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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?
October 1, 1999
URL: http://www.entrepreneur.com/article/18408

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.

Finding A Solution

"[Our] customers have a problem and are looking for a solution," says Nelson. "That's what they want to hear from [us]." For example, when a client asks Crystal Group for a price quote on a specific computer system, the salesperson doesn't start rattling off numbers. Instead, the individual begins a series of questions about the customer's needs. The same can be done at most any company.

To find out this information, you can, for instance, ask customers such things as: What is the application? Are there problems with the product or service you're currently using? How often does the product need to be replaced? What does that cost your company? What types of things does your current warranty cover? How are you being serviced and have you been generally satisfied with the service? By asking these types of questions, the company is able to distinguish itself from its competitors and take the focus off price. Your customers will begin thinking about getting the best value, not getting the cheapest product or service.

To find out what's most important to each customer, your sales staff should treat each client individually. In many cases, a crucial factor to one is minor to another. This requires salespeople to focus on the needs of the prospect in front of them, not what another customer thinks is most important or, worse, what the salesperson thinks is paramount.

Too often (and usually due to bad sales training), salespeople spend most of a call spouting off the benefits of their product or service, regardless of whether those benefits mean anything to the customer. A salesperson will tell a prospect about delivery times, promotions or other benefits that may have no relevance to the client; the result is that the salesperson leaves his or her prospects feeling like they're dealing with someone who hasn't bothered to learn about their company's needs or interests.

The approach of treating each client individually works for all kinds of businesses, even those selling commodity items. A 3-cent fastener readily available at a number of distributors can, in essence, become a different product depending on the company that's selling it. If customer service is better, if one has superior technical support or if its salespeople are more knowledgeable and friendly, then buyers won't be entirely concerned with price. Instead, they'll see a real difference between companies because the focus has shifted to value. Figure this out with each customer, and you may never sell on price again.

Contact Source

Crystal Group Inc., (800) 378-1636, curtis.nelson@crystalpc.com