It’s the Risk, Not the Price

by Dave Kahle

“Low price, low price, low price.”  It’s the mantra that salespeople in every industry segment are hearing more these days than ever before.  Customers, looking for ways to contain costs, naturally pressure their vendors for lower costs. But, is the lowest price the motivating factor in a customer’s decision to buy?

          In every survey of buying motivations I’ve ever read, low price is never the primary motivation.  Yes, it’s important.  And, when everything else is equal, it will be the deciding factor.  But very rarely is everything else equal.  And very few people in this world buy only on the basis of low price.  How many of you are wearing a suit you bought at a garage sale?  Or watching a 12-inch TV?

          If low prices were the only motivator, you would have gone with those lower-priced options.  But, you don’t always buy on the basis of low prices, so why should you think that all your customers do?

          The truth is, they don’t.  And here’s a secret that almost nobody knows, including all those gurus telling you to sell value.  They don’t always buy the best value.  But, they can invariably be counted on to buy the lowest risk!

          The biggest issue in the minds of your customers and prospects is not price, and it is not value – it is risk.

What’s Risk?

It is the potential cost to the individual customer if he/she makes a mistake.  It’s not just the money, although that is part of it.  It is also the social, psychological, and emotional cost that your customer will pay if your choice isn’t the best one.  The lower the risk of the decision, the more likely your customer will say “yes” to you – regardless of the price.

          Let’s become comfortable with this concept of risk first, and then discuss how to use it in your sales efforts.

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An Illustration – Risk

Here’s an illustration to help you understand this concept.  Imagine that you are under orders by your spouse to pick up a package of disposable cups on the way home from work today because you’re having friends over for a casual evening of dessert and drinks tonight.  You stop at the local grocery store and make a selection between brand A and brand B.  You pick brand A.

          After you bring the cups home, your spouse mixes up a pitcher of margaritas and pours one.  The drink leaks out of the bottom of the cup and puddles on the counter.  There is a hole in the bottom of the cup.  You pour your drink into another cup and it leaks, too.  In fact, every one of the cups you bought is defective.

          What happens to you in this instant in time?  What is the consequence of your decision?  I don’t know about you, but I would be the recipient of some negative emotions.  My spouse would be upset with me.  That may be the most painful cost of your decision.

Risk and Other Costs

You’re going to have to fix the problem.  If there’s time, you’ll have to run back to the store and replace the cups.  So, in addition to the emotional cost, you must also pay in terms of extra time and additional money.  All because of your bad decision.  Those costs — negative emotions, time wasted, the extra money spent – all combine to form the risk you accepted when you made your decision.

A Simple Exercise to Gauge Risk

Here’s a simple exercise to help you understand this concept.  Draw a short vertical line.  At the top of the line, write the number 25... READ THE FULL ARTICLE HERE