Progressive Distributor - Selling value vs. price

Selling value vs. price

Anyone can close a deal by promising to save the customer a nickel a foot on a reel of hose. It takes a skilled salesperson to make the sale when you don’t have the rock-bottom price.

by Richard Vurva

A salesperson’s five most feared words are, “Your price is too high.” Hearing them, salespeople typically respond in one of two ways. They either say, A) “Let me sharpen my pencil and see if we can work on those numbers for you,” or B) “That’s our price. Let me explain what’s included.”

Which statement do you think is used most often? If you answered B, try again.

Lawrence Steinmetz of High Yield Management Inc., Boulder, Colo., has written extensively and leads seminars on the topic of how to sell at higher prices. He says salespeople place undue worry on the subject of price.

“Most pressure to cut price comes from the sales force,” Steinmetz says. “A lot of sales reps have the commodity mentality. They think they’re selling a commodity and accept the paradigm that people buy on price.”

But price is generally not one of the top reasons people make final purchase decisions, Steinmetz says.

He believes salespeople can learn to use higher prices to their advantage. This article focuses on ways manufacturer and distributor salespeople can achieve sales success even if they can’t offer customers a rock-bottom price. The advice was gleaned from companies that primarily manufacture or distribute hose and accessories products, yet their ideas can benefit distributors of other MRO products as well.

Change your focus
There are three ways to beat the price issue, according to Richard Balka, president of Home Rubber Co., a hose manufacturer in Trenton, N.J.

1) Position yourself as a specialist.

2) Meet or exceed delivery promises.

3) Provide excellent value-added service and technical support.

“We live in the world of higher price and higher margins because we’re providing either products that our customers can’t get elsewhere or because we provide them much faster than they could get from our competitors,” says Balka.

A recent experience with a Fortune 500 customer illustrates how Home Rubber justifies charging customers higher prices than competitors (which, not coincidentally, delivers higher margins to distributors).

The customer, an aluminum manufacturer, noticed a problem with tubing used in a “pot room,” where ore is transformed into pure metal. Over time, ore leaked out of hairline cuts in the tubing. Plant engineers determined the failure was caused by a buildup of static electricity in the transfer tubes.

The customer approached Home Rubber about developing a hose with identical flexibility, wear resistance and physical properties as the original tubing, yet with slight conductivity to help limit the buildup of static electricity when ore was transported through the tubes.

“What they wanted was a very specific range of conductivity that would keep the tubing conductive enough not to hold a charge, but not too conductive to transfer the whole current,” explains Donald Slowicki, Home Rubber technical director.

Slowicki and his staff spent weeks on the project, agreeing on a method of measurement with the customer’s engineers, developing and testing compounds and providing samples.

The project took about six months to complete. Price was never an issue, because the customer recognized the great lengths Home Rubber took to solve the unique problem.

The customer has since placed four new orders for the tubing, including private labeling to ensure the tube is used only for its intended purpose.

“That’s an example of the steps we’ll take to help a customer,” Balka says. “We understand our role as a small player. We need to carve out a niche and be technically on top of our game and willing to share that with our customers.”

Consultative sellers
Place a call to Sterling Rubber & Plastics, a Dayton, Ohio, hose distributor, and you’ll get your first clue that this isn’t necessarily the place for customers if all they want is the cheapest price. The operator answers by saying, “Good afternoon, Sterling Rubber & Plastics, performing to the highest standards.” It’s a simple, yet effective, way for the company to set itself apart from the competion.

Sterling president, Rodney Yarger, says one way distributors demonstrate their value is by training their staffs, especially salespeople, to become consultative partners with customers.

“The worst thing a salesperson can do is go in and say, ‘I gotta show you this, I gotta show you that,’ and hope the prospect wants something,” Yarger says.

Sterling requires its salespeople to participate in ongoing sales training that follows a less transactional approach. Sterling differentiates itself by elevating the status of its salespeople. They’re striving to be partners with customers, not product peddlers.

“We teach salespeople to engage customers in a dialog. Tell me about situations that have been a problem for you. How do you make your buying decisions? What are your criteria?” Yarger says. “If their buying criteria fit what we have to offer, then we determine the next steps together.”

Instead of doing a dog and pony show for a customer or prospect — saying this hose works under this operating pressure and these temperatures — Sterling salespeople try to find out a customer’s needs before spouting off a series of product features and benefits a customer may not even require.

They might say, “Do you have problems with hoses swelling and deteriorating and the covers peeling off?” If the answer is yes, they ask follow-up questions. What’s the application? What’s the pressure? What material is going through the hose?

“The traditional approach is to throw out a bunch of facts and hope you hit the mark,” Yarger says. “Our approach is the opposite. We know we have a hose that resists this type of circumstance, so we ask, ‘Are you having this type of problem?’ If they aren’t, you don’t talk about that kind of hose. You have a list of problems you think the customer might be experiencing and you ask about them.”

Yarger instructs salespeople to look at themselves as consultants who happen to get paid when they sell something. To walk in and go through a chest-beating monologue doesn’t cut it anymore.

“Our approach is very relaxed,” he says. “It’s give and take. We’re on the same side of the table focusing on the problems and the issues and how we can jointly solve them.”

