That is Not Selling

People who offer to sell their products or services based on their position as the lowest priced competitor continue to baffle me. Selling based on the lowest price may sometime be a short term success, but it always becomes a mid and long term loser.

I practiced price cutting in the late 1970’s. Among the things I sold to doctors was a diagnostic test. My price was $1 per unit. Each test cost me twenty five cents, so this was a very profitable business. I had a couple of competitors who were just as smart (dumb) as I was. Over time, we all kept chipping away at the price we sold the tests for and the retail price was ultimately driven down to twenty five cents, my cost. Some knucklehead, with my help, had killed the goose. I got out. I changed product lines and immediately helped destroy profit margins and another great market.

Price is only one element of a balanced sales proposition. The other elements are quality and service. In the real world, a company that cuts to the lowest price is often unable to maintain high quality and responsive customer service. There is a cost associated with quality and service. Quality and service are paid for by margins from the transaction.

Using the lowest price to book business is not selling. There is absolutely no skill required. Just show up and give your stuff away…often for no good reason.

I was challenged by a young lady in a recent sales skills event. Her point was that people shop at Walmart because of their low prices. The point was taken and acknowledged. If you are selling commodities to the general public you have a tough time fighting for margin. Most of us are not selling commodities to the general public.

Based on this lowest price logic, we would all dine at McDonalds daily. After all, they have a dollar menu. You can get a sandwich, fries and a drink for $3.00. How do they do it? Why would anyone go to Morton’s Steak House and order a Porterhouse Steak when they could save big with a double cheeseburger? Better yet, could you imagine sitting down at Morton’s and attempting to negotiate a deal on the steak with the waiter? They don’t have to cut the price and they won’t cut the price.

The good news is that you do not have to be the lowest price offering…ever!

Why not offer the highest price? That’s a challenge.

You can be the highest price competitor. The key to getting more for your product or service is for you to clearly understand why your customer will pay more. What is “extra” worth and why? What additional value are they going to get for paying a premium? Your argument needs to be valid and you need to deliver the message convincingly. It’s easy if you know your competition, can determine why you and your company are different and better and then hold your ground.

I have a cousin who is a home improvement contractor. For his entire career he has charged a premium for his work. The outcome for his premium pricing strategy was that he didn’t get as many jobs as his competition, but his jobs were very profitable. The net result is that he worked less for measurably more revenue. He was able to differentiate himself from the competition and convince his customers that they would be better off paying him more for the project. By the way, his work was great and he delivered the value he promised. How dumb was that?

How can Cadillac, BMW, Lincoln, Audi and other premium brands survive if low price is the standard for purchase decisions? Are Shula’s, Morton’s, Ruth Chris, Capital Grill and Mitchells’ just money losing tax shelters? I don’t think so.

Really, being the lowest priced salesperson is not something to be proud of. There is no selling skills involved. Stop doing it. You just don't have to.