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The Price Is Right?

Many entrepreneurs are consumed with putting price tags on their products or services. But at what cost to their businesses?

Whenever a prospective client asks Curt Nelson for the cost of his product, he always replies with the same answer: "I'm not sure." Exactly why does he do this? Nelson says he honestly doesn't know the cost until he talks to the customer, and, equally important, he doesn't want to get into a price war.

"Price isn't [the only thing] that drives a customer, even though everyone thinks it is," contends Nelson, 47, president of Crystal Group Inc., a Hiawatha, Iowa, computer manufacturer. "The real issue is always value. Think of it this way: Would you eat the cheapest hamburger simply because it cost next to nothing, regardless of how it tastes?"

Despite this argument, many entrepreneurs and their salespeople continue to focus on price alone. In some industries, price tags drive deals because customers often use them as their primary measuring stick. Unfortunately, salespeople go along with these customers all too often. That doesn't mean you have to succumb to a price war, however. In fact, the most successful entrepreneurs rarely do.

To avoid focusing entirely on price, a company has to come up with ways to differentiate itself from its competitors. The best way to do this is to make sure your salespeople ask prospective buyers a lot of questions--and actually listen to the answers.

Bill Kelley is an Arcadia, California, business writer and former editor of Sales and Marketing Management magazine.

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This article was originally published in the October 1999 print edition of Entrepreneur with the headline: The Price Is Right?.

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