September 15, 2011 Leave a comment
That is the question every business should consider: Whether it is better to suffer the loss of a sale than defend against a sea of diminished revenue?
It seems now days most businesses have forgotten to ask or ignored this question entirely in their sales process. The history of when this happened is really unimportant, a far more productive approach is to look at what the situation is, understand why it occurred and how it can be changed in the present to create a more profitable future.
So where the bloody sell are we?
The answer is simple. We sell on price and now we buy on price, value and quality are a secondary notion. The situation is that discounting is the easy sell and so in turn it becomes the easy buy. Businesses have survived for too long on this factor, there is no such thing as a free lunch and it is the margins that pick up the tab. This is evident in the astounding success of so many group-buying sites such as Groupon, Cudo and Spreets. Even more astounding is that businesses have fallen for the trap and actually paid to devalue their offering, worryingly some are even happy about it.
Discounting indiscriminately for no reason allows regular customers to pay virtually nothing for the services they were previously happy to pay for and new clients to exploit the offers, often unwilling to return when faced with the going rate. How a business hopes to sustain its future by replacing good (paying) customers with bad (discount loving) clients is a mystery. An unjustified discount becomes the normal price, this makes it infinitely more difficult to reward loyalty or provide buying incentive without damaging the profits.
The spiraling decline in pricing, quality and brand value was fast enough in the face of competitive pricing but the immensely popular group-buying model has alarmingly exacerbated this into a shear drop. The good news is we’re selling more; the bad news is that we’re making less!
Why are we in this mess?
Because those that can, sell and those that can’t, discount. Unfortunately those that can are now a rare breed. The fact is cheap is the easy sell, not the good sell and businesses have tended to follow their competition rather than be bold and stand for something unique. Part of the problem is that once you discount you have little or nothing to reward loyalty with and so the land grab becomes more important than the existing relationship. This progresses the spiral ever downward as new customers have no loyalty and compare the rates of competitors forcing the hand of the business to better the pricing of a rival, further reducing the value of the products, brand, margins and profits. But the blame cannot lie on the business alone, we all complain about the state of the world, uneasy with the thought of sweatshops and child labour, the reality is that buying cheap is supporting the problem. Changing the world is easy, pay more and demand more, after all the greatest dictator is the dollar and the strength in every negotiation.
The sad fact is we got here by being easy and selling ourselves short, by being cheap and putting up with less.
So what’s the trick to the fix?
The solution is a basic one. Companies need to train their sales staff on the art negotiation. Placing a greater emphasis on value than price, thus setting the tone of the ongoing relationship and benefits of doing business together. Sales targets need to be set and rewarded with the focus on quality of sale instead of quantity. New selling techniques need to be explored, challenged and perfected based on added value not reduced price in order to move away from the current discount culture.
Put simply businesses need to pay closer attention to the quality of the sales and sales staff rather than the quantity of sales and sales staff. The market share and growth of a company is better captured & maintained with value than price.
A great example of this is Apple; their policy of maintaining product value has afforded them the innovation and quality of manufacturing to become an iconic consumer brand and sustain continual growth.
Consumers need to be made aware that paying more gets more, that loyalty is rewarded with benefits unavailable to the new customer. That quality and value comes at a price…
In the words of Warren Buffet. “Price is what you pay. Value is what you get”.