It’s okay to lose on price. It’s okay—and it’s necessary—to walk away from business where you will lose money. Your company’s business strategy requires that you walk away from this business.
There are still plenty of buyers that buy on price alone and refuse to admit that they buy on price. There are even more salespeople that have trouble defending their price and that don’t make the effort.
You Must Believe: If you don’t believe that you are worth paying more for, neither will your clients. It is amazing how much belief matters here. Not your client’s beliefs. Your beliefs. You have to believe you are worth paying more if you are going to defend your pricing. If you don’t believe that you create more value at your price than your lower-priced competitors, then your prospective clients won’t either.
You Must Explain: You have to be able to explain the difference between price and cost in a way that is meaningful to your prospective clients. It isn’t enough that the pricing difference makes sense to you. It must make sense to your prospect.
If you have a higher cost structure when it comes to producing what you produce, you have to translate how your higher cost structure translates to greater benefits for your client. It’s not your client’s job to figure this out on his or her own.
If you don’t know how to talk about the difference between price and cost, you are going to have to learn. You can’t defend your price without defending the additional value that you create. You are going to have to demonstrate to your dream clients how the greater investment is going to be put to use in getting the result that they need.
You Must Teach: If you don’t teach your dream client how to help you defend your pricing, they won’t defend the decision to choose you. And it is likely that they won’t choose you either.
Your contacts are going to be asked why they are spending more on whatever it is you sell. They are going to be asked to justify their decision. You have to provide them with the ability to make that defense. You need to provide them with the argument they need, as well as evidence that it is a good decision.
If you want to capture the price that you need to produce the value your client needs, you have to believe that your price is necessary and worth defending. You also have to be able to explain how your pricing helps your client to achieve their goals, and you have to teach them to defend your pricing and their decision to choose you.
It’s okay to lose on price when that is your prospect’s primary decision criteria. It’s not okay to lose on price because you could not—or didn’t—defend your pricing.
Are you prepared to defend your price?
Do you believe your price is right and that it allows you to create differentiated value?
Do you know how to defend your price? Can you tie it directly to the value you create?
Are you prepared to prepare your clients to defend your pricing inside their organization?