Dropping prices

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15 08, 2016

5 Reasons Why Dropping Your Prices is a Bad Idea

By |2017-03-03T12:06:48-05:00August 15th, 2016|Categories: Blog|Tags: , , , , , , |0 Comments

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Thanks to Preston D. Lee for image.

Thanks to Preston D. Lee for image.

Do  you think dropping prices are a bad idea?Long term it can be a really bad idea.

I was at a tag sale the other day and asked the woman if she considered  $1.00 for a $3.00 Christmas tree. “

“ I paid $50.00 for that wreath; she yelled; $3.00 is highway robbery. I can’t give it to you for a $1.00!” There are lots of things wrong with this scenario, the first thing is if you think your price is too low to start with why would you price it so cheap? And if you price it cheap, why would you be offended when someone tries to ask for a bigger discount?”

How’s this one; another friend told me she was selling at really low prices so she could get known in the business world. Hmn, known for what?

The biggest problem with this transaction is she doesn’t have any idea how to mark her merchandise or how to sell it. Does this happen to you?

It’s likely that none of my readers are working at a tag sale, but this is a good way to start a conversation about dropping prices.

If you don’t think your product is worth your price you will have a problem selling it.

  1. The most obvious problem is that dropping prices give you less profit. If you continue to drop prices, you will start to believe that your products aren’t worth your ‘asking price.’ The more you believe it’s true, the less likely you are to get your asking price. Giving something away doesn’t take much skill, working hard to get your price makes you a true salesperson.
  2. Dropping prices gets you bad referrals. Cheap customers are easy to get; what’s not easy is to get a customer who will pay your price and send you a great referral.  It’s worth it to understand your products and their value.
  3. Self-esteem is hard to get in life. According to Psychology Today by Neal Burton, self-confidence essentially means to trust and have faith in oneself. It is our certainty as to our judgement, ability, and so on—in short, our certainty as to our aptitude to engage with the world. Why would you take this away from yourself? For more on self-esteem, check out this article in Psychology Today.
  4. How will you stay in business by haphazardly dropping prices? I say ‘haphazardly’ because most businesses don’t have a system for dropping prices. In other words, they don’t have their merchandise marked up enough so that dropping prices  won’t hurt their margins.  They drop prices because they need the money.
  5. Dropping prices can bring in customers, give you cash flow and build traffic short term. Long term, you’re creating a very slippery slope. The customer takes her lead from you. Unless he/she has recently bought the same product, it’s doubtful they understand  pricing in general.

Remember just because the customer says the price is high it doesn’t mean they won’t buy your product. It’s likely they are testing you to see if you understand your own pricing!

Why drop your prices when you don’t need to? Need more help on on getting your prices? How about a webinar on pricing for your company? Call Lisbeth at 518.495.5380.

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9 03, 2016

Why Dropping Your Price Can Give You More Than You Bargained For

By |2017-09-22T12:32:31-05:00March 9th, 2016|Categories: beliefs, Blog, Selling on price|Tags: , , , , , , , , |0 Comments

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cost-cutDropping prices doesn’t benefit anyone; nope not even the customer.

If you’ve been in sales for any length of time, you may have said, “If I don’t drop the price, I won’t get the sale.” I’ve probably said it myself; that was before I realized what I was doing. I kept telling myself that getting the sale was more important than getting my price. What I was doing was killing my confidence. Whenever someone asked me to drop a price, I wondered if they had spoken to my last customer. I also thought will I have to go lower to get this sale? I was on my downward spiral.  I watched my sales people struggle with the same problem; how low should we go?

Inexperienced sales people will tell me they’re trying to show the customer they have fair prices. You don’t need low prices to show the customer you know what you’re doing. If you continue to do this, you collect ‘price conscious’ customers who will never pay a higher price.

Dropping a price is like telling a lie. You have to start telling more lies to cover up the other ones. Have you ever had an incident when a customer returned weeks later and you couldn’t remember the price you gave them? Telling lies can erode your confidence.

Cutting costs can put you out of business. Why would you want to do that?

According to Lawrence Steinmetz, in his classic book, How to Sell at Prices Higher than Your Competition, says the following: 

“Most Sales reps who are most successful DON’T MESS WITH PRICE-BUYERSThere are times when you just don’t sell.” This is an old book but everything in it is right on!

Besides, my experience tells me that  dropping the price doesn’t necessarily guarantee you’ll get the sale.Sometimes you’re being tested by the customer. Unless you’re really good at “the drop,” the customer often leaves and takes your lower price to your competition. I remember when I bought my appliances for my house 20 years ago. Those were the days with ‘price matching.’ I shopped until I dropped and finally said to one retailer, give me your lowest price so we don’t have to do this forever!

Let’s go back to why the customer doesn’t win either. If they pay less than your original ‘asking price,’ they wonder why the price was so high to begin with. Wasn’t the original price real? So now the price/value equation is lost. 

If sales are your profession, you have to protect its integrity as well as your own.  Great salespeople get pleasure out of servicing their customers, helping to solve problems and getting the best out of their situation. Price or investment is the byproduct of the solution and should not be the focus. Stores like the Dollar Store are definitely price focused.  However, when I’m in the store, I always look for brand names that are discounted. Then I feel like I get my dollars’ worth.

Consider that the customer is also trying to get their dollars’ worth. They want to know that their purchase is worth more than the price they paid. This is where you come in. It’s your job to explain to the customer that your product, and your brand are worth the price. You do this by focusing on the problem and defining it so when you come up with the solution, the price seems more than fair.

Successful salespeople rely on value rather than price to cement the sale. The customer has to decide that your product will do the job; until that is established, price never matters. If the product doesn’t work, why would anyone buy it?

Unless you’re the Dollar Store, price cutting will eventually lead you out of business. Isn’t that the first things businesses do when they’re going out of business?

Lisbeth Calandrino has been teaching  salespeople  the “price/value” equation for the past twenty years and how to sell at profitable prices. Lisbeth spent 14 years with 7 “liquidator furniture and carpet stores” in the Northeast. She has spent her life negotiating price. To have teach pricing strategies to your employees, reach her at 518.495.5380, EST or Lcalandrino@nycap.rr.com. Check out her website, lisbethcalandrino.com.

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