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Sellers, Are You Confusing Price for Cost
06 January 2019

Confusing Cost for Price can be a big mistake when selling to customers.

A common sales problem came to light for me a week or so ago when a vendor reached out to me to suggest as the year-end was near, they might be able to consider lowering their price to close another deal before ending their year.

Now, I am truly in the “consideration” or “evaluation” phase of this purchase. We’ve done our due diligence and discussed options and outcomes but I had expressed some concerns I had about the overall cost and my thoughts about the investment meeting my ROI goals and fitting into how I make decisions about running my business, leveraging my cash flow, what I was willing to invest in this particular bundle of marketing goods and services as a major strategic shift, et cetera.

Without bringing up any of my business decision making factors, this vendor offered me a “discount” to lower the price if I would sign by year end.

That’s when it occurred to me that this vendor (and probably Many, Many Sales Pros) don’t understand the difference between “cost” vs “price.”

Cost is about your customer’s perspective. Cost is how they view an investment. Cost is relative to how the budget is allocated and spent.

Price is the dollar value a seller or business assigns its product or services. A customer pays a price they feel is in alignment with the value they receive in exchange.

Confusing Cost for Price can be a big mistake when selling to customers.

Here’s an example: I might walk away from buying a barely used piece of manufacturing equipment at less than market value – not because the price isn’t phenomenal – but because the cost is too high: I’d have to upgrade electrical capabilities, hire and train new team members, market our new capabilities.

The price is fine. It’s a great value. But the cost is too high.

In my own example above, the price is not what I’m evaluating. It’s the cost.

So, the vendor, offering a discount, is undercutting their own margin and pushing for an answer when I’m not ready – because they don’t understand where I am in my process and if I am conflicted because of Cost or Price.

Cost is relative to the buyer’s business.

Price is relative to the value of the goods or services.

Our goals as sellers are to first understand if either of these is an obstacle (note, not an objection, necessarily), so that we don’t try to negotiate Price and potentially lose margin (or time) when we should be trying to help our buyers work through the Costs.

To help buyers work through cost issues, focus on how your product, service, or solution changes your customers business or their outcomes.

  • Can you quantify this cost as an investment and calculate the payoff? (Can you show them how and why this makes sense?)
  • What are the offshoot costs associated with the purchase? (Can you help with a funding plan or resources?)
  • Does this investment tie up more capital in labor? (Can you help connect to contractors or provide training?)
  • If they pull the trigger on the investment, what other projects or investments are being sacrificed? (Can you work through the pain of these?)
  • What other opportunities does this allow them to pursue? (How do those payoff in the future?)

Your price is irrelevant if I cannot make the cost work for my business.

Don’t confuse the two. Know where your buyer is hung up. Work with them to understand how the cost of your product or solution impacts their business and your price will hold its value much better than if you discount!

Until next time, stop hoping and start SELLING!

-sks

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