Category: Price

Mastering the Art of Perception: Understanding Contrast Bias in Sales and Sales Management”

Contrast bias is a cognitive bias in which our perception of something is influenced by a previous experience or exposure to a contrasting stimulus. This bias can lead to an exaggerated difference in our perception of two similar things due to the direct comparison between them.

Simple Example of the Contrast Effect

In sales and sales management, contrast bias can have significant implications. For example, when a salesperson presents a high-priced product after showing a series of even more expensive options, the customer may perceive the high-priced product as a good deal in comparison, even if it is still expensive in absolute terms. Conversely, if the salesperson presents the same high-priced product after showing a series of lower-priced options, the customer may perceive it as excessively expensive, despite its actual value. This demonstrates how the perception of value is heavily influenced by the context in which it is presented.

In sales management, contrast bias can affect performance evaluations. For instance, if a sales manager evaluates a salesperson who has been consistently meeting moderate targets after observing another salesperson exceed exceptionally high targets, they may perceive the first salesperson’s performance as subpar, despite it being objectively satisfactory in a different context. This can lead to unfair assessments and demotivation among the sales team.

To mitigate contrast bias in sales, salespeople can strategically present products in a consistent context to avoid exaggerated perceptions of value. Sales managers can reduce the impact of contrast bias by evaluating each salesperson’s performance based on individual targets and industry standards rather than direct comparisons with colleagues. By understanding and addressing contrast bias, sales professionals and managers can make more objective decisions and improve overall performance.

Here are 10 questions to help identify where the contrast effect may be present in your day-to-day. The contrast bias is not inherently bad or good. However, identifying where this bias may be contributing to both positive and negative outcomes can be important to achieving the results you want.

  1. Have you ever felt that a product was a great deal only after seeing a series of more expensive options?
  2. When making purchasing decisions, do you find that your perception of a product’s value is heavily influenced by the context in which it is presented?
  3. In a sales environment, have you noticed instances where a product appeared more or less appealing due to the way it was presented in comparison to other products?
  4. When evaluating performance in a professional setting, do you tend to compare individuals directly to one another, potentially leading to unfair assessments?
  5. Have you ever observed situations where a colleague’s performance was perceived as subpar, even though it met industry standards, simply because it was compared to exceptionally high achievements?
  6. Do you find that your perception of a product’s cost or value changes depending on the sequence in which it is presented alongside other options?
  7. Have you experienced situations where a salesperson’s performance evaluation seemed influenced by the performance of their peers rather than their individual achievements?
  8. When considering different options, do you feel that your perception of each option’s qualities is influenced by the qualities of the others?
  9. In a sales context, have you observed instances where a customer’s perception of a product’s value dramatically changed after seeing alternative options?
  10. When evaluating performance or making purchasing decisions, do you consciously consider how the context or comparisons may be influencing your perception of value or achievement?

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Navigating the Price Game: Mastering the Art of Negotiation with Buyers

When it comes to negotiations, buyers often try to push for lower prices to maximize their own gains. As a seller, it’s important to be aware of the tactics buyers use and to develop effective strategies to navigate these situations. In this article, I will explore the five most common ways buyers negotiate lower prices and provide insights on how to respond as a seller. Whether you are in sales or simply interested in understanding the dynamics of negotiation, this article will equip you with valuable knowledge to achieve win-win outcomes.

A LOST (when effectively negotiated) deal is often better than a BAD deal

1. One Last Request: Appealing to the Seller’s Desire for Closure

Buyers often employ the “one last request” tactic to secure a final concession from the seller. This tactic occurs at the end of a negotiation when the buyer requests one additional change to seal the deal. The effectiveness of this tactic lies in the seller’s eagerness to close the sale and their willingness to make a final concession in exchange for the buyer’s signature.

To effectively counter this tactic, sellers should remain diligent in evaluating the value of the requested change and considering whether it aligns with their pricing and objectives. It is essential to communicate the rationale behind your decision and signal that you understand the buyer’s request without compromising the overall value proposition.

2. Flinch Test: Challenging the Seller’s Initial Price

The “Flinch Test” tactic involves buyers insisting that the seller’s price is too high and demanding a better offer. This tactic is often used regardless of the circumstances and aims to evoke a concession from the seller solely based on a price reduction.

