Advertisement

The impact of budgets

Font Size

Getting The Edge In Professional Selling — Terence A. Hockenhull

What can a salesperson do when a customer rejects a suggested product based on cost?

One of the most common complaints I hear from salespeople is that their products are deemed “too expensive” by their clients, and they often lose out to cheaper products and services offered by “lesser” companies. It is perhaps worth pointing out at the start of this article that taking the phrase, “It’s too expensive,” at face value may result in the loss of a sale that might easily have been won! Let me explain.

“It’s too expensive” can have two different meanings. It may be that the client believes the product is overpriced, that it is not worth the selling price. Alternatively, it may be that the client has a fixed budget allocated for the purchase, and there are no more funds available.

There is an ice cream company with outlets in many of the more prestigious malls. No doubt, they have excellent ice cream. Their product is always fresh, well-packaged, and nicely served.




But perhaps I don’t want a full-fat, creamy concoction with all sorts of exotic berries and other flavors; a simple ice from the sorbetes cart is more to my taste. No surprise that I might comment, “It’s too expensive.”

Consider, too, that I might only have P50 in my wallet. No matter how much I might want the ice cream, I do not have the money to pay for it. Yet I may be heard to mutter the same sad refrain: “It’s too expensive.”

Dealing with a computer company some years ago, I was surprised to find their sales team were tasked with selling everything from low-cost peripherals and inexpensive desktop systems to sophisticated network servers. Some of the sales team commented that they determined a client’s needs based on budget. If the client mentioned limited funds, they would push one of the cheaper stand-alone computers, even if this meant compromising on performance and failing to meet the needs of the client.

Larger budgets clearly indicated that the client was in the market for something a little more sophisticated. So, the sales team would push the most expensive systems, often over-specifying or selling unneeded peripherals and add-ons.

Of course, there are clients who are wildly unrealistic about budget; I came across one guy (from a very reputable institution, I might add) who expected me to train 250 staff for a measly P50,000. He suggested that I should run a pilot training program for 20 persons, and he would then copy the training materials to use himself!

Other than behaving in a professional manner, there is little that can be achieved with a client like this. Politely withdrawing is the only real solution.

While I would agree it is pointless trying to sell to a customer who has no money to spend, making early judgments about a client’s budget constraints can lead to costly mistakes and missed opportunities. Customers are often unclear about their real problems and needs; budgetary figures are often based on previous equipment purchases or an expectation of the cost of a solution based on erroneous data.

The analogy of buying a birthday gift is a good one. We go to a store to select an appropriate gift, and the sales clerk, offering assistance, invariably asks, “How much do you want to spend?”

If we have a small budget, we may feel embarrassed. We worry that the salesclerk may think we are “cheap” because our budget is so much lower than the items on display. Conversely, if we have a large amount of money to spend, we worry that revealing the amount will be counter-productive. Instead of identifying gifts based on appropriateness or suitability, the salesgirl is more likely to use price as the sole determining factor in choosing a gift.

A couple of months back, shortly before setting off back to UK on vacation, I was choosing a gift for my mother. Since I rarely get to see her nowadays, I had set a generous budget for the gift.

Telling sales assistants how much I had to spend failed to reveal anything suitable. Taking time to browse the shops in malls allowed me to choose a suitable and much-appreciated gift at less than half of my budget.

The point I am making is that most sales assistants overlook the suitability of the gift in favor of using every single centavo of the budgeted amount.

It is interesting that (for the above reasons) customers are often reluctant to tell a salesperson how much they have to spend. Paradoxically, they will often volunteer the information without being asked for it. I sympathize with the salesman who is wary of spending a longtime with a client, only to find they can afford little other than the cheapest product or service. However, to base selling effort on the customer’s cost estimate or budget can lead to some serious mistakes being made.

A friend of mine sells realty in Sydney. During the first meeting with a client (a husband and wife) she asked about budget and was told that they had set a ceiling of A$150,000. They didn’t like any of the houses shown to them.

However, once my friend switched to showing more expensive properties in a more salubrious neighborhood, they quickly decided on a house (for which they paid cash!) priced at A$300,000.

She could have taken the budget figure as the “last word”, assuming that anything beyond this was out of the reach of her customer. Had she done so, it certainly would have cost her both client and sale! Experience told her that finding the “right” house for a family is more important than an arbitrary price ceiling. If the house is right, the client will find ways to finance it!

Budgets are rarely fixed. The lazy salesman who makes no effort to explore his client’s needs, review and demonstrate the suitability of a product, or consider the tangible and intangible benefits will rarely sell beyond the client’s budget ceiling. Less focus on cost will often help push the ceiling up to a level where the client gets exactly what he wants and needs.

Terence A. Hockenhull is a long-term resident of the Philippines. He is an accomplished sales consultant who currently holds an executive sales position with an Italian geotechnical company.

terry@charteris-inc.com









Advertisement