Kenny Chapman: How price positioning impacts your sales
Don’t let false assumptions or perceived limitations affect your service business.
What is the most difficult conversation most of your front line team members have with your prospects and clients? Price. What is the number one objection your sales team shares with you regarding why they don’t close more of their opportunities? Price. What is the one psychological blocker that must be addressed before any sale can be made?
Allow me to save you the angst of automatically answering “price” and jumping in the middle of all these questions that lead to conversations about false price-related assumptions and limiting beliefs we all have. When I say “assumptions and beliefs we all have,” I truly mean all of us, not just the sales team, managers or company representatives involved in the process; I’m talking about the client as well.
Salespeople are taught limiting beliefs about price throughout their lives (personally and professionally), and so are clients. When we factor in that clients get the majority of their home service, replacement and upgrade education from in-home service and sales professionals, there is a lot of confusion about real value-based pricing. The truth is: What we believe as an industry, we automatically project upon the client. Why do you think some companies are scaling faster than ever and adding team members by the handfuls, while most contractors are all aboard the “whining and complaining wagon?” That wagon is being driven by false assumptions that you can’t create the service business you really want right now based on market, recruiting or other perceived limitations.
One of the first things to address is the pricing conversation taking place both inside and outside the walls of your office and service trucks. What is your team saying regarding your price and value proposition at a scheduled weekly training meeting? Do they give feedback that the price is definitely too low, a little too high or just about right? You might be reading this and thinking, “Price is definitely too low? What technician or salesperson would ever say that?” Rest assured my friend, many of your competitors have a team that wants the price (and value proposition) to be higher than most in the market. This is because of the positioning it automatically gives them when it comes to a pricing conversation.
There are specific reasons for price to be at certain levels depending on product, service, profit margin desire, lifetime client value, etc.
There are three ways price is utilized, effectively or not, and it directly impacts your sales and overall results in the service business. Price is used and positioned as a crutch, a reason or a differentiator every time your client and team members have an interaction involving price.
1. Crutch-based pricing. This model of pricing and sales communication reveals itself in most companies and most interactions the majority of the time. This happens when the team fails to believe in the value of what is behind the price, or there is a lack of training around how to demonstrate those value points. We see this every day in all trades, regardless of number of options or dollar amounts presented. One of the greatest examples of crutch-based pricing is our industrywide maintenance agreement programs.
If you don’t believe me, do five ride-alongs with your team and you’ll witness five separate maintenance agreement presentations. You will see immediately as soon as the discount amount from the club savings exceeds the investment of the maintenance plan, the client will become a member. Period. It happens all the time. Where else is this showing up in your sales process?
2. Reason-based pricing. This model of pricing is common as a way to justify price, and is used by owners and team members alike. Some people feel every single detail needs to be rationalized within each interaction rather than understanding that finding value points important to the client is the real key. One of the powers of written, upfront pricing is it eliminates this age-old question in the prospect’s mind of “why” the price is what it is. Is it because of the neighborhood? Is it because of how far it is from the office? Is it because you are busy? Is it because you are slow?
There are specific times and places to utilize reason-based pricing, but it is not effective the way most of your team is probably utilizing it. The reason for your price does not matter as long as it meets and exceeds your client’s value desire. Your price may be higher for a myriad of reasons. The client really doesn’t care about the true “why;” they just need to know they are making the best value-based decision possible for their situation and family.
3. Differentiator-based pricing. This model of pricing is the least common, and yet, it’s the most profitable (and fun) positioning model in the marketplace. Differentiator-based pricing is built on a value demonstration and delivery system, focused on client relations from the beginning to the end.
We tend to think our pricing is assessed and judged during the options presentation at the table in the home. However, pricing becomes a differentiator when a system is in place, which assures each value box”gets checked during the entire client experience. This is no different than the buying experience you have been through periodically in your own life as a client. These experiences are sometimes hard to recall, but I’m sure you can think of a time when your experience was so amazing during every step that when you got to the price reveal you thought, “Well, it seems higher than I planned, but I really like (fill in the blank).”
Just like the experience you are recalling, your clients can like the person, process, product, brand, culture, etc. Differentiator pricing is the least common, yet most profitable because it takes effort, focus, training and commitment. However, you’re already doing most, if not all of those four items. Why not get more focused on your own value differentiators and train your team? When you focus on what really matters during the client interaction, like delivering value and truly connecting, you are positioning yourself away from crutch-based and reason-based pricing. Trust me, when you position your pricing correctly, it will have a hugely positive impact on your sales.