I was with a client group yesterday and the question came up, " what's the best way to deal with a prospect/customer that wants to buy on price?" My answer, simple, "have them call the people at Mattel Toys!" If ever there was a good example about the potential risk of buying on price and a situation to exploit it, just read the paper!



Our manufacturing community has been literally "decimated" by the move to off-shore sources with much of it going to China. "Why..." you ask, to get a lower price of course. Driven by the relentless price pressure from market gorillas like Wal-Mart, General Motors, Home Depot and every manufacturer of consumer and industrial goods the quest for "low price" has been appeased and has essentially "trumped" or ignored the economic reality that "you don't get low price without some consequences".

Unfortunately, getting a lower price always (notice the underline) comes with a consequence. Just like in the world of physics where "every action has an opposite and equal reaction", when making a decision on price there is always something you give up! In sales we always say there are no "free moves" and the decision to buy on price always requires that you give something up and is never free! For that matter, every buying decision that will ever be made always forces the buyer to give something up. The same principle holds true when you buy a high priced item, you give up money for the promise of better quality or performance.

The challenge for sales people is to have a complete understanding of their product/service value and to be able to direct a conversation that helps the customer understand what they give up, economically, if they make their decision to buy based on price. Unfortunately, and to often, sales people are not prepared to effectively handle "the price objection" and rely on outdated or "simple" selling methodologies that just don't work. For Mattel, having their own inspectors at the manufacturing plant and testing every batch was just to costly, and besides purchasing said "they assured us the fact that we buy this stuff cheap won't affect their (off shore manufacturer) ability to do quality inspections...", ha! Now we'll see how much the law suits costs.

Greed and fear drive the equity markets, and the same emotional forces that guide the market also guide most buying decisions. Our greed to make more money (buy low price, or high risk investments like sub-prime mortgages) go away when we figure out that the low price, or in this case high risk investments, could end up not being a good deal. Similarly, until you can create enough "doubt" (fear) in the mind of your customer/prospect that buying low price (greed) could actually cost more they will always choose price.

Action Step: Understand what the consequences of buying "cheap" are with the products/services that you sell. Develop questions around those consequences and use them to create enough doubt (fear) to get your customers to be willing to pay more and abandon the low price (greed) strategy!