As a seller, it is crucial to resist the temptation to immediately concede to price demands. Instead, focus on highlighting the unique value your product or service offers and the reasons behind your pricing. Demonstrate the differentiation and benefits that set your offering apart from competitors. By emphasizing the value proposition, you can shift the negotiation away from pure price discussions and towards mutually beneficial outcomes.

3. Split the Difference: Appealing to Fairness

Buyers may suggest “splitting the difference” as a negotiation technique, portraying it as a reasonable compromise. However, sellers must be cautious, as meeting in the middle may not always result in a fair outcome for both parties.

To navigate this tactic, sellers should focus on rationalizing their pricing based on the value provided. Engage in open discussions with the buyer to understand their concerns and identify alternative concessions that align with the overall value proposition. By showing a willingness to collaborate while safeguarding your pricing, you can establish a partnership based on transparency and shared benefits.

Sellers want to be seen as reasonable. They want to create a partnership. When buyers say, “Why don’t we meet in the middle?” there’s an emotional appeal of showing good faith by splitting the difference.

Mike Schultz, Rain Group

4. Anchoring: Establishing a Low Budget Threshold

The “anchoring” tactic involves buyers sharing a low budget early in the negotiation to set the stage for further bargaining at a reduced price. By presenting a low anchor, buyers aim to influence sellers to provide lower estimates and increase their chances of securing a better deal.

Sellers must be aware of anchoring effects and the cognitive bias associated with the first offer in a negotiation. It’s crucial to understand the buyer’s budget and pricing expectations while highlighting the unique value your product or service brings. By framing the conversation around the value derived from your offering, you can counteract the anchoring effect and build a foundation for discussions based on the benefits your solution provides.

5. Meeting with Your Competitor Today: Leveraging Time Pressure

Buyers often use time-pressure tactics, such as presenting an offer within a tight timeframe or hinting at engaging with a competitor. These tactics aim to create a sense of urgency and scarcity, pushing sellers to make concessions quickly.

To counter time-pressure tactics, sellers should remain composed and analyze the situation objectively. Evaluate the buyer’s timeline and ensure you have a clear understanding of the value your product or service brings to the table. Demonstrate confidence in your offering and focus on the long-term benefits rather than succumbing solely to short-term pressures. By communicating the value and emphasizing the partnership potential, you can mitigate the effects of time-pressure tactics and maintain control over the negotiation process.

The Bottom Line

Negotiations are a crucial part of the consultative sales process, and understanding the tactics buyers employ can significantly impact your ability to secure favorable outcomes. By familiarizing yourself with the five most common ways buyers negotiate lower prices and developing effective responses, you can position yourself as a strategic partner who emphasizes value creation and mutual benefits.

Remember, negotiations should always strive for win-win outcomes where both parties feel satisfied with the agreement reached. By employing strategies that focus on highlighting the value of your offering and fostering open communication

FAQs:

Q1: How can sellers effectively respond to the “One Last Request” tactic?

In response to the “One Last Thing” tactic, sellers can employ Chris Voss’s technique of labeling, introduced in his book, “Never Split the Difference: Negotiating as if Your Life Depended on It”. Labeling involves acknowledging the buyer’s request and labeling it as legitimate while reframing it to gain perspective.

For example, respond with, “I understand that this is important to you, and I can see why you’d want this. Let’s take a step back and explore how this change aligns with the overall value we’re providing.”

Q2: What strategies can sellers employ to counter the “flinch test” tactic?

In dealing with the “Flinch Test” tactic, sellers can apply Chris Voss’s technique of mirroring. Mirroring entails repeating the buyer’s words or the last few key words to encourage further elaboration and create a collaborative atmosphere. By saying, “So you’re looking for a better price?”, sellers gather more information and show a willingness to understand the buyer’s perspective. This allows for a more thoughtful response rather than immediately conceding to price demands.

Q3: Are there situations where buyers’ negotiation tactics can be beneficial for sellers?

Yes, there are instances where buyers’ negotiation tactics can be advantageous for sellers. Chris Voss explains the importance of utilizing and adopting a mindset of “tactical empathy”. Through active listening, sellers can uncover the underlying motivations and concerns driving the buyer’s negotiation tactics. By understanding these factors, sellers can adapt their approach to address the true needs of the buyer and arrive at a mutually beneficial outcome.

Q4: How can sellers effectively respond to time pressures buyers use by leveraging competitive research?

