Regardless of the crisis your business may be suffering, nothing will have a more adverse effect on your company’s gross margin than failing to prepare your people to deal with the price objection.
My goal is for this article to target sales managers, owners and managers, the positions in every company that are charged with keeping the sales force prepared to respond to the price objection. There never has and there will never be a time in the life of a business when customers and prospects don’t use every possible skill they possess in an attempt to extract a lower price from their suppliers.
How prepared do you believe your salespeople are to deal with these attempts to buy at a lower price?
FACT: Management has given approximately 73% of the outside salespeople in our industry some degree of pricing authority.
FACT: Pitifully few of the salespeople in our industry who have been given pricing authority have been exposed to in-depth training on how to deal with the price objection.
FACT: Over 90% of the building supply businesses in the United States and Canada go to market with competitive prices. When salespeople allow themselves to be persuaded that the prices they are authorized to quote are not competitive, they are compromising their company’s pre-tax margin by as much as 50%.
The key is education. Take the time to either hire a professional sales trainer to train your people or train them yourselves. But train them! When I became a salesperson, my company spent not even one minute discussing with me how to respond to a customer or prospect who blatantly told me that my prices were not competitive. As a naive new salesperson, I believed them, and even though my particular company gave me no pricing authority, I was intimidated into taking the authority.
And when I met a fictitious price (that I had no authority to meet in the first place) the customer or prospect would typically shop that price right back to his current supplier. When prices lateralize in this manner, no one (manufacturer, dealer, or contractor) has very much confidence that they are—with regard to pricing—being told the truth.
Is it possible that members of your sales force are being manipulated by their customers and prospects? Is it possible they’re guilty of using below-market pricing to make more sales? I can just about guarantee you that the answer is yes.
There are several professional sales trainers who specialize in the LBM industry who are highly experienced at teaching salespeople how to sell without attempting to “buy” their way into the market. But if you believe you can do the job yourself, here is a training technique that has worked well for me:
Sit your salespeople down in a large enough room to space them six feet apart (social distancing). Give them some writing paper and a maximum of 30 minutes to write out their responses to the following questions:
- You quote your customer a competitive price and the customer responds: “You’ve got to be kidding, you can do better than that! What’s the best you can do for me?”
- After quoting a prospect what you believe to be a competitive price, the customer says: “I’d like to give you a chance to show me what your service is really like, but after doing an apples-to-apples comparison, you are $1,544 If you’ll reduce your quote by $1,544, I’ll give you the order.”
Your salespeople’s answers may be extremely eye-opening.
Bill Lee is a respected sales and business consultant in the LBM industry. For more information, contact Bill at firstname.lastname@example.org