Best Price or Biggest Margin?

by Frank Rumbauskas

Published on this site: November 7th, 2005 - See more articles from this month

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!

Frank J. Rumbauskas Jr. is the author of the hit sensation Cold Calling Is A Waste Of Time: Sales Success In The Information Age. His training and products teach salespeople how to generate hot leads without cold calling and how to keep their power and remain in control of sales situations. For more information
please visit http://www.nevercoldcall.com