Alan O'Neill: 'Communicate a clear position on price to your team;
If you're selling a premium product, make sure your staff knows its USP - or risk a race to the bottom on price with competitors
Alan O'Neill, author of Premium is the New Black is Managing Director of Kara Change Management, specialists in strategy, culture and people development. Go to www.kara.ie
As you swipe through the various feeds on your smart phone, you'll have noticed the volume of videos that are being used to communicate a message to you.
Pictures tell a thousand words and videos even more. Motivated by this trend, I visited a camera shop to explore the idea of buying a video camera with all the necessary equipment.
The assistant brought me to a showcase and, before asking me a single question, she said: "They're all very expensive".
Nevertheless, I asked to see the various brands and options and enquired about the features and benefits of each one, which she outlined expertly.
I then asked about a clip-on wireless microphone. Before showing me any, the assistant quizzed me on why I'd even need one and then suggested that I get a low-priced one with a cable that plugs into my iPhone. On we went and I moved to where the tripods were on display. Well, you can guess how that went.
Now if I had been attended to with a different attitude, I think I might have bought something and probably would have ended up spending €2,000- €3,000. But I left empty-handed.
Whatever the reason was for this assistant being negative about the pricing of the products, it is unacceptable. I have seen this many times over the years, where sales people have an unconscious bias about the price of what they're selling.
I do understand it, as the camera kit is a costly purchase. I remember a similar occasion working with a high-end fashion retailer. When it came to the 'handling objections' part of the sales training, some of the sales associates actually agreed with some customers' negative views on the premium pricing.
I don't blame the sales associates for this. It is entirely the fault of the company for not communicating its pricing strategy and target market context to their teams. Not to mention the unfortunate lack of sales training.
But for me, this is part a wider issue. Too often, I've seen SMEs trying to compete without a proper appraisal of their marketplace, which includes customers and competitors.
Then, when the chips are down and sales come under pressure, they discount to compete. That just causes margin erosion and reputational damage. Whereas if they have confidence in their chosen strategy and have their teams aligned to that, sales will follow.
1: Be clear on your market positioning. After studying your marketplace, decide on a pricing strategy that will enable you to differentiate and make a profit.
2: Know your price architecture. Learn from the best retailers that use a 'good, better, best' approach to product segmentation.
That simply means that in most categories, they will have products at entry price level, mid-level and higher price.
For example, Arnotts have 'good' fry-pans (a brand called Prestige, at entry price). They have a 'better' collection made by Stellar and a 'best' premium selection from Fissler.
This wider collection enables them to cast to a wider net of customers. It also give the sales associates a structured approach for upselling.
3: Know the USPs (unique selling proposition) of all of your products. If you have a premium collection especially, be clear on what makes those products premium.
If a customer can't see the added value of your product, they will assume that you're expensive.
That just risks reputational damage for your business.
4: Communicate your pricing strategy to your sales people. Don't make assumptions that they know and don't ignore this need (as the camera shop above has clearly done).
Ensure your team understand the context and market positioning of your product edit and pricing policy. Explain the profile of your target customer. Dispel any risk that they might have their own in-built price objections.
5: Lastly, train them on how to sell your products. Show them how to confidently present your products with conviction, regardless of your pricing policy.
THE LAST WORD
Unless you have incredible scale or a significantly lower-cost model than your competitor, trying to be the cheapest in your market is a highly questionable strategy. There is usually a competitor that is in greater need of a sale than you. And they're often willing to pay for that with lower prices. For many of us, it's just not sustainable given the average cost base on this island.
Last week I talked about the challenges for tourism in Ireland and the issue of 'Ireland Inc' being a premium priced destination. (You can access that article and lots more great business advice on www.independent.ie/business/small-business/advice-centre).
There is nothing wrong with premium pricing, so long as your proposition matches or exceeds what your customer deems to be value for money.
One way or another, study the market and make an informed decision about your positioning. Then communicate that to your team so that they can sell with confidence.
- Alan O’Neill, author of Premium is the New Black is Managing Director of Kara Change Management, specialists in strategy, culture and people development. Go to www.kara.ie
Sunday Indo Business