You’ll Never Know Your Customer’s Walk Away Point Until You Know Your Own – PART I
You have to know when to walk away from a customer over price. I repeat: you must know your walk-away point. If you don’t know your walk away point, you will never find the customer’s walk away point. This is best illustrated by an example:
I recently met a sales leader for a company who was the premium service provider in his field, and his company was constantly compared against the same two competitors. The competitors offered less features and service but were also less expensive. The customers constantly asked this sales leader to ‘sharpen his pencil’ and match the competitive price to win the work. His company had for years chased the volume by matching the competitive price.
My question to him was, “how do you know they won’t still buy from you even if you don’t price match?” He didn’t have an answer for this. I pointed out to him that many of the customers that had bought from him at a discount over the years had likely already made up their mind to buy from his company because of their premium features and service; they were simply using the competitive price match as a tactic. How much profit had this cost his company?
They didn’t have a walk-away point. They felt so unconfident in pricing and scared of volume loss that they price conceded every time. If they hadn’t discounted (or not all the way down to the competitors’ prices), they would have a chance to learn just how price sensitive the customer really was. Or wasn’t. In my experience, we fear the customer will walk away far sooner than they actually do. You will never learn your customer’s walk away point until you know your own.
Now sometimes, we find we actually do need to walk away over price. Sometimes the highest price that customer is willing to pay does not overlap with the lowest price we should accept. This is hard for sales people, even very good ones, because closing deals is what sales people do best. We are asking them to operate counter to their nature and even counter to their own compensation. This is where good organizational guardrails, sales leadership, training, and effective incentive design can all play a role.
Know your walk-away point. This is the Kenny Rogers moment, folks. You’ve got to know when to walk away… and know when to run.