Who Cares About Price?
I read an interesting article recently in the Harvard Business Review by Steve W. Martin, “6 Reasons Salespeople Win or Lose a Sale,” presenting findings from his years of win-loss analysis and research. One the idea I particularly liked was the difference between price conscious, price sensitive and price immune.
3 Categories
Here’s what Martin wrote: “Price plays an important role in every sales cycle. Since it is a frequent topic during buyer conversations, salespeople can become fixated on the price of their product and believe they have to be lowest. However, decision makers have different propensities to buy, and the importance of price falls into three categories.
“For ‘price conscious’ buyers, product price is a top decision-making factor. For ‘price sensitive’ buyers, product price is secondary to other decision-making factors such as functionality and vendor capability. For ‘price immune’ buyers, price becomes an issue only when the solution they want is priced far more than the others being considered.”
If you can figure out where your buyer fits on that scale, you’ll be way ahead of the game.
Price and Profit
If you can sell at higher prices, you’ll make more profit. That’s a pretty straightforward concept, right? In execution, though, it often suffers from the perception that a low price is the best way to define value. As Martin points out, that’s true of some buyers, but not all of them.
I use the term “price monsters” to describe buyers who make all of their buying decisions strictly on price. What percentage of buyers fit that category? I’d estimate 20% would be the high end of the range.
So here’s the question. If only 20% — or less — of all print buyers are price conscious/price monsters, why should you focus on offering everyone your lowest price?
Risk Tolerance
The factor most likely to affect a buyer’s position on price is their risk tolerance. Printing is a custom-manufacturing industry, and a lot can go wrong between orders and finished products — from quality and service failures to the product falling flat on execution.
That, to me, suggests several questions should be added to your repertoire. In addition to spec questions, ask “How much risk do you anticipate with a project like this? What could go wrong, and how would that affect you?”
A high level of risk and a low level of tolerance would be a pretty good indicator of price immunity. A low level of risk and a high level of tolerance would be an equally good indicator of price consciousness. Think about the difference between a marketing manager who needs something turned quickly for a trade show and a purchasing manager ordering a commodity item with no deadline. I’m not suggesting that you gouge anyone when they’re desperate, but I am suggesting selling at the high end of your range whenever you can.
You should have a range on every estimate, from the premium price you’d like to get, to the lowest price you’d be willing to offer, while still having a satisfactory profit margin. Don’t forget that your secondary goal on every quote is to get the order — your primary goal is to run a profitable business.
By David M. Fellman
Dave Fellman is the president of David Fellman & Associates, Raleigh, NC, a sales and marketing consulting firm serving numerous segments of the graphic arts industry. Contact Dave by phone at 919-606-9714 or by e-mail at [email protected]. Visit his website at www.davefellman.com.