Selling Value in a “commodity driven” world
What would an additional 2% mean to your sales? If your average sale is $20K, it’s an additional $400. If it’s $1Million, you’ll reap an additional $20K. You can do the math. That might not sound like much, relatively speaking, and that’s exactly what your customers want you to think. Despite what others may say or think, your company is unique because of its capabilities, products, expertise and value. Some may even describe your services and products as a commodity.
Another way to look at the 2 percent is to ask yourself how much you would have to sell to make up the difference. If your profit margin is 15% you would have to sell an additional $2,667 to net another $400 profit. Even more startling is the $20K at 15%, you would have to sell an additional $133,334 to make up that difference.
Two entities have a vested interest in ensuring you think of your products and services as commodities, your customers and your compet
itors. When you think of your products and services as a commodity, the majority of your sales conversations naturally center on price. This causes many salespeople to feel as though they are simply “order takers” having no power or influence. If that were truly the case, many companies would just encourage customers to order online, foregoing the cost of salespeople and their associated salaries and expenses.
While there are always customers who will buy the lowest price regardless of what might be offered in the way of enhanced value, there certainly are enough others who recognize the extraordinary benefits that your company provides. As illustrated above, you must ask yourself: “What would an additional one or two percentage points in revenue do to my bottom line?” One or two percentage points would be a conservative expectation should you re-orient your strategies and tactics by distinguishing your company from the other so-called “commodity” suppliers.
Two key factors in negotiating, power and influence, are both a state of mind. They are perceptions. If you perceive your customer has all the power and influence then they do. If you perceive you have the power and influence, then you do. Remember, you have the power to walk away or choose not to make a deal.
Changing an individual or team’s mental approach to negotiating is not easy to accomplish. Two factors play into the perception of value in the minds of you and your customer. The first is your ability to financially justify the benefits of what you sell to your customers and the second is the ability to defend your price with appropriate negotiating strategies. The two go hand in hand and it is difficult to execute one without the other.
What would an additional 2% or more mean to the bottom line of your company?