Feb 25, 2019

Don't Play the Game

Avoiding customers who demand lower prices

Avoiding customers who demand lower prices

My parents bought me a 20-year-old Mercedes for my graduation. That was seven years ago. It has been falling apart since I have owned it, but in fairness, I rarely change the oil or keep up with the routine maintenance. Now it is time for me to get a new car. I know Mercedes has a reputation for being a good car, and there is a coolness factor to driving one. I am not totally sure what makes it better than the others and I am not motivated to do all the complicated research to find out why. 

I went to the Mercedes dealership and told them I wanted to buy a Mercedes. I liked the one with all the safety features, and the heated seats were nice, as well. The one I wanted handled great in the weather and had excellent fuel efficiency. 

The salesman gave me a quote of about $54,000. That would have made my payments more than $800 per month. I told him I could not afford that monthly payment. He said I could lease it for about $500 per month. I reminded him that I had been a loyal Mercedes driver for as long as I could drive and that should count for something. I told him that the Kia salesman said I could get the same type of car for about $300 per month. I demanded a lower price and when he said he did not have the authority to give me one, I demanded to talk to his manager. The manager told me he had a less expensive version that did not have the same cool features. He told me I could look at a used Mercedes for less money. I told him I wanted the better model for a lower price, and if he was not willing to give it to me, then it was obvious he did not want my business and I would just have to buy a car somewhere else.

Would you believe he offered to get me an Uber to the Kia dealership?

Full disclosure here, I do not currently drive, nor have I ever driven a Mercedes. It is clear that this scenario was a bit exaggerated. Most people do not shop for cars this way, yet this scenario frequently happens in our industry. 

A Different Scenario

A customer has a softener from your company that was old when it came with the house years ago. They have run it out of salt and ignored the service technician’s recommendation to consider replacing it when they have called for service over the past few years. This last time, the service technician told them he could not get the parts for it and they needed to replace it, so they set up a sales call.

The sales professional explains the differences between the softeners offered, and the customer says they want the best one. The sales professional gives the price and the customer begins demanding the better softener for the economy price.

They begin touting the length of time they have had your equipment, how they can get it cheaper from the competitor, and how it is obvious you do not want their business if you are not willing to drop the price.

There is a lot to unpack there, but let us examine why customers think it is okay to demand this from us when they would never imagine doing it in most other industries.

I think it is important to first recognize that our customers are only doing what they have been taught to do by many companies in our industry. There are many companies in the water treatment industry that will present a customer with an $8,000 to $10,000 price. A seemingly reluctant customer knows that if they play hard-to-get long enough, they can purchase the same equipment for which their neighbor paid $9,500 for $7,500—even with the soap. If they hold out, they know that in a couple days they are likely to get a call from someone at the office who will tell them about last year’s model or a show floor sample that they can get for $6,000. This is how we have taught our customers to play the game. It should be no surprise that they expect all of us to have such a lack of price integrity.

Action Items

You are not going to win all these sales, but if you want to minimize these conversations, there are certain actions that need to be taken.

Set a fair but consistent price. I am not saying it needs to be low, but stop setting a higher price with the expectation that you are willing to drop it to get a customer’s business. Is your price worth the service and quality you claim? Assuming it is, take pride in it and do not cheapen it by teaching your customers that you are willing to rip them off if they do not barter. In the short term, even if you do not make the sale you will earn a reputation for having integrity. It is difficult to maintain a reputation for having both the best quality and the lowest price. People know that it usually is a choice between one or the other.

Communicate with your customers. First and foremost, tell them that you do want their business, but you understand if you do not have a system that will meet their needs. Express empathy, but maintain price integrity. Explain that your goal is to earn their referrals and that if you are going to get referrals, you cannot be a company that inflates the prices just so there is enough room to lower them if you have to. Customers will appreciate this, and if they do not, it is not a bad thing if they are upset enough to tell people you were not willing to budge on your prices. As long as you simultaneously focus on the service and quality that earn you a higher price, you will end up with a higher-quality customer base.

Do not pay your customers to use your equipment or services. I know we all want to get that sale, but how can we possibly be profitable if we drop our price so low that there is no return on investment? Giving a huge discount on rent or purchase is a double whammy. First, you did not make profit on the sale or rental. Plus, that customer is going to go out and tell everyone about the great price they got you to give them, which will render any referrals you do get nearly worthless. Focus on earning referrals based on integrity, quality and service, and you will be far more profitable in the long run.

When our customers are demanding that we give them our top-of-the line equipment for an economy price, they are admitting that they know the equipment is better. The claim that they can get the same thing from your competition for less money does not make much sense. If it is true, why are they arguing with you instead of going to the competition? It is possible they tried the same game with the competition and the competition told them no, but it is more likely that they want your equipment because they know your company is better. You do not want them to leave mad, but it is not your fault that they cannot afford your product any more than it would have been the Mercedes dealership’s fault that I could not afford a new car.

If you allow customers to blackmail you into paying them to do business with you, you are gift-wrapping the high-quality customers and delivering them directly to your competition. The reality is, yeah, I guess there is some business I would rather not have. 

About the author

Kelly R. Thompson, MWS, CI, is president and founder of Moti-Vitality LLC. Thompson can be reached at [email protected] or 810.655.9600.

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