Some marketers have established a positioning plan that emphasizes low price and the use of transactional selling tactics. These companies maintain a basic strategy that focuses on meeting competition. If the firm has “meeting competition” as its pricing goal, it makes every effort to charge prices that are identical or close to those of the competition. Once this positioning strategy has been adopted, the sales force is given several price tactics to use. Salespeople can alter (lower) the base price through the use of discounts and allowances. Discounts and allowances can take a variety of forms. A few of the more common ones follow:

• Quantity discount. The quantity discount allows the buyer a lower price for purchasing in multiple units or above a specified dollar amount.

• Seasonal discount. With seasonal pricing, the salesperson adjusts the price up or down during specific times to spur or acknowledge changes in demand. Off-season travel and lodging prices provide examples.

• Promotional allowance. A promotional allowance is a price reduction given to a customer who participates in an advertising or a sales support program. Many salespeople give supermarkets promotional allowances for advertising or displaying a manufacturer’s products.

• Trade or functional discounts. Channel intermediaries, such as wholesalers, often perform credit, storage, or transportation services. Trade or functional discounts cover the cost of these services.20

Another option available to salespeople facing a buyer with a low-price buying strategy is to “unbundle” product features. Let’s assume that a price-conscious customer wants to schedule a conference that will be accompanied by a banquet-style meal. To achieve a lower price, the salesperson might suggest a cafeteria-style meal, thereby eliminating the need for servers. This product configuration involves less cost to the seller, and cost savings can be passed on to the buyer. Timken Company, a century-old bearing maker, has adopted bundling as a way to compete with other manufacturers around the world. The company now surrounds its basic products with additional components in order to provide customers with exactly what they need. These components can take the form of electronic sensors, lubrication systems, castings, or installation and maintenance. Giving customers bundling options has given Timken a big advantage over foreign competitors who often focus on the basic product. Salespeople who represent Timken have flexible pricing options.21

These examples represent only a small sample of the many discounts and allowances salespeople use to compete on the basis of price. Price discounting is a competitive tool available to large numbers of salespeople. Excessive focus on low prices and generous discounts, however, can have a negative impact on profits and sales commissions.

Pricing is a critical factor in the sale of many products and services. In markets where competition is extremely strong, setting a product’s price may be a firm’s most complicated and important decision.

The authors of The Discipline of Market Leaders encourage business firms to pick one of three disciplines—best price, best product, or best service—and then do whatever is necessary to outdistance the competition. However, the authors warn us not to ignore the other two disciplines: “You design your business to excel in one direction, but you also have to strive to hit the minimum in the others.”22 Prior to using low-price tactics, everyone involved in sales and marketing should answer these questions:

• Are you selling to high- or low-involvement buyers? Some people are emotionally involved with respected brands such as BMW, Sony, and Apple’s Macintosh computers. A part of their identity depends on buying the product they consider the best. Low-involvement buyers care mostly about price.23

• How important is quality in the minds of buyers? If buyers do not fully understand the price–quality relationship, they may judge the product by its price. For a growing number of customers, long-term value is more important than short-term savings that result from low prices.

• How important is service? For many buyers, service is a critical factor. Even online customers, thought to be very interested in price, rate quality of service very highly. This is especially true in business-to-business sales. A survey conducted by Accenture reports that 80 percent of nearly 1,000 corporate buyers rate a strong brand and reliable customer service ahead of low prices when deciding which companies to do business with online.24

Companies large and small are racing to discover new sales and marketing opportunities on the Internet. Products ranging from personal computers to term insurance can be purchased from various websites. Salespeople who are involved primarily in transactional selling and add little or no value to the sales transaction often are not able to compete with online vendors. To illustrate, consider the purchase of insurance. At the present time, it is possible to purchase basic term insurance online from InsureMarket.com, AccuQuote.com, and other websites. A well-informed buyer, willing to visit several websites, can select a policy with a minimum amount of risk. In the case of long-term care insurance, which can pay for healthcare at home or in a nursing home, the buyer needs the help of a well-trained agent. These policies are complex and the premiums are high.

Investors now have more choices than they have had in the past. Persons who need little or no assistance buying stocks can visit the E*Trade website or a similar online discount vendor. The person who wants help selecting a stock can turn to a broker, such as Merrill Lynch or UBS PaineWebber, that offers both full-service and online options. Full-service brokers can survive and may prosper as long as they can add value to the sales transaction. The new economy is reshaping the world of commerce and every buyer has more choices.