"Lower the price, lower the price, lower the price." It’s the mantra that salespeople who are calling on school administrators are hearing more these days than ever before. Let’s face it, with school budgets being slashed, every decision-maker is looking for ways to contain costs. They are putting the price squeeze on their suppliers, like you, for discounts, and they are exerting pricing pressure on our entire industry.
In every survey of buying motivations I’ve ever read, low price is rarely the primary motivation. Yes, it’s important, and in some “bid” situations (RFP) price can be the deciding factor. Certainly, when everything else is equal, and in the case of some commodity products, price is the deciding factor. But very rarely is everything else equal. And very few purchase orders for the products sold by K-12 solutions-providers are issued based only on price.
The truth is that school administrators don’t buy based on price alone. And here’s a secret that almost nobody knows, including all the sales gurus, and likely managers in your own company, who tell you to sell based on value or who tell you to push harder to tout the special, unique features of your product. School administrators don’t always buy what they believe to be the best value, and definitely don't buy just because of product features. But they can invariably be counted on to buy the lowest risk!
What’s risk? It is the potential cost to your prospect if he or she makes a mistake. It's not just the money, although that is part of it. It is also the social, psychological, and emotional cost that your customer will pay if his or her choice isn’t the best one. In public institutions, the exposure is also political. We know that risk-aversion and the accountability that goes with incredibly tight budgets is at an all-time high. Therefore, the lower the risk of the decision, the more likely your prospective customer will say yes to you regardless of the price. Let’s become comfortable with this concept of risk first, and then discuss how to use it in your school sales efforts.
In order to understand risk, you must first see this issue from your customer's perspective. Try to put yourself in their shoes, and calculate the amount of risk you might take to say "yes" to your offer. Here's an illustration to help you understand this concept. You need a simple example, outside the school market context, before you apply the concept to your potential customer. Imagine that you have been instructed by your spouse to pick up a package of disposable cups on the way home from work today because you're having friends over for a casual evening of dessert and drinks tonight. You stop at the local grocery store, and are faced with making a choice between brand A and brand B. You pick brand A.
What happens to you in this instant in time? What is the consequence of your decision? I don't know about you, but I could be the recipient of some negative emotion if I made the wrong choice. My spouse would be upset with me. That may be the most painful cost of your decision. But there are other costs.
You're going to have to fix the problem if you made a mistake. If there's time, you'll have to run back to the store and replace the cups. So, in addition to the emotional cost, you must also pay in terms of extra time and additional money -- all because of your bad decision. Those costs -- negative emotions, time wasted, and extra money spent -- all combine to form the risk you accepted when you made your decision.
Here's a simple exercise to help you understand this concept. Draw a short vertical line. At the top of the line, write the number 25. At the bottom, write the number zero. Now on a scale of 0 to 25, with 0 being low, and 25 high, where would you put the risk of buying a package of disposable cups? You’d probably say it is close to zero. So, put an X on the line from 0 to 25 where you think the risk of buying those cups would be.
Let’s look at an illustration at the other end of the scale. I once had an adoption agency as a client. When a young lady is in a crisis pregnancy, and she's making a decision as to whether to release her unborn child for adoption, how big a risk is that for her? Put your X on the line that represents your assessment of that risk.
Most people put their mark around 25. The risk in this situation is a lifetime of consequences for at least four people: the mother, child, and adoptive parents. That's a very high risk. Compare the X's for the two different decisions, and you’ll conclude that different decisions carry different degrees of risk.
Now, let’s apply this concept to your prospects and customers who run K-12 schools. Remember that every time you ask your prospects to say yes to you, they accept some risk. And each of those decisions you ask of them carries with it a different degree of risk.
Imagine your typical customer. Then think of the typical offer or decision you ask of that person. For example, take one of your newer products. Imagine you are presenting it to the prospect or a committee that is looking at your solution for the first time. Now, put yourself in his shoes (or theirs), and see the situation through the prospect’s eyes. On the 0 to 25 scale, how much risk do they accept by saying "yes" to you and your company?
