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Sales Training Article:Offering the Lowest Priceis Overrated
by Skip Anderson Selling to Consumers www.SellingtoConsumers.com
Some salespeople have a propensity for cutting their price at even the most subtle price-related questions from their prospect. When the economic climate begins to get challenging, many salespeople put extra effort into offering the lowest possible price for their product or service. It's true that consumers can be competitive shoppers, and sometimes a discount or other incentive can allow the sales process to move forward.
But being the lowest bidder in a competitive bid situation can work against you. Here is one example of this phenomenon.
In August of 2007, Minnesota's fifth busiest roadway bridge, crossing the Mississippi River on interstate 35W in Minneapolis, collapsed. Despite its demise during a late afternoon weekday rush hour, thirteen people died in the accident - far less than the fatality estimates offered by many immediately after the tragedy.
State, County, city, and federal officials quickly began planning the replacement bridge. Officials called for bids on this project and in mid-September 2007, four bids were opened and one bidding company was chosen to be the contractor for the project.
The bid was awarded to Flatiron Constructors, Inc., in a joint-venture with Manson Construction Company. The Flatiron-Manson bid was $234 million and included a construction schedule of 437 days. This was the highest of the four bids received by the Minnesota Department of Transportation. The construction schedule of the winning bid was tied with one of the other three bidders.
Other bids were received for $177 million and 367 days, $178 million and 392 days, and $219 million and 437 days, all less expensive than the winning bid.
According to various news reports, Jon Chiglo, the project manager for the I-35W project stated, "We might pay a little more but we feel that when we do that we feel we'll get a better value based on the approach that these teams are taking."
Customers who purchase all kinds of products, from home improvements to automobiles to art, often take a similar approach. Consumers will often choose to buy the most expensive option if other criteria, such as trust, reliability, and likelihood of satisfactory performance based upon the customer's perception of the seller's reputation or experience, are being met. Salespeople who disregard this fact and instead assume everyone is looking for the lowest price will miss out on many closing opportunities, and those transactions tend to be very profitable.
However, when presented with several prices for comparable products or services, some prospects are not so easily attracted to the most expensive option.
Many prospects find comfort in the middle ground when confronted with multiple bids. These prospects select the bid that is priced in the middle of the pricing range because they don't want to spend the required funds to acquire the highest bid solution, yet, they also don't feel comfortable selecting the least expensive. A fear of poor quality or poor reliability steers them clear of the lowest-priced bids.
By completing a thorough and effective needs analysis with the prospect, the salesperson can determine which pricing structure - high, medium, or low - will be most appropriate for the prospect.
This article here may be distributed or reproduced as long as an attribution to Selling to Consumers and Skip Anderson are included, along with either a link to this web page www.SellingtoConsumers .com (if in electronic form) or a statement including the web page URL (if in print).
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