Every single day, salesmen, advisors and consultants try to convince potential clients to buy the products and services they offer. The most challenging task is to maintain their desired level of prices and markup.

For sales executives leading their teams, it is not easy to answer questions about how to defend your prices and keep your markup from getting lower. Wouldn’t it be easier to lower the prices of our products to match the competitor who is outselling us? Our markups are too high which is why we cannot meet sales targets.

Price and markup discussion is the most difficult stage of the sales process. Sooner or later, the dreaded phrase will be uttered, one that causes a lot of salesmen a whole lot of trouble: “What you are offering is too expensive for me”. The client pressuring us to lower the price or ease up on the markup can often make the salesman defensive and vehemently deny and make the client’s objections invalid, and eventually lower both the price and the markup. As a result, you end up selling your products or services at a much lower price or even losing the client.

The sales executive should make it known to the sales force that the prices were calculated and set according to the pricing policy of the company and it is not their job to make them higher, but to simply offer them to the clients. The executive should make the sales force realize that by presenting the value added of the products – quality, service, long-term relationship, customization - they fight to keep the prices and markups as set while also convincing the client that they have made the optimal choice. Every sales executive knows that their team should strive to maintain the intended price level when selling. If they do, the benefits include: higher profit, same level of commission for the salesman, avoiding a destructive price war with the competitor, a wide-spread reputation of a hardball negotiators in company X on the market (ones that believe in the value and advantages of what they are offering), a wider range of value added and increased investment opportunities. Let’s tackle the common myths that the executive can heard from their sales force.

The price myth

Granted, price is important, but is it the most important? If it was, the competition offering the same product at a lower price, would disappear from the market. That is not happening, quite the opposite in fact, the competition has their loyal clients, unfazed by price. Besides, an excessively low price can scare off the clients who value quality, guarantee, delivery conditions, punctuality and so on. Disclosing the price right off the bat is a mistake, as you would skip all the other negotiation phases (opening, scoping out the needs, negotiation, dealing with resistance or impasse). Price discussions always provoke emotions, not necessarily positive ones either. If you cave in too easily and lower the price, you are greenlighting the client to pursue further compromises. It will start with an inch, and end with a mile. By lowering the price to win over a client, you will only impress those who are the most price-sensitive. In dollar stores, for example, you will rarely see people queuing up, despite the extremely low prices. Price negotiation is a strategy applied by the clients as it is the easiest to cry high prices when rejecting an offer. List 2 or 3 benefits relevant for the customer before you even begin a discussion about the price, make sure they are of any value to them. Perhaps it will turn out that the products are not price-competitive after all and that is when you will need to pivot towards other important elements such as delivery conditions, prestige and so on. It is important that the sales force is well aware of that.

The competition myth

The clients like to scare the salesmen with the competitors, causing them to complain about being pressured regarding the many advantages and benefits of the products offered by the competition. However, the customers do the exact same thing while talking to your competitor. If a company that a salesman represents is doing alright, it means that there is demand for its products in a certain segment of the market and that it differs from its competitors. This is the part that the client will decide to leave out of the conversation. If the customer is praising the competition and is complaining about the products offered by the salesman it means they need it.

What every sales executive knows is that the task of the salesman is to determine what is it that the client values and needs. What the company and the salesman have at their disposal and what the competition does not, is particularly important. While discussing the price with the customer, what the competitor did or did not do, can be a strong bargaining card. If the client is trying to scare you with the competition, you should ask directly: “Why is their offer better than mine?”. Ask for specifics.

A professional salesman should always be prepared to discuss the price and the markup with a client and they should be flexible and quick to adapt to the constantly changing sales situations. It is worth appreciating constructive criticism from clients, although be careful not to let it undermine your confidence and be dominated by the customer. It is important that the sales executive, while setting the growth targets in the team, deals with the above myths and presents arguments against the price arguments posed by the clients. The competency and experience of the sales executive allow us to act quicker in order to prevent the sales force from getting discouraged by not being competent or able to maintain the set price and markup during sales talks. Common development exercises include self-improvement workshops (role playing and sales simulations), operational coaching, Q&As, topical meetings, instructional videos or mentoring. In any development endeavors, it is crucial to consider strategies to defend the price and markup level, because that is usually what makes or breaks the sale. How would this look in a simulation? Let’s see.

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