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Discount Debunked!

Discounting is weak selling...


For many years, and coming from a sales background, I am convinced that price isn't everything when it comes to buying something. Research backs this up with the following considerations rating higher than price in a global survey.


In no particular order:

  • Quality

  • Brand

  • Performance (reliability and functionality)

  • Design

  • Uniqueness (Value adding feature or functionality)

  • Overall Customer Experience when purchasing


If you think about the appliances in your kitchen, I am sure that one or more of the above was more important than the actual price. Is it the right colour (design) to match the rest of your appliances? Is it the right size (performance) to fit inside my kitchen? Is the Brand (brand) suitable for my social standings? Or was it just about the price? If it was just about the price, then all your appliances would be white!


At this stage, I want to include in my own addition to the considerations list. And that is convenience.


Being able to buy something easily, for me, is more compelling than getting a slightly better deal somewhere else. If I'm already in your store, it's convenient for me to buy from you - so long as your price (yes price) is reasonable in comparison to whats out there - not necessarily the cheapest price, just reasonable.


But not everyone is like me. And this got me thinking about what determines things like convenience, price, availability etc. for different customers. Is there some underlying link, thats unique to each individual customer, when it comes to consideration factors influencing a purchase?


A good friend of mine recently bought a VW. When I asked him about his consideration factors influencing his purchase, the following was revealed.

____

  • He was determined to buy a specific VW

According to him, he had done, sufficient research to be confident in his choice of VW.

  • He was determined to get the right price.

In his opinion, he had done most of the work himself, so why should he pay extra for 'professional car advice'

  • Convenience

He wanted to buy his VW from his nearest dealership, but only of they could get him what he wanted, at the price he wanted.

____


In the above, Brand still trumped price. He was determined to buy a VW at the best possible price, not any Brand at any price. So the theory holds true.


But I still think there is more to this that meets the eye.


In sales, you need to maximise your profit opportunities in each deal. After all, the more profit you make in a deal very often leads to more money in your back pocket in commissions. For sure, discounting is a reality, and many customers ask for and even expect a discount. They do this, in the majority, to feel like they have 'won a little battle' in the deal and feel better about themselves. So most of the time, yes, discounting is a reality.


Let's say on average there is around 10% variable / discountable margin in the product(s) you are selling. Off the bat, and knowing that you will probably have to give a discount, let's set ourselves a standard discount of 3%. Now imagine that the above consideration factors, including my added convenience factor, all held a potential profit defending weighting of 1%. In other words, for every consideration factor you can place ahead of price, you get to retain 1% additional profit. In total, there are 7 consideration factors representing a total of 7% potential profit retention. So the 3% standard discount plus the 7% in consideration factors equals the full 10%. Got it? Great!


The goal is to position as many consideration factors as possible ahead of the price or discount factor. In the example of my good friend buying the VW, the only consideration factor ahead of price was Brand. Therefore his 'discount bargaining power' would be the standard 3% plus 6% equalling a potential 9% discount. Not much in the way of commissions to the salesperson unfortunately...


And so on to the wicked twist in the tail...


The 7 consideration factors are not entirely in the control of you the Salesperson. They are solely determined through the eyes and emotions of the customer.


You cannot convince anyone that they should pay more for design if they don't see the value in design. Simple as that.


So where does this leave you the salesperson? How do you protect the other 7% potential profit retention in terms of the consideration factors, if none of the consideration factors are in your control?


The truth is a double edged sword. Because as much as you cannot, you can!

It will all depend on the customer that you are dealing with.


Let's look at the cannot's first.


If the customer sitting in front of you, is determined to push the discounting limits, then thats whats going to happen. You will win or loose the deal based on your offer vs. competitive offers. Simple as that.


The flippen great news is that this is the ONLY situation that does not allow you to influence the other 7 consideration factors! And this should only happen when you are competing with the same product(s) within a franchise (VW against VW, not VW vs. Toyota for example). The bad news is if you, as a salesperson, only sell on price, then you are, well, screwed, and you can stop reading now...


Lets now look at the can's list - far more interesting!


The first thing you need to do, is become a Product Expert on ALL products that you are responsible for selling within your Brands portfolio. Be that 'go-to person to speak to'. You absolutely have to know every little detail about your products, and you have to be passionate about the Brand you are selling. The rationale behind this statement is simple. Most of the time, customers believe they know what they want based on their research. But as I discuss in my TEG Talk 'SalesGate: Customers know everything!', I debunk the fact that customers know everything, even with all the online information at their fingertips 24/7.


There is always a tit-bit of information that a customer does not know about that can spike their interest in your product even more! The challenge is that each customers tit-bit of information that spikes their interest is different. So you need to know 100% of what it is that you are selling, in order to focus in on that unique 1% of your product that spikes your customers interest. By doing this, you can increase your product(s) Uniqueness Consideration Factor, as well as offering your customer an increased 'Overall Customer Experience when purchasing' consideration factor. Thats an addiotnal 2% profit protection right there!


The second thing that you can do is realise, appreciate and believe that your Brand is not the same as another Brand. You don't sell the exact same product(s), offering the exact same solutions. Knowing what makes your product(s) uniquely different and better qualified to solve your customers needs over the competition allows you to influence some of the consideration factors.


For example: If your product out-performs your competitors in a certain area that is of importance to your customer, you can use this knowledge to increase the 'Performance' consideration factor in the eyes of your customer. And thats another 1%!


The third thing is a biggy. The transactional complexity of the purchase process in the eyes of the customer. The just of the Transactional Complexity discussion is that the more complex a transaction is, in the eyes of the customer, the greater the need is for Face-2-Face interaction. For example: Replacing a dishwasher is not very complex for a customer. Just get the same one again! But buying a new dishwasher is more complex, because now a customer needs to look around at various options, power consumption options, different internal stacking layouts etc. The more complex the purchasing decision is, in the eyes of the customer, the greater the opportunity to influence consideration factors. For example 'Performance', 'Uniqueness', 'Brand' and the 'Overall Customer Experience when purchasing' consideration factors.


If you are selling complex solutions, then there is ALWAYS opportunity to increase your retained profits.


To sum up:


In all your sales transactions, focus on how to position and 'up-sell' as many of the consideration factors above price as you possibly can. Focus on your product(s), showcase the pants off them, discuss the unique solution your product(s) offer you customer, and leave price to the very end of your negotiations!


Happy selling!



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