The High Cost of Cheap Prices

What if the cheapest price was actually the most expensive?

Cheap prices seduce and deceive. They attract price-sensitive shoppers and delude them into believing they are getting great deals because of the cheap prices. Cheap prices do not equate to great deals.

A cheap product that fails to perform is a lousy value at any price. Consider the total cost of a product that fails to perform. Consider the aggravation, the disappointment, and the extra money. All this added total cost leads to a disappointing outcome, yet some buyers still choose a low price over long-term value.

Some buyers view cheap prices as the best way to save on total cost. Humans are biased toward an immediate and certain gain. That’s why buyers are lured easily by cheap prices. A cheap price is an immediate and certain gain. Buyers view total cost savings as long-term and less certain.

Humans are hardwired for instant gratification. We opt for an immediate, short-term gain versus a long-term gain, even if the long-term gain is greater. For example, if you were given a choice between $500 today or $550 one year from today. Chances are you would take the money today. We want an immediate gain.

That’s why a cheap price is so tempting. It’s tangible, it’s obvious, and it’s immediate. It’s a known short-term gain. A total cost reduction is a long-term, less certain gain. Most customers understand the concept of total cost, but they can’t tell you exactly what that cost is. In the customer’s mind, a cheap price is more compelling. Until we convince the buyer to think total cost, price wins.

Salespeople must change the way buyers think. The first step is to change the conversation from price to total cost. Here are a few suggestions to help you change the conversation.

Total Benefit of Ownership
To make a total cost conversation more compelling, discuss the total benefit. In Walter Mischel’s classic marshmallow experiment, children were offered one marshmallow now or two marshmallows in 15 minutes. Most chose the single marshmallow, but some were able to delay gratification.

For the buyer to resist the single marshmallow (cheap price), focus on the sweetness of the total benefit. By discussing total benefit, you’re projecting the buyer into the future past the immediate gain of a cheap price.

Sometimes the benefit is to reduce risk or avoid pain. Pain is a stronger motivator than gain. Demonstrating how your solution reduces the risk of future pain is a very compelling value proposition.

For example, one of our clients effectively used pain as part of their total cost conversation. They would explain to buyers that nearly 75 cents of every dollar spent in their industry is to fix another contractor’s mistake. This data reminded the buyers to be wary of cheap contractors. Then they would emphasize their own company’s reputation, industry-leading warranty, and Better Business Bureau rating.

Use Proof

Buyers value proof more than opinion. Proof is tangible and compelling. Any total cost savings should be supported with proof. Several organizations provide their salespeople with spreadsheets and total cost calculators. Other organizations use case studies highlighting the total cost and total benefit of their solution. In either case, the numbers have to make sense and be realistic. Buyers value proof.

Buyers also want unbiased information. Testimonials provide the buyer with unbiased proof. Every salesperson should have a collection of testimonials for their prospective buyers. A compelling testimonial will support the claims you are making. If you are claiming to lower the buyer’s total cost, your testimonials should support this claim.
When gathering testimonials, ask customers these three questions:

  • What do you like about our products?
  • What do you like about our company?
  • What do you like about working with me, your salesperson?

This testimonial is called a three-dimensional testimonial. It emphasizes the three-dimensional value of your solution: product, company, and people. Too many salespeople just sell products. If you just sell products, you open the door to too much competition. Remember to emphasize the unique aspects of your solution.

Educate the Customer
Most buyers are unaware of the hidden costs of your solution. The total cost of ownership is similar to an iceberg. Like the tip of an iceberg, the acquisition price is visible and on the surface. However, the mass of the iceberg, like total cost of ownership, exists below the surface and is hidden. Make the buyer aware of what’s below the surface.

For salespeople to get beyond price, they have to change the conversation. At your next buyer meeting, have the buyer walk you through the cradle-to-grave experience of the purchase. When the buyer mentions a cost variable, probe further. Ask the buyer to elaborate. The more the buyer elaborates, the more real the cost becomes.

Remember to substantiate any claim with proof. Provide customer case studies and develop total cost calculators. Ask the buyer to help you determine their total cost. Make them part of the process. When the buyer participates, they are more aware of their costs.

Buyers want more than a cheap price. They want the greatest value. Remind the buyer that the cheapest solution could be the most expensive.

Paul Reilly is president of Reilly Sales Training, a St. Louis-based, privately owned company that specializes in training sales professionals, sales managers, and service professionals. Reilly Sales Training offers public seminars, in-house sales training programs, and hiring and training assessments. For additional information on training programs, call or email Paul at 636.778.0175 or You can also visit and sign up for his free newsletter.

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