article!

Thomas J. Winninger, author, speaker and strategist, is under contract with 70 major companies in North America to ensure their competitive market dominance. He is the author of several dealer-focused books including Price Wars: How To Win The Battle For Your Customer ($24.95) and Hiring Smart: How To Grow A Team That Wants To Work ($15.00). You can contact the Winninger Institute at 800-899-8971; e-mail at twinninger@aol.com; web site at www.winninger.com.

Successful Business Customer Care Strategies, Thomas Winninger

Choices – Three, Never More Than Four!

Choices, choices, choices! In today’s strong economy, customers have so many choices of what to buy, where to buy, when and how to pay, why should independent business owners be concerned with giving customers more choices? Because one of the key responsibilities of any successful leader is to help customers sift through the myriad of choices available in the general market and guide them toward our products. The challenge for us is to effectively offer choices without confusing the customer.

I have always followed the rule I learned many years ago from Ray Kroc, founder of McDonald’s, the key to having your customer choose you is to offer choices of your products and services. “Every customer needs choices,” he said. But Ray’s rule was to offer customer three choices, yet never more than four. What kinds of choices are we giving our customers? Don’t force your customers into shopping you against your competition by giving them only once choice of how you can meet their needs or solve their problem. Now you might be thinking, “I give my customers the choice of everything I have in my showroom!” However, with that frame of mind, we are really offering them one overwhelming choice. In essence, we are saying, “It’s something or nothing.” Always remember, a large inventory does not constitute offering choices. Choices must be based on benefits and satisfying your customers’ needs.

PACKAGING
The real key of offering choice is effective packaging. Choices can be offered by packaging models, features, function, etc. A simple but effective example of packaging choices is the method followed by the coin-operated car wash bays. For one amount, the lowest, you can get the Basic wash, rinse and power-dry for your vehicle. Add $1.50 more and you get the Deluxe wash, which includes the basic items, plus wax. For $2.00 more your vehicle gets the Super-Deluxe Care Package which includes the whole job plus under-carriage super power wash and premium wax. You can see how each choice offers more to the customer. A “sell easy” example in the manufactured home industry might offer the following packages:

Package A: House delivered to a building site and laid onto foundation – $50,000.
Package B: House delivered to building site and laid onto foundation, includes utility hook-up with septic and well – $65,000.
Package C: All of the items in Package A and B, but the customers receives assistance in selecting the right lot and placement for the home – $75,000.

The key is to give your customer choices of you, you and you – not you or someone else!

SET A BENCHMARK
A savvy business leader can effectively offer choices and can count on selling more of the higher priced choices by starting with a benchmark package. Choose a basic
item at the lowest price you can offer. This is the benchmark product. Then add accessories to add value. For example, you might offer:

Customer’s Choice: A gourmet cooking set, with a complementary utensil set at no charge.
Silver Choice: Same cooking package utensil group, but with a complete cookbook set.
Premium Gold Choice: All the previous items and including a premier quality knife set.
With each choice, you have added price to the benchmark, but in small increments, with the smallest increment added to the most expensive choice. The customer sees greater perceived value in the Premium Gold Choice and his response is likely to be, “It’s only $300 more and look – I get everything I want.” You will also anchor your customers to you because you have taken them from selection to choice. Selection is two. Choice is three. The third choice has to be extended in terms of value, but not extended in terms of price.

Accessories are an important part of offering choices but will not boost your sales if they are detached from your benchmark. A lawn care dealer may have a showroom full of accessories, but realizes he doesn’t sell very many. If he has them positioned as stand alone items, I can assure you they won’t. Accessories need to be connected to the featured items. Most customers want to make one purchase decision. The more decisions a customer has to make the more complicated it becomes. If you have a primary choice item on the floor and the accessory choice on the wall, your customers will think by purchasing an accessory they are increasing their cost. The accessory will likely stay on the wall.

SELL EASY RULES
Rule Number One: Offer at least three but never more than four choices. Take your basic product or service and accessorize it into three choices for the customer. Each choice should cost a bit more, but each choice must offer more value.
Rule Number Two: Build vertical packages. Packaging is not just offering more accessory choices but rather building an accessory package around your benchmark item.
Rule Number Three: Price vertically. Always spread the difference in price between package A and B wider than you split the price difference between B and C. Make your greatest value choice the smaller margin difference.

Thomas J. Winninger, CSP, CPAE, and member of the Speaker Hall of Fame is the president of Winninger Institute for Brand Strategy and over 70 major companies in North America depend on him to assist them in maintaining their market dominance. Thom is the author of best selling “Price Wars”, “Sell Easy”, and new in 2000, “Full Price!” Contact the Winninger Institute at (612) 896-1900
E-mail: thomas@winninger.com; or visit our website

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