Enlist manufacturer help
Distributors that strive to demonstrate their added value to customers (and therefore deserve to ask a higher price) need more than the usual kind of support from their channel partners. In today’s selling environment, the distributor and customer attempt to establish a relationship where they mutually seek solutions to the customer’s problem. The same attitude must exist between manufacturer and distributor.

Some manufacturers recognize the need to change how they do business with distributors. At Dayco Products, Dayton, Ohio, the company switched from a product focus to a market focus, according to vice president of marketing Brian Short.

“We examine each market where our products are used and share that information with the distributor salesperson so when he or she goes in, they’re knowledgeable about the industry,” Short says. “They’re not just saying, ‘I’ve got a belt that’s cheaper than the other guy’s.’ Instead, they can say, ‘I have a belt that works in this application,’ or ‘You’re going to have less downtime with this belt because . . . .’”

Short recognizes independent distributors can’t sell on price. “They have to bring value to the process,” he says. “As suppliers, we have to recognize that and help them be more effective in identifying the markets, the end-users and the applications.”

For example, a new program Dayco recently instituted helps distributors tap into business they may otherwise miss. It involves major highway construction projects that are often awarded to contractors from out of state.

Funds to pay for the road projects stem from the Transportation Equity Act for the 21st Century, commonly called TEA-21. Signed into law in June 1998, TEA-21 guarantees at least $198 billion will be spent on highway and transit programs for the next six years.

Dayco recently began providing a handful of distributors with research indicating where TEA-21 construction dollars are spent.

“We use our market research tools to identify which states get the most transportation dollars from this act,” Short says. “We take a given state and try to find out the nature of the contracts, the name of the contractor and where he is based, how much dollars are involved and so on.”

The information is passed to a Dayco distributor, along with details about the kind of products found on equipment used in the projects. For example, they will explain which high-pressure air hoses are used on jackhammers, the concrete pumping hose typically used on cement trucks, high-pressure hydraulic hoses used to repair equipment on the jobsite, V-belts for concrete saws, etc.

Bob Lyons, president of Tipco Technologies, a distributor from Owings Mills, Md., says it’s too early in the program to call it a success, but he appreciates Dayco’s approach.

“A lot of manufacturers do a wonderful job from an R&D, manufacturing and technical standpoint, then they drop the ball when it comes to marketing and selling the product,” he says.

Helping distributors learn as much as they can about a project before they visit a jobsite makes them appear more knowledgeable than the competition. And, it takes the emphasis away from price.

“Above all, we sell performance and quality,” Lyons says. “Price is important, but it’s not the dominant issue.”

When the issue of price is raised, Lyons likes to talk to customers about the lowest “laid-in cost” of products.

“In other words, what’s the cheapest way to get the product through the chain from our facility into theirs,” he says. “That may mean by vendor reduction. It may mean putting inventory on their floor at specific locations rather than at their dock. It may mean invoicing the account once a month instead of every time you ship something.”

But it involves much more than the sticker price.

Provide on-site support
Howard Feldstein, a marketing specialist for the Boston Weatherhead division of Dana Corporation, explains one way distributors and manufacturers can avoid being labeled commodity providers is by developing a certification program that identifies distributors as a cut above the rest. Dana’s Boston Certified Chemical Hose Distributor program includes 39 select distributors from around the country.

“While price and product are one of the features we sell, we also emphasize eight or nine other services for customers, such as training, auditing their facilities, testing hoses, tracking hoses and fabrication,” Feldstein says.

Working with distributors, Dana targets specific customer accounts.

“If an end-user wants to have a hose audit done, we’ll provide manpower,” he says.

In facilities with 2,000 or 3,000 hose assemblies, it might take two or three days to get through a plant. Then Dana and the distributor issue a report based on the findings of the audit, sometimes including photographs taken inside a customer’s facility. The report may take the form of a safety presentation, including recommendations to rectify unsafe situations.

“After the audit, the distributor provides the end-user with hose assemblies the distributor fabricates,” Feldstein says.

A tracking number assigned to each assembly enables the distributor to trace each assembly going into the facility to determine how long it has been in service.

“If there’s a failure, we can go back to the manufacturing date to check if there have been any problems reported anywhere else. It provides us a lot of good information,” Feldstein says.

The goal of the program is to lower a customer’s overall cost by extending the life of hose assemblies. It also provides proper hose handling and safety practices that help reduce environmental or workers’ compensation costs.

It requires hard work by the manufacturer and by distributor salespeople.

All of the examples in this article prove it’s not easy to sell when you can’t boast of having the lowest price. Some salespeople won’t devote the extra time and energy required to provide specialized service, adopt a consultative selling attitude and work more closely with manufacturers. No doubt some salespeople will prefer to continue harping to sales managers about their inability to sell more because their prices are too high.

We’ll let Larry Steinmetz have the final word on that subject.

“It doesn’t take much of a salesperson to sell the lowest-priced product,” says Steinmetz. “Any idiot can give stuff away by cutting the other guy’s price. Selling occurs when your prices are higher, but you’re still able to close the deal.”