With so many companies paying commissions as a percentage of
gross margin, it's tempting to quote full price - or at least a
very high price - when writing proposals. You'll certainly make
the biggest commission this way, but the question begs: will you
lose too many sales on price to make it worthwhile?
If you've read my materials before, you know that I am very blunt
about speaking the truth, and the truth is that price matters.
Lots of sales trainers seem to be in total denial of this fact,
and a lot of managers too, who just happen to be paid on profit
margin. They insist that if you're a good salesperson, you can
sell everything at full price. But in the real world, price
matters. Period.
Even when using the powerful profit justification techniques I
teach, if your price is out of line, it's out of line. Your
prospect will take your profit-justified proposal and ask a
competitor to provide the same solution at a better price.
As usual, this topic came to mind due to a real life experience
that happened to me. It was a conversation yesterday with a
friend who happened to be the prospect of a salesperson trying to
make a full-price sale. The moment she objected to the price,
the salesperson immediately offered a lower price. A much lower
price.
Her reaction? She was insulted - infuriated - that the sales rep
tried to pull one over on her. She rightfully felt that his
intent was to get as much money as he could out of the sale.
When the sale was in jeopardy, he instantly dropped his price.
After all, getting less money is still better than getting none.
I feel the same way when a salesperson marks up a price in an
attempt to make easy money off of me. I'm not stupid, and I take
it as an insult to my intelligence when it happens.
When I was selling based on margin, I gave a fair price up front
and stuck with it. I told the prospect flat-out that my price
was my best price and it could not come down any more. I
explained that I feel it's unethical not to give my best price
up-front because anything else would be an attempt to rip the
prospect off. Prospects identified with this and appreciated my
honesty and frankness. I got lots of sales this way.
In addition to angering prospects, quoting your full price will
also cause you to lose more sales than you know. Prospects will
consider your quote to be "out of the ballpark" and assume that
even if you can negotiate, you still won't be within their
budget, and as a result they won't return your calls when try to
offer that lower price. Quoting a fair price up front gives you
a much better shot at the sale.
Having said all this, quoting a fair price doesn't mean giving
your maximum discount on every proposal. Find the right balance
where your price is fair and competitive but where you're still
making a good commission. If your proposals are within that
range, you'll win plenty of sales and have a generous commission
check to show for them!
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