Factors that affect price sensitivity
Understanding price sensitivity helps you become a better salesperson and protector of your profitability. Study these five factors and challenge yourself on how well you use each of the factors.
Customer satisfaction, brand loyalty, and customer retention are inversely related to price sensitivity. This means satisfied, loyal, and returning customers are less focused on price. They understand and appreciate your value. How are you building loyal, satisfied customers?
Customers who participate actively in the sale and know more about your product are less price sensitive. This happens because engaged buyers feels a sense of control and realize they are buying, not just being sold to. It also happens because informed buyers who know more about your product understand its value. How do you engage your buyers in the sales process?
In negotiating, whoever feels the most pressure makes the most concessions. Pressure points such as timing, scarcity, availability, previous experience, critical nature of the purchase, access to resources, and availability and ownership of funds, affect price sensitivity. Is your sales radar tuned into these buyer pressure points?
Relationships displace the importance of price. The stronger the relationship, the less important the price because of the trust bond the seller enjoys with the buyer. This is why some large companies attempt to set up a firewall between buyer and seller. They may use purchasing groups or outside consultants to prevent their buyers from becoming too close to the suppliers. In this case, familiarity breeds agreement. How are you building your personal and professional relationships with customers?
Buyers tend to be less price sensitive for the niceties of life and more price sensitive for necessities of life. When was the last time you heard someone complain about the price of a new Mercedes-Benz automobile or a new Rolex watch? People complain about the cost of energy and food—the necessities of life. How do you make your product more of a “nicety” for customers?
Author byline: Tom Reilly is a professional speaker and author of twelve books. Tom is literally the guy who wrote the book on Value-Added Selling (McGraw-Hill, 2010), the book that started the value selling revolution. For more information on Tom’s presentations, training, and products, visit his website www.TomReillyTraining.com or call his office, 636-537-3360.