An accusation audit, a technique introduced by Chris Voss, can be a powerful tool in negotiations. Instead of shying away from potential criticisms or concerns, the accusation audit allows sellers to address them head-on.

For example:

Buyer: “I’m meeting with your competitor this afternoon, and I’m sure they can do better. Is that the best you can do?”

Seller: “It sounds like you believe our price is too high and that we may not be offering enough value for the investment. I can understand why you might think that, as there are many options on the market. However, I’d like the opportunity to highlight the unique benefits and superior quality/service we provide.”

By leading with a statement that acknowledges the buyer’s concern or accusation, the seller demonstrates empathy and shows a willingness to address potential reservations. This can lead to a more open and constructive dialogue, allowing both parties to explore ways to create value and find a mutually beneficial solution.

Ready to take your sales game to the next level?🚀

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📩 Stay up-to-date with the latest blog posts, packed with practical advice and real-world examples that will help you close more deals and inspire your sales team.

🔗 Want more valuable content? Check out the library of articles for a treasure trove of sales wisdom just waiting to be discovered. From prospecting techniques to negotiation tactics, I’ve got you covered!

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Three Surefire Ways To Crush IT Through A Recession

Successful managers and salespeople alike are constantly looking for new opportunities. They are confident in their product and their consumers’ ability to purchase it, and they are aware that tough economic times present opportunities that aren’t present in more prosperous times.

Photo by Razvan Chisu on Unsplash
  1. Get More Advertising for Your money.

It just makes sense that your advertising will generate less of a return than it would during an economic boom when the economy takes a turn for the worse. Of course, less money is being spent, but that doesn’t mean you have to see your profit margin shrink!

Just like you, advertisers are suffering from the recession, which has made them more desperate for customers. Even when you are already receiving a good bargain, the environment is ideal for negotiating your way to a lower price. For instance, if you have been paying an agency fee, rather than a flat fee, can you negotiate a percentage of revenue from sales driven by the agency’s efforts? This saves you the initial outlay of cash and gets your agency to have “skin” in the game. You will profit from the products by that much more for every up-front advertising dollar you can save.

Have you considered obtaining free publicity? Newspapers in your area are constantly looking for local news. Create news! Publicity is often free, but it’s a great way to expose your company to potential customers. If you have a new service offering or a new product line, use free resources like openpr.com (there are many others) to generate activity online that can be linked to and is SEO-friendly.

Is the size of your advertisements truly necessary? We have a tendency to believe that bigger is better, but the truth is that ads with 11 words or fewer frequently get more attention than longer ones. Try it out to immediately cut some expenses from your advertising budget. Additionally, is there a complimentary business or product to yours that you could co-op advertise together?

  1. Profit From Big Ticket Sales

During a downturn, not all of your clients experience hardship. It is common for many managers and salespeople alike to believe that consumers will begin to lean more towards cheaper products when times are tough, and that couldn’t be further from the truth. Don’t fall into the trap of thinking that you have to discount your product or service to stay ahead. Keep in mind that if you discount prices by 10% (assuming you’re at a 30% gross margin), you would need to sell 50% more units to maintain the same gross profit dollars. When considering a discount, always look at the other side of the equation to evaluate if you have the capacity, inventory, and capital to increase sales volume by an additional X% to maintain profit margins. Many consumers will evaluate risk differently during a downturn, and if your product is more expensive but a “safer” option, then don’t shy away from offering larger ticket items. Consumers who have a lot of faith in your products and services will also appreciate them much more in times of financial difficulty.

3. Increase Your Customer base.

Your clients are already aware of your excellent products and friendly customer service. They have faith in you to deliver for them. Consider this: Selling to someone you already have a relationship with is considerably simpler.

Take advantage of every chance to boost sales among your current consumer base. Do you sell a product to complement the one they’re buying? Toss it their way at the time of sale—think of it as “super sizing” their order. It is a tried-and-true strategy for boosting sales. The additional sales you can make from customers who currently do business with you might astound you.

My Top 5 Recommended Books on Selling

Photo by Shiromani Kant

Mark Twain once said, “The man who does not read good books has no advantage over the man who cannot read.”

