The Mind Set of Price

“A Penny Saved is a Penny Earned” – Benjamin Franklin

“Always Get the Best Price, Therefore the Best Deal”

“Never Pay Retail, Always Pay Wholesale!”

In a perceived constricting economy coupled with dismal daily financial reporting, our customers’ and prospects’ desire to cut costs in any manner they can, is influencing their buying decisions more than ever before. This affects current, ongoing and newly projected purchases for 2009.

Reinforcing this picture, retail has a projection of 40% closure rates, including many household recognized names. Many economists are stating that overall there may be 20% shrinkage of private sector businesses, no matter what the field. This means that your current and perspective markets may shrink at that same rate. You’re not losing customers and prospects to competitors; you’re losing them to closure. This places greater pressure on your sales efforts to attain sales forecast at full margin, just to stay even with last year.

So how does this climate influence our businesses and your sales efforts? Well, knowing the enemy is the first step. Yes, there is pressure on all fronts to get the best price. No matter what your prospect states, this decision factor is playing a bigger and bigger role.

What is price – is it the same as cost? The answer is, of course, no. Very simply stated, price is what you pay for something, while cost is what you incur after purchasing.

The total cost of ownership needs to be addressed now more than ever before. So what are the components in determining this?

The True Components Effecting Cost

· Quality of product

· Ease of use or incorporation

· Timeliness in delivery

· Communication

· Support and expertise

Quality of product or service – Does it do what it is supposed to do the first time, or is there a constant reworking to fit the prospect’s requirements?

Ease of use – Is it “plug and play”? If not, does the supplier of the same provide the appropriate training so it appears so? Dealing with a provider shouldn’t be a chore.

Timeliness in delivery – When will it arrive is not a question that a client should be asking. They should know and be able to count on the stated schedule.

Communication – If there is an issue or difficulty, can I get the right answers when I need them; or does it seem that since the sale has been concluded, the client becomes a second-class citizen?

Support and Expertise – Does the provider really have the tools to deliver on their promises? Can they create what you need the first time, or do they take a “shelf-product of solutions” and make you conform to their requirements?

So let’s suppose that the saying, “You really do get what you pay for” is now more pertinent than ever. What happens when a disappointment occurs in any of these cost components? First of all, if a company buys or sells based upon being the lowest priced provider, what happens if and when things go wrong; and they always do?

Typically, if the product was sold on price, the provider generally does not have enough margin built into the price to care for and promptly fix any of the above-mentioned issues. In fact, since they sell on price, usually support and development capabilities are either very stretched or even mediocre. Low-profit margin companies rarely have the expertise, personnel, support or financial backing; they can’t afford them.

We need to be addressing, not the price prospects pay for products or services, but rather what they may experience when they are disappointed by a low-priced provider.

What do they experience when what they bought doesn’t work as they thought?

What support is provided when they need help?

What happens to their production and promises to their clients if they can’t deliver on time?

What does this cost?

When you add these real business experiences and associated costs, it gives us the true price, which is the “Total Cost of Ownership”.