The Dangers of Discounting | How to beat the competition without selling price

Discounts and incentives are one of the Senior living industries most expensive and damaging sales tools. Before you continue your current policies you might want to consider these questions?

A sales executive with a national Senior Living company recently shared with me that the company’s sales people did not have the sales skills or confidence to differentiate their communities from the competition without the help of discounts.  She felt that sales reps lacked the confidence and skill they needed to combat the ever growing use of discounts by their competitors and meet their sales goals. 

There is no doubt that discounting can help sales people boost overall sales given the current competitive environment, but at what cost?

From my experience, discounting can have a negative impact on your sales team, your product, your quality and your profitability.

If your current sales policies allow pricing discounts you might consider:

1)     Are your policies creating a negative image for your company?

By discounting, you effectively preposition your brand message. You are sending the message that your service or product is just a commodity, rather than something of value to the customer. This might be intentional; A Chevy’s positioning is obviously different to that of Mercedes for example, but just consider your own offering before potentially changing your customers’ perceptions of your company by offering a lower price.

2)    Rarely do customers really put more value on price than on their loved ones safety or happiness and if they did, is that the kind of customer you would want?

Focusing on discounting sends the message to your customers that they might as well shop around for the cheapest price anywhere, because you have nothing to offer them but a lower price.  The kind of customers that are attracted to you because your price is low is also the sort of customer who will flee to your nearest competitor the second they have a discount or special offer running, these customers are never your best customers and they certainly aren’t loyal which brings us nicely onto the next question… 

3)     Are you in danger of starting a price war you can’t win? It’s a slippery slope that does not usually have a happy ending.

When your competitors see you discount, they will naturally retaliate by cutting their own prices and escalating their discounts. What happens if your competitors decide to match your prices or worse provide bigger discounts? Your advantage is immediately eroded, and worse still, It’s a downward spiral.  The company that will inevitably win is the company with the deepest pockets and that may not be you.  Ultimately no one wins, both you and your competitors are eroding your profits.

4)     Are your sales people relying on price instead of skill? Are your discounts creating a barrier to building the skill required to maintain long term success?

When your sales people have a price reduction at their disposal they often bring it up and use it before the customer has made their decision which often adds confusion and even uncertainty to the process. Offering a price reduction to early can actually slow the sales process and create doubts about your quality and stability.  Sales people who rely on discounts can forget how listen for core values and root concerns and lose their ability to use proven sales skills to create value and close the sale.

5)     What is the actual cost of discounting? 

When the average length of stay can range from 2 to 6 years, (depending on care level) a simple discount of $300.00 per month can potential reduce annual cash flow by hundreds of thousands of dollars and millions of dollars in overall value. I recently visited a community that was falling short by more than $100,000 a month even though they were at 90% occupancy.  The sad part was that the previous sales manager walked away with significant bonuses for quickly filling the community and it would now take years to move the rents up to where they were initially budgeted.

Wouldn’t it be better to train your sales people to avoid talking about price altogether and instead focus on selling value?  

Sales people who know the companies different and better story and how to sell it have a competitive advantage over the competition.

If one or more of your sales people have grown accustomed to talking about price instead of selling value and you are ready to make a change here are some areas you might focus on improving:

  • Teach sales people to treat each customer as a unique individual who has a unique situation, needs and values. Teach your sales people how to get control of the sales conversation up front so they can gain the customers trust and build a relationship where the customer feels comfortable sharing their particular situation.
  • Teach your sales people to resist mentioning price up front or directly responding to price related questions before they have discovered, clarified and prioritized your customer’s needs and values.
  • Teach your sales people to always present your solutions in the light of the customer’s values which will automatically make it difficult for the competition to replicate.
  • Teach your sales people to have confidence in your company’s inherent value and always ask for the sale, even if your offering appears to be slightly more expensive.
  • Teach your sales people to never respond to initial objection’s.  Teach them to always listen to the customer’s objections with the knowledge that objections related to price and other factual items are never real and are usually based in hidden emotions which if uncovered can be easily addressed without making price reductions.

Hopefully this article has been helpful in encouraging you to look at discounting in a different light and make some changes if needed to get your pricing and sales on a better path.

If you are interested in teaching your sales people to stop discounting, improve their sales skills and immediately improve sales and profits then you might want to consider introducing the ValueMatch+ Sales Skills program?

Register for the “Dangers of Discounting” Webinar this Thursday 13th October at 1 PM EST and 10 AM PST.

William Nowell

by William Nowell