Pricing and Delivery
Potential buyers expect salespeople to be well versed in price and delivery policies and be in a position to set prices and plan deliveries. If a salesperson has pricing authority, buyers perceive the person as someone with whom they can really talk business. The ability to set prices puts the salesperson in a stronger position.25
Decision-making authority in the area of pricing gives the salesperson more power and responsibility. If the salesperson negotiates a price that is too low, the company may lose money on the sale. Price objections represent one of the most common barriers to closing a sale, so salespeople need to be well prepared in this area.
In most situations, the price quotation should be accompanied by information that creates value in the mind of the customer. The process of determining whether or not the proposal adds value is often called quantifying the solution. When the purchase represents a major buying decision, such as the purchase of a new computer system, quantifying the solution is important. One way to quantify the solution is to conduct a cost–benefit analysis to determine the actual cost of the purchase and savings the buyer can anticipate from the investment (Table 6.1).
Table 6.1 Quantifying the Solution with Cost–Benefit Analysis
Quantifying the solution often involves a carefully prepared cost–benefit analysis. This example compares the higher-priced Phoenix semitruck trailer with the lower-priced FB model, which is a competing product.
| Cost Savings of the Phoenix versus FB Model for a 10-Year Period (All Prices Are Approximate) | |
|---|---|
| Cost Savings | |
| • Stainless steel bulkhead (savings on sandblasting and painting) | $ 425.00 |
| • Stainless steel rear door frame (savings on painting) | 425.00 |
| • Air ride suspension (better fuel mileage, longer tire life, longer brake life) | 3,750.00 |
| • Hardwood or aluminum scuff (savings from freight damages and replacement of scuff) | 1,000.00 |
| • LED lights (last longer; approximate savings: $50 per year × 10 years) | 500.00 |
| • Light protectors (save $50 per year on replacement × 10 years) | 500.00 |
| • Threshold plate (saves damage to entry of trailer) | 200.00 |
| • Internal rail reinforcement (saves damage to lower rail and back panels) | 500.00 |
| • Stainless steel screws for light attachment (savings on replacement cost) | 200.00 |
| • Domestic oak premium floor—13⁄8 (should last 10 years under normal conditions) | 1,000.00 |
| • Doors—aluminum inner and outer skin, outside white finish, inside mill finish, fastened by five aluminum hinges (savings over life of trailer) | 750.00 |
| • Five-year warranty in addition to standard warranty covers bulkhead rust, LED lights, floor, scuff liner, glad hands, rear frame, mudflap assembly, and threshold plate (Phoenix provides a higher trade-in value) | 1,500.00 |
| Total approximate savings of Phoenix over 10-year period (all the preceding is standard equipment on a Phoenix; this trailer will sell for $23,500; an FB standard trailer would sell for $19,500) | $10,750.00 |
| Less additional initial cost of Phoenix over FB standard | 4,000.00 |
| Overall cost savings of Phoenix over FB trailer | $ 6,750.00 |
Another way to quantify the solution is to calculate return on investment (ROI). As products and services become more complex and more expensive, customers are more likely to look at the financial reasons for buying. This is especially true in business-to-business selling. Salespeople who can develop a sales proposal that contains specific information on return on investment are more likely to get a favorable response from key decision makers. Chief financial officers, for example, are more inclined to approve an expensive purchase if it results in a good return on investment.26
Performing accurate ROI calculations often requires the collection of detailed financial information. You may need to help the prospect collect information within the company to build a case for the purchase. BAX Global offers customers multimodal shipping solutions. It has the capabilities to employ more than one mode of transportation for a customer. In order to develop a customized solution for the customer, the sales representative must collect a great deal of financial and nonfinancial data from the prospect. Transportation modes (trucks, airplanes, railroads, etc.) vary in terms of cost, speed, dependability, frequency, and other criteria, so preparation of the sales proposal can be a complicated process.27
The use of ROI selling appeals requires more work upfront, but it often leads to shorter sales cycles. The salesperson who is not well schooled in financial issues, and cannot compute and supply price information accurately, may be at a serious disadvantage. In Chapter 7, we discuss how to position products according to price.
Knowing, understanding, and being able to clarify information in product literature adds value within the sales process. Customers seek out the “product experts” who can assist them in making intelligent buying decisions.
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