Selling To Small Business

Selling To Small Business - Strategies to help you sell to small business entrepreneurs

Thursday, November 1, 2007

Avoid Cutting Your Own Profit Margin and Sell on Quality

Guest Contributor: Albert Luk
Albert's Posts - Albert's Site


"Is that the best price you have?"

"I can get that on-line for cheaper"

"Can you give me a discount?"

Do your potential clients ever say any of the above to you even though you sell a high-end good or service? It is a reality of our existence that our clients and customers have been conditioned to ask for, or demand, loss-leader or low margin pricing- chalk this up to the side-effects of the Made in China/commoditized world we live in. But, if you sell non quantity priced goods or services, how do you avoid falling prey to "the cheapest goes the sale" syndrome?

It is admittedly an uphill battle but here are a few tips to help you avoid cutting your own profit margin and selling on quality:

1. At $4.00/cup, Starbucks' prices brand them as quality. Are you doing the same? Remember that the paramount concern for every client/customer is "what's in it for me?" They may not realize you are selling a quality good or service immediately because they are thinking of the me factor. Show them that you are a quality good or service with your price point, branding and sales/marketing collateral. How does Starbucks get away with charging $4.00 for a cup of coffee? They put the coffee in fancy cups, have a great logo and their stores reflect a high-end design not traditionally seen in coffee shops. Starbucks has set the stage for customers paying $4.00 a cup of coffee without ever saying a word by the environment they create when you walk into their stores. If your product/service invokes the same sense of quality by its pricing, branding and marketing material you are implicitly sending a message that you do not engage in quality pricing.

2. Know who the quantity pricing clients are and walk away. Being a lawyer gives you a glimpse into human nature and I am often surprised by how convinced people are that they can change someone's mind. In my experience, rarely is this the case when it comes to spending someone's hard earned money. If potential client leads with questions or comments like "how much do you charge?", "I would like a free demonstration/consultation" or "I want your best price" at the outset of the conversation, chances are it will be hard to sell on anything other than quantity pricing. Avoiding cutting your profit margin means knowing when to pick your battles and walking away from the quantity pricing clients.

3. People will pay to feel special. The paradox of our market is that people will either demand loss-leader prices or pay for luxury (don't believe me? Look up the stock prices for businesses like Ralph Lauren or Gucci). Small businesses will pay a premium if they feel their solution is a customized for them and just not off the shelf- people like feeling that they are not just another number. For example, I have seen and heard of small businesses paying in excess of $15,000 for a website designer to build a customized and "one of a kind" website tailored specifically for the business. Clients don't usually have a large issue paying for such luxury pricing because they know they are not buying a website built by easily downloadable templates. If you can customize or tailor your product/service, you can increase your chances of charging quality pricing.

4. Keep it simple though. Apple has a very devote and loyal following among certain sub-industries of the small business world. Why? An Apple computer is a luxury item (by industry standards) but it is easy to use. You get what you pay for in life; people will pay a premium for a simple and easy to use product/service if the alternative is cheap but troublesome. For example, Herman Miller, a furniture designer, has not had too many problems selling $1,000 office chairs since they are simple and elegant to use whereas the $100 knock-off may give you a bad back and may have to be replaced every year.

5. At the end of the day, it is always about the relationship. Building customer loyalty and trust will increase sales success no matter what you are selling. Apple's remarkable turn-around is due in large part to the amazing brand loyalty and trust it has built with its clients.

Best of luck. See you next month.

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Selling To Small Business