Here are short links for you to find on Amazon:

  1. Objections: The Ultimate Guide for Mastering the Art and Science of Getting Past No Jeb Blount does an excellent job of outlining the mental process of addressing objections rather than rejection. This is my favorite book on closing and isn’t your typical anectdotal approach to objections that you find in sales.
  2. Triggers: Creating Behavior That Lasts-Becoming the Person You Want to Be While this isn’t technically a “sales” book, being truly effective in sales is about engaging in the right behaviors consistently. While there are many books that will tell you exactly what sales behaviors to do- none of them get to the psychology of root behaviors. Goldsmith does an excellent job of understanding the psychology behind the behaviors we choose to engage in (sales or not).
  3. Escaping the Price Driven Sale: How World Class Sellers Create Extraordinary Profit Anyone who knows me knows that I am a BIG fan of SPIN Selling. When your value is determined by your ability to be consultative, there is simply no better sales methodology than SPIN, in my opinion. Escaping the Price Driven Sale is a great companion to SPIN Selling and further deepens the understanding of the SPIN methodology.
  4. Emotional Intelligence for Sales Success: Connect with Customers and Get Results Talk to anyone who works in sales and they will undoubtedly tell you that it’s an emotional rollercoaster of a profession. Enter; Emotional Intelligence. If you don’t have it- your success, if any, will be shortlived. If you don’t have it, and you find success, you’ll never become a great leader- you’ll be pigeon holed. Just get it and be grateful that you made the investment in yourself.
  5. The Sales Bible: The Ultimate Sales Resource I simply enjoy Jeffrey’s approach to all things sales. It’s short and to the point. He over delivers on what he promises and his approaches simply work. The amount of complimentary resources he provides on his website through this book is worth 10x’s what he charges for the book. You’ll be referencing this for years to come and should be a staple on your shelf.

As with any list it’s hard to narrow down to just five, and some would be debatable depending on the stage of your sales career. I consider these to be foundational to the profession of sales. I could create lists upon lists should we get into the various facets of sales; presenting, speaking, communicating, building value, prospecting, asking for referrals, so on, and so on. Hey- there’s my next few lists ideas 🙂

What books are staples on your “sales” shelf?

On Goodreads? Let’s connect there!

Eight Ways To Sell Value- Not Price!

If you want to get paid what you’re worth here are eight ways to sell value – not price

1. Be Unique. If there is nothing that differentiates you from your competition you become common. Webster defines the word common as, “ordinary or not special” and the only way buyers select one common service over another is price. Take inventory of your skills, experience and knowledge. Are you a specialist in some area? Are you an expert in certain facets of your business? These and other differentiators can make you unique and valuable to a select group of clients.

2. Choose Your Clients Carefully: Don’t ever let your clients choose you or you will be at their mercy. If a deal is going to close successfully, the true professional should be in control, not the client. To begin controlling your business, write down the attributes of the people you want as clients and then go out and get them with targeted marketing. I hope the first item on your list of attributes is that they are people you enjoy spending time with. Being a business owner is far too difficult to work with people you don’t like just to earn a living. Turn away people who don’t meet your criteria. When you reject or refer clients it tells the world that you don’t just work with anyone, you are selective which raises your perceived value. It also makes you unique from other businesses who will work with anyone who can bring them a paycheck.

3. Set High Standards: If you work with anyone and everyone your value drops. If people have to qualify to work with you your value increases. Of course you know that there are prospects who will ask you to give them a bid with no intention of ever buying from you. They’re planning to use your bid to leverage a discount with their current vendor or any one of a dozen other reasons that they want your knowledge but not your services. Then there are buyers who will use your time and then purchase through another vendor. Don’t ever meet with a potential client until you ask a logical list of questions to determine their seriousness and loyalty. You need to know their motivation and if they are interviewing other vendors. You also need to know if they’re financially qualified. If you don’t have serious, financially solvent, and loyal clients, your valuable time may be better spent somewhere else.

4. Compete On Value, Not Price: No disrespect intended to other business models, but it doesn’t take any special skill, experience or knowledge to compete on price. All you have to do is be the cheapest, but this is a losing game. History reminds us of the housing price wars of the mid 2000’s when there were more houses that people in the market. To gain market share, one would cleverly lower its price, but then all the others quickly followed suit and the only result was that everyone’s profit margin was reduced.

The way to get paid what you’re worth is to visibly demonstrate your value to your clients. If you find that difficult to do make sure you work with vendors that can help you in that conversation to your end customer. Competing on price does not create value.

