People don't buy on price alone

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I try to write about three times per week. Most of it is pretty good and will probably help you grow your business. If it doesn't, then I probably can't help you.

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You can use a traditional RSS Feedreader with this fancy-dancy link. I think this approach is harder but if you want to do it the hard way, who am I to say otherwise?

posted this on Friday, April 12, 2013 at about 5pm.
cheap gas

When I was a sales manager in a former career, I’d have sales reps that would tell me they lost a deal based on price alone. I would always try to help them understand that was only the excuse they were using to make themselves feel better.

While I agree that there are many people that say they make a purchase decision based on price, the reality is that most people have many other considerations, which they usually never think about.

I think people who truly believe they buy on price alone just aren’t very smart. When they disregard all other considerations, they often will spend more money. Maybe that is the biggest proof they are not actually buying on price.

I live 9 miles from Costco. Costco has an average savings (as far as I can tell) of about $.05 per gallon… sounds pretty good, right? I get 20 miles to the gallon. I have a 20-gallon gas tank. This means that driving all the way across town saves me $1… and only if I am bone dry by the time I get there.

But wait, it takes me almost 1 gallon to drive there and back and gas costs $3.50 per gallon. That means that cheap gas just cost me $2.50 more to buy from Costco.

Let’s get a little crazy. Let’s say that going to Costco saves me $.50 per gallon (not likely, but let’s say it anyway). My 20-gallon tank saves me $10, but it still costs me $3.50 to get there and back. I reality, I have actually only saved $6.50. It takes me an hour to get there, wait in line and get back.

If $6.50 is that important, I could have worked one hour at McDonald’s and been better off.

If I’m already there, it may be worth it, if I don’t have to wait too long at the pump. If the philosophy were correct that people only buy on price, gas stations across the street would have the same price or no customers, all the time. I have seen gas stations across the street have a $.15 variance and still the more expensive gas station is busy. Why would that be if people only care about cheap gas? If people only care about cheap gas then why is premium gas even offered?

Your customers are no different. When they say they make their decision to buy from your competitor because you are too expensive, you need ask one of two questions:

  1. What price could I drop to in order for you to buy from me?
  2. What more can I offer to make the price more appealing?

You’ll find that they will still say no to you, which means that they are proving my point. If you can get to the bottom of why they are really saying no then you’ll be able to be more effective in your sales approach.

Corey Smith and his wife are the proud parents of five wonderful children and live in Meridian, Idaho. He is the president of Tribute Media, a Meridian based Web Consulting firm.

He is the author of two books, "Do It Right: A CEO's Guide to Web Strategy" and "Tweet It Right: A CEO's Guide to Twitter." You can learn more about his books here.

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