You went for the moon and priced high. You wanted to show the market who’s the boss. You made your stand, but the customer hasn’t called you back and won’t return your call. You are frantic because you want and need their business. What do you do now?
Oh boy. What does a salesperson do when they have overpriced their product in a competitive market?
In order to address the problem (or our strategy), and find out why our customer isn’t calling us back, we need to figure out: Was it a mistake to quote so high? Or, was it the right price for the wrong customer?
Was it a mistake to quote so high?
When was the last time you evaluated your hotel versus your hotel’s competition?
Reasonable Compensation: Experts say reasonable is whatever you can convince your buyer that your product is worth. The operative thought behind this premise is VALUE. No buyer will begrudge you a price that is reasonable relative to the perceived value of the product or service. However, if you have over-improved or over-valued your product – you may not be able to get the higher price you NEED no matter how good you are, how extraordinary your service may be, or how much money you have invested.
Develop a pros and cons list of your hotel versus each of your competitors. Once that is done, rank each hotel in comparison to your hotel in terms of quality and location. Shop the comp set (BAR, LNR, Group). How does your pricing compare to your rank and to the rank of each competitive hotel? Only with this information can you determine whether your value is warranted.
Based on this information: “Were you right or were you wrong?”
Don’t Sell Yourself Short: Discounting or “fall back” can oftentimes hurt your negotiation. BEFORE any price is ever quoted, make sure you are selling versus your competition. Ask the customer, “what other hotels are you interested in for your annual board meeting?” Once they identify the hotels/venues, ask them what you like about each of them. When you get to the moment of quoting the price, make sure you give them your best pitch: “We are pleased to offer your group a special group rate of $xxx which includes xxx, xxx, xxx” (list whatever is included for the group). Don’t ever quote a price EXPECTING to have to fall back. Be prepared to negotiate by knowing how you stand against the other hotel – but always put a fair price forward first.
Based on this information: “Were you right or were you wrong?”
Don’t Apologize: If you start your sales pitch by apologizing for the high price then you are not confident of the value you have assessed. You’ve made the decision to price your product, now use all your salesmanship and sell it!
Based on this information: “Were you right or were you wrong?”
Was it the right price for the wrong customer?
Be Prepared to Walk Away: If the business isn’t right for your hotel at the price you feel is the right price, be prepared to accept the fact that the customer will probably have to go somewhere else.
However, before you move on, remember to make sure it is a sound decision because no one really WANTS to chase business down the street. Have you have filled all your buckets? Will your hotel suffer and will the rooms go empty? Will you find other business to replace it?
Taking a lower price from a group or LNR company means you have to make it up somewhere else. A few examples that are oftentimes used to “make up” rate would be to closing out groups and sell at only BAR rates, close out retailed-tied discounts or adjust percentages, limiting inventory or closing out OTAs, and/or taking additional group business at higher rates to make up the difference. Is this a sound strategy for this piece of business?
Based on this information: “Was it the right price for the wrong customer?”
Qualify Your Prospective Buyers: Yes, there are occasions where you may be wasting time negotiating with a customer who is buying outside their price range. It’s like the home buyer who wants a $500K home but is only approved to pay $250K…. their philosophy oftentimes is, ‘if the seller is desperate enough they’ll lower the price’…. yeah, right. Watch the show “Say yes to the dress.” The first question they ask the bride is “what price range are we trying to work within?” If you know your customer’s budget then you can decide if the business works for your hotel. If their price point is too low, you can then decide whether to continue talking or to pass.
Based on this information: “Was it the right price for the wrong customer?”
So back to my initial question,
What does a salesperson do when they have overpriced
their product in a competitive market?
The obvious answer is: Lower the price based on sound decisions, or pass and move on.
My answer: If you have properly priced yourself in the first place, your belief in yourself and your product or service will be your best weapon. Stand firm.
Happy pricing properly!
Linda