5. Create Value In The Eyes Of Clients: Frankly, most people throughout the country believe that people in sales do little to earn their commissions. This is our fault because we should be educating them about how hard we work before ever accepting them as clients. Keeping prices firm is a problem for many business’s until you start tracking all the different duties required to earn your pay. I suggest you developed lists of activities that you do for customers. This amazes clients because most have no idea how complicated their orders sometimes can be (whether it’s manufacturing, servicing, fulfillment, etc.) Since sales reps and business owners began creating these lists they’ve rarely, if ever, have had to cut prices. If a prospect asks for a discount simply show them the list and say, “Here are just some of the activities I must complete to earn my money. Why don’t you point out the things that you’d be willing to do instead of me. If you save me time then we can talk about saving you money because I earn every penny I get.” When confronted with a list that runs nearly ten pages long their eyes glaze over and they usually respond with something like, “You’re the expert, I expect you to do this work!” To which you simply say, “If you want me to do all of these activities on your behalf then I need to paid what I’m worth. If you want to pay less, I’ll see if I can find someone who will do less and maybe they can save you some money.”

6. Educate Your Clients About How Much You Make. After speaking to thousands of sales reps, customers and business owners all over the country for the past 20 years it’s clear to me that the average prospect is clueless about how your prices are determined, factoring in overhead and other expenses you have to run your businesses. Customers often get caught up in comparing product specs while not taking into account the business model. For many business owners they have chosen a business model that either adds more value to the customer experience, thus increases overhead, or have chosen a business model that reflects a pricing strategy. The latter typically involves reducing overhead; service reps, technicians, all benefits that lead to customer retention, and these decisions affect the customer experience as well. When agents are trained to speak to these differences a customer can evaluate if the additional costs equates to adding value to meet their expectations.

7. Provide value that no one else offers. When prospects do business with you, do they get a complete outline that explains your process from start to finish? Does it include samples, a list of service providers that could be involved in the process? Other competing business may not offer any of these benefits, so if a client wants to work with you they must pay what you ask.

8. Reject price shoppers. Studies show that only 15-18% of people make their decision to purchase a product or service primarily based on price. This means that the majority of clients appreciate value and are willing to pay for it – if they see it.

Don’t forget that real professionals earn their money by helping clients maximize value, minimize costs, save time, and much more. If potential clients don’t appreciate this then feel free to refer them to your competition.

“It’s way out of our budget”- Oh no!

We’ve all had it happen before, we are in front of a prospect who has completely unrealistic price expectations. What do you do? Check out the video below for a few tips on how to address this scenario.

A potential client wants a 20 product bid. They tell you that they expect the price to be under $10,000; you know it will be considerably more than that. Now what?

Don’t be in a hurry to write off someone with an unrealistic expectation on price. If they called you, doesn’t that mean they need or want your product? Take the time to gather information before you decide they aren’t worth your time and energy. See if you can turn it into a sale.

This can be accomplished with the proper set of questions and a little patience. Start by asking the four basic questions that are needed to get to the contract. At some point, the budget will come up. Ask the question, “How did you arrive at the budget you have set?” You will get all kinds of answers, but the usual sources are other contractors, something from the media, or a hopeful wild guess on the part of the owner.

Give them the three price ranges that their job will fall into. Not one lump sum figure, not two broad figures, but three well-defined ranges based on your experience. You want them to make a decision, and that is why the wording is so important. Start with the middle range, move to the top range and finally explain what they will get in the low budget range.

Will they have sticker shock? Most likely. Will they think you and your prices are nuts? In some cases, yes. Will you get through to them that their budget is unrealistic? Maybe.

Most of it depends on how you present the information. Good questions can lead them to the conclusion you need them to reach. Blanket statements are not as effective. Remember that you have two ears and one mouth and use them in that ratio.

When you have given the three price ranges, ask the question, “Which of these three budget ranges would you like to invest in your home?” Or, “Which of these three budget ranges do you think would work best for you and your family?” There are several ways of asking this question but after you ask it, STOP! One of the biggest mistakes salespeople make is that they ask a question, and then keep on talking. Put a zipper on your lip. Button it up. Let them give their answer.

If they come back with the nonsense that they don’t know what it will cost, tell them it will be in the ranges you just discussed. Give the ranges again if necessary. They don’t like making decisions, and are trying to avoid the fact that you provided that info already.

Give your clients good information, help them adjust their budget, and make the sale. If they won’t adjust, move to the next client with a realistic price expectation.

Remember, the best earn the sale!