Get All Access for $5/mo

Selling Cost vs. Price Find the price point that covers your costs and provides a profit margin.

By Barry Farber

Opinions expressed by Entrepreneur contributors are their own.

I recently finished a keynote presentation for an industry that's getting hit hard by competitive pricing. Customers want the best price they can get, especially in a difficult economy. So what can you do to keep your price at a number that covers your cost and maintains your profit margin, without discounting? I have two options for you: Walk away from the customers who don't see the added value you provide, or figure out a way to communicate your key differentiators that warrant the additional investment.

Believe me, I've seen my share of customers who have wasted the salesperson's time and energy--the salesperson would have been much better off moving on to more qualified prospects. But there are customers worth working with, whom you can help understand the difference between price and cost. Price is what they pay for the product or service; cost is what the investment is over the lifetime of doing business. Can you help your customers grow their business in a way they never thought possible? Have you ever solved a critical problem for a customer where the end result was a lot of time and money saved?

On the other hand, if I'm spending money on promotional materials, and they're delivered late for a conference date or don't communicate the message that helps me achieve my goals, how much am I really losing? My time, my customers' time, lost opportunities--you get the point.

I asked the group during my presentation, "How many of you have had customers leave because of price but come back because the level of service they received from others was not what they got from you?" Eighty percent raised their hands.

So I told the 80 percent who raised their hands to ask those clients why they left for a better price and why they came back for better service. You can use this feedback when confronted with price objections. Also, find out what else they gained from spending a little more money with you--what are the long-term effects of doing business with you, and how does that offset the initial investment?

If price is one of your advantages, that's great. But remember, you need something that keeps the competition away and secures your relationships for the future. I remember seeing this statement above a local printer's office:

  1. Price
  2. Service
  3. Quality

(Please pick two)
If you choose to lower your price, something else may suffer. No matter how tough the market gets, you'll have to stick to your principles to sell the value that differentiates you from your competition.

Barry Farber is the author of 11 books on sales, management and peak performance. His latest release, "Diamond in the Rough" CD program, is based on his book, radio and television show. Visit him at www.BarryFarber.com, or email him at barry@barryfarber.com.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Growing a Business

The Best Way to Run a Business Meeting

All too often, meetings run longer than they should and fail to keep attendees engaged. Here's how to run a meeting the right way.

Fundraising

Working Remote? These Are the Biggest Dos and Don'ts of Video Conferencing

As more and more businesses go remote, these are ways to be more effective and efficient on conference calls.

Business Solutions

Boost Business Efficiency with Five Years of Control D for $40

Secure, optimize, and customize your internet experience with this tool.

Franchise

7-Eleven Stores in the U.S. Will Introduce Some Japanese-Inspired Changes. Here's What to Expect.

You'll soon be able to pick up some fresh sushi or a new type of snack at your local 7-Eleven — but the Big Gulp isn't going away.

Marketing

Launching Your First Paid Product? Here's How to Successfully Turn Your Expertise Into Profit

Are you ready to launch your first paid product but feeling nervous? Don't worry — starting small with the right type of product is the secret to success. Read on to learn how to outline clear benefits, value price, leverage social media marketing and deliver excellent customer experience.

Starting a Business

How to Find the Right Programmers: A Brief Guideline for Startup Founders

For startup founders under a plethora of challenges like timing, investors and changing market demand, it is extremely hard to hire programmers who can deliver.