Top 7 Reasons Why Sales People Cut Price

1. Why sales people Cut Price? Russell Sarder Chairman and CEO NetCom Information Technology
2. Because they can
3. Fear of losing the deal
4. Lack of Confidence in what they sell
5. Lack of skillon how to sell value instead of price
6. Projection I shop price, doesn’t everyone
7. Mixed Messages given by Sales Managers
8. Over identification with clients
9. Russell Sarder Chairman and CEO NetCom Information Technology Web: www.netcominfo.com Blog: http://russellsarder.wordpress.com/
10. Concept source / Book • Value based selling by Tom Reilly • Pricing for profit by Dale Furtwangler

Editor's Notes

Personal story: Blooming date => Tuxedo story => 25% discount even thought I didn't ask for it.

Companies give their salespeople authority to discount, oftentimes without adequate preparation and the information they need to make prudent pricing decisions. Most salespeople lack the innate knowledge and skill to hold the line on pricing. Additionally, they make lack the discipline. The irony is shocking. What they lack they need to make prudent decisions. Instead of giving them training and policy guidelines, their companies give them authority to do what they are unprepared to do .
NetCom Story: CISCO Discount didn’t work (gave out of fear), Buy 2 _get 1 in charismas due to fear, 2009 (no discount, better sale)

Some salespeople fear losing the sale, losing a customer, or being perceived as gouging the customer. Fear can be an inhibiting force. If you fear losing the business, is it because your product or solution’s value is too low for the price that you’re charging. Cutting the price is only one way to respond to this. Adding value is an alternative to balance the value equation.

The fear also comes from not understanding the full impact of our solutions to customer’s business.
Lack of confidence in what they sell
Some salespeople don’t believe their solution is any better than the competitor’s. They feel unjustified in charging more than competition.
These salespeople need to do some in-depth soul-searching. They should study their product features and benefits and their company’s value-added services. They should also study the competitor’s vulnerabilities. If you conclude, after studying, that you’re no better than the competition, you could be working for the wrong company.

Confidence comes from knowledge. When you know how to quantify and communicate the value of our offerings, when you know that you’re charging a fair price, when you know how to bundle offerings to meet a variety of budgets, you’ll have the confidence you need to:
Attract customer who value what you provide
Gracefully walk away from prospect who don’t
Avoid the scarcity mentality that plaques many business owners and sales people
Personal story:

No one has taught these salespeople to sell value added. They need training in the principles, strategies, and tactics of Value-Added Selling. Selling value added requires knowledge and skill.
This is one of the most common reasons salespeople cut price. If a salesperson is a price shopper in his or her own life, that salesperson will get more price objections than average salesperson. Why? This salesperson projects his or her feelings onto the buying by rationalizing, “I shop price, doesn’t everyone?” He or she assumes that price is important to everyone. If one is six shoppers is a price shopper, one is six sellers is a price seller. You sell price because you buy price.
Managers support Value-Added Selling as long as it serves their purposes. If capacity drops for a month or two, management gets nervous and may decide on a short-term, volume-sales mentality: sell more at a lower price, and make it up in volume. This confuses customers and frustrates salespeople. You cannot expect your salespeople to hold the line of prices if you change your mind and blow with the wind.
Some sales people cut price because they over identify with customers. Sales people experience this feeling when their personal attachment to buyers clouds their vision and causes them to make decisions based on personal relationships rather than business principles. This is one reason you must maintain some professional distance so that you can make the tough decisions regarding your customers.
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Editor's Notes