For an easy way of calculating it, just ask yourself what happens to that individual if you, or your company, or your product, doesn’t do what you promise. If your prospect buys that product and it doesn’t do what you claim it will, what trouble will that create? What consequences will he/she experience and how will it impact others in the school (students, teachers, other staff)? What is the risk?
Don’t say that there is no risk because you’ll take care of any problem that might develop. You may think that, but your customer doesn’t know that and, in fact, has probably been burned before by believing a supplier would provide good customer service. And remember, you’re trying to see this from your customer’s point of view, not yours. The amount of risk is what your customer perceives it to be. This is especially true for smaller companies that may not be as well known or well established as the big players.
I had a great example of the role of risk in sales several years ago. A young man approached me to help his company with its sales efforts. They were selling a product that was, at the time, a real state-of-the-art breakthrough. The company designed computerized controls that were retrofitted on food processing equipment. As a result of the use of these controls, the savings in energy consumption would pay for the cost of the equipment in less than a year. It looked like a great product. But he couldn’t sell them as rapidly as the company wanted. "Tell me how you go about selling them," I asked. He replied, "We qualify our prospects to the point where we know we have someone who could use the equipment. Then I call the production engineer or the plant manager on the phone, and gather some information about the type of equipment they use. Then I create a written proposal showing the economic payback, and mail it to him. Next I call and try to close the sale."
"Let me see if I understand correctly," I said. "You’re calling a plant manager on the phone. I would guess that most plant managers are men in their fifties, probably with advanced degrees, and who have been in the plant for a number of years, is that right?" "That’s right," the sale rep said. "OK," I said. "So, you’re calling someone twice your age, asking him to spend thirty- to forty-thousand dollars on equipment he’s never seen, from a company he’s never heard of, and from a sales person half his age whom he’s never met. Is that right?" My client became a little defensive. "If you put it that way, I suppose it's right." "Well put it that way," I replied, "because that’s the way he sees it."
The problem was simple: risk. On that scale of 0 to 25, how much risk would you think the plant manager would be accepting if he said “Yes” to the over-the-phone offer? Put yourself in his shoes. Suppose the equipment didn’t work the way it was supposed to? He could shut down production lines, spend weeks trying to make things right, cause all sorts of havoc in the plant, and potentially even lose his job. Now that’s risk. If you were that plant manager, how much more than the original $30,000 quote would you spend to reduce the risk? It wouldn’t be hard to justify a price double that.
That should give you a clue as to how to fight the “low price” issue. Worry less about low price, and more about lowering the risk.
Build solid, deep relationships with the key decision-makers. Relationships mitigate risk. The greater the relationship, the more prospective buyers believe that the relationship will work, the lower the perceived risk. That’s why the sales professional with the longer relationship almost always has the benefit of the doubt in a competitive situation.
Make ample use of peer recommendations, customer lists, case studies, and testimonials. Be prepared with references and use them. All these say to the customer that someone else, or many other people, has trusted you and your company, value the relationship with you and your team, and use your product or service successfully. That means it is less risky for your customer to buy from you.
Try to get your customer as physically involved with the product as possible. For example, if you’re selling educational software, or even a new professional development program, try to get the customer to try it (for free!) or visit a school where it's being used. The more your customer can see and feel the actual thing, the less risk is it to them. Transfer of ownership begins with a personal experience with a product, service, and the company that provides them.
Create offers that reduce risk. Trial periods, money-back guarantees, delayed billing, warranties, and service desks -- all reduce your customer’s perception of risk. Remember: it isn’t about product features. Ultimately, if what you sell doesn’t work as expected in the customer’s environment, then they are in a tough spot. Lower their risk that the implementation could fall apart, and you'll be more likely to fend of pricing questions.
Remember, the winners in the competitive selling in the school market, in light of our difficult economy and projected budget shortfalls ahead, are those individuals and companies who are the low-risk providers, not the low-price people. Additional, valuable information on how to handle a range of "objections" resides on my online resource center, www.thesalesresourcecenter.com.