I was reading a piece recently where the author was building the case for a particular buyer behavior. He suggested that people desire not to take a risk over getting a better bargain. Which makes one think about price and risk, and the crucial risk in using price as a sales tool, as many do.
The majority of people, according to experts, about 70%, are risk averse, and will take substantial precautions to avoid risk. If you want to see this in action, just observe any rental car counter and watch them buy redundant amounts of insurance, all with the purpose of being covered for all risk. This incorporates risk that many already have covered by virtue of their current auto policy or other sources like their credit and debit card. (Disclaimer: I am not an insurance expert, please consult with one before renting). Pair that with the propensity to associate risk with the unknown, in sales that would be any provider who is not the incumbent, and you start to appreciate the challenge many salespeople have.
Even with all that has been written by many about the futility of selling on price, how it diminishes margins, which in turn has some detrimental effects, I continue to see salespeople (apparently professional sales people) spend extra time convincing their managers to make price concession to win deals. But if we take the premise presented as accurate, reducing your price could, in fact, be losing you deals, rather than helping you win them.
Picture it like this, every time you lower your price, you increase your risk profile, making it harder to get the buyer to pick you. The more of a bargain you try to be, the more you cause the buyer to stop and think. “Is this too much of a bargain, is it cheap because it is no good, is he willing to drop the price because it was inflated to begin with, is everything else he tells me inflated, ooh, I can’t afford to take that risk.” A strategy to explore is how by selling at full value and full price you could actually reduce the risk profile and improve sales. Yes I know, this may be difficult, but there are ways to do it.
Begin by adjusting your focus from the price side to the risk side of the equation. By this I don’t mean working on reducing your risk profile, but increasing the risk profile of where the buyer is currently. Given the propensity to avoid risk, and the premium people are willing to pay for safety, seems like a better idea than discounting.
This may not be easy, if there was a clear risk factor, the buyer would have seen it and acted on it already. Your task is to identify minute elements that if either left unattended, or combined can lead to insuperable risk. This requires that you as a sales person leave your focus on need or pain, being a “solution”, and focus on the buyer’s objectives. Unlike other sales people who beat the drum about a current risk, engage them on the risk of not achieving an objective that may be 18 – 24 months out. This probably will not be one or even two things, but a series of smaller risks, not scary on their own, but in tandem, they will lead to the big risk the buyer does not see, yet. Think of it like dominoes; it may not be the first, or the fifth, but if the sixth domino gets knocked down, it exposes the buyer to the big risk inherent in domino seven. Helping them dodge the first two or four dominoes from falling, will reduce the unseen risk, and help you drive full price, if not a premium.
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