Very often the message coming back from the sales team is that “our prices are too high”, but is this questioned enough? Market research often shows that customers only buy on price when they have no other comparisons, to quote a leading property developer “We do not go to the market looking for lowest price. There are other factors to consider….it’s really quality that’s the most important thing.” Quality is a benefit, and the important thing is to present sufficient relevant benefits to justify the price.
Even when you lose an order, question if price is really the cause. It is very easy for the customer to say “your price was too high” it’s a simple way to end the conversation, but might not be the real reason. So press further to find out.
I provided marketing support to a client who acquired their principal competitor. For years their competitor had beaten them on price and they had accepted low margins in the belief that the competitor had a lower manufacturing cost. After the acquisition they found that both had similar cost bases. Both had believed the competitor’s costs were lower and had driven down the market price, eventually resulting in one company going out of business.
Far better is to sell on benefits, demonstrating why your product delivers value and is worth paying a premium for. And if you are going to do that, a good place to start is with the architect or engineer.
As part of your specification strategy define the value your product represents. When I run training courses I’m always surprised by how few benefits the sales team can list. Market research with designers, installers and facilities managers can identify benefits which were not fully appreciated or understood. Often these are small things, but it all adds up.
Benefits fall into three categories. Functional benefits such as corrosion resistance, long life, colour range, recycled content. Some functional benefits are service based, created to allow differentiation such as design advice, standard specifications, BIM content or bespoke designs. Then there are emotional benefits – perceptions from your marketing activity; brand reputation, confidence in quality, sustainable. Finally there are cost benefits, not just price, but ease of purchase, time to install and confidence that the supplier will keep their promises.
Having established all the benefits your product offers you need to consider who they matter to. Low operating costs matter to the client, but mean nothing to the installer. Similarly good availability, short lead times and ease of installation all matter to the installer.
It’s important to sell-in the value features early in the design process. The Quantity Surveyor will often be the starting point for a project, defining a budget. Between 70% and 80% of a project’s costs are decided at concept stage and if your product has not been included at this point it will be much harder to justify a price premium later, even if you can demonstrate superior value.
Then when the Purchasing Manager says that your product is too expensive respond with some questions, based on your knowledge of why your product was specified and your competitor’s shortcomings. Questions such as “does it meet the specification?”, “is it available in the same timescales?”
Understand all of the features your product offers and promote the relevant benefits to each member of the project team. Get involved at an early stage of the design process, creating awareness and demonstrating how your product represents value. Then monitor throughout the stages of design and when it finally gets to the construction stage know what is important to the project and use questioning to understand how much is negotiation as opposed to a genuine price issue.