Stop cutting prices and start creating value

Your company's sales are sluggish, off target. Sadly, you’ve been down this road before. The reasons vary and seem to sneak up on your business, but there's a fork in the road and you need to make a move.

Why are sales down? Maybe it’s a customer that’s rarely happy with you, no matter what. Or, a particular competitor has become very aggressive in their marketing tactics. Maybe revenue just isn’t growing as planned and with 3 weeks to go in the quarter, your business is $235,000 off its sales target.

What do most companies do to remedy many of the ailments they suffer from?

They discount. This is not a right or wrong choice, but be aware this path is filled with hazards. Take it, and before you know what’s happening you’ll get stuck in quicksand. Trapped in an out of control spiral.

Discounting is a word that should strike fear deep into every company. Well, at least businesses that want be profitable. And grow faster than their competitors.

Discounting can create a boomtown of sorts. Demand improves, gross revenue goes up, the team gets excited and you celebrate, make new purchases and hire new people. Still, like every boomtown in history -- the oil wells eventually dry up or just as bad, overproduction caused by competition floods the market.

Others begin to drop their prices. So, you discount some more. What little margin you previously had is now gone. Ouch! Let’s call it the boom-bust rule of discounting.

But there is one particular type of discounting that is the most sinister and dangerous of all: volume discounting.

Offering volume discounts seems to make sense. You encourage prospects to purchase larger orders than they normally would with a big ‘ol fat discount. Better yet, have multiple discount steps to entice them to the next level.

But, once you go down the road of volume price discounting, a culture of endless lowering of prices is created. Buyer and seller expectations are shaped. The race to the bottom begins and it’s hard to stop.

Let’s talk about the volume discounting blues symptoms and the ways to fix it, fast.

Take your medicine and see me in a month if you don’t feel better. Sadly, discounting is almost always a knee jerk reaction to a symptom and not a strategic decision based on underlying issues. And when a disorder (medical or business) is not deeply diagnosed, the patient only gets temporary relief because there are deep, fundamental problems not considered -- especially when there’s a volume discount structure in play. Stop! All you’re doing is “training” your customers and salespeople to expect discounts as your normal way of business. And that will eventually destroy you sales.

Pricing success belongs to companies that plan for it. Most companies emphasize sales volume instead of profitability. That in turn leads to rewarding bad customer behavior. Think about it; once prospects know there’s a volume discount structure, in their minds you’ve sent a signal that there is a process in place to get a better price. In fact, buyers will believe that you’re holding out and can actually offer something beyond the “published” best price. Saying no doesn’t matter; they’ll just keep pushing. The assumption is that others must be getting better pricing. Every time a business offers a discount, the lowered price becomes the new standard for the customer and they’ll want more. Be prepared with a strategy and policy that modifies the buyer’s behavior and emphasizes value.

Modify buyer behavior with objective benchmarks. Now what? A customer drives hard for a more attractive deal and threatens to walk away if they don’t get their way. Sound familiar? Just like for your kids, positive reinforcement works really well. Instead of unintentionally sending the message that you’ll do anything for a deal, or find yourself at an impasse, avoid “reactive” discounting with a proactive strategy. Have a clear, no bending policy in place that mandates requirements of the buyer to gain an advantage. For instance, offer a good behavior incentive such as a sweet loyalty rebate once a threshold is met, or for adopting a cost saving behavior such as placing orders online or special shipping prices when literally filling up a truck with orders. Make the “reward” very favorable as long as it is very specific to the behavior you want that meets your goals. Don’t be afraid to add a premium for high cost behaviors such as rush orders and changes. Never allow exceptions.

Stop cutting prices and start creating value. If you ask the customer what they’re looking for to close the deal, don’t be surprised when a price concession tops the list. Well, unless you help them understand the full value of what you have to offer. A behavior modifying conversation with the buyer is one way to do that. Of course, from the first contact focus on how your product or service can add value to your prospect’s life and business. Bake value into your marketing and all of your conversations. And be prepared to prove that with demos, case studies, and videos with lots of testimonials. Customers who buy on price are simply never satisfied -- stop reacting and start managing with value.

Just say no to volume discounts! Pricing is a potentially powerful strategic weapon, no matter what industry you’re in and whether you sell business-to-business or business-to-consumer.

You may never eliminate volume price discounting altogether, yet you can keep from feeling pressure to offer constant discounts to make sales.

In Robert Frost’s poem "The Road Not Taken", a person stands at a split in the path they’re on and says, “Two roads diverged in a yellow wood, and sorry I could not travel both. I took the one less traveled by, and that has made all the difference.”

Your competition won’t travel down the no discount path. Will you?

Ron Stein is President of FastPath Marketing (www.marketing-strategies-guide.com) and the author of the Rapid Impact Marketing & Selling Playbook. As a speaker, coach, and consultant he works with small business owners helping them to accelerate the path between their vision and the actions needed to reach, win, and keep customers. Ron is the creator of the FastPath to More Customers Now! 7-step marketing system based on more than twenty years as a successful business owner, corporate CEO, business development executive, and salesman. He is also a mentor at two nationally recognized business accelerators. Ron offers one-on-one and small group mentoring, conducts seminars, and consults. He can be reached at 727-398-1855 or Ron@FastPathMarketing.com.