Making the sale is the ultimate goal for any business. Whether you’re trying to upsell on parts or move some of your whole goods off of the floor, understanding what type of customer you’re selling to could make a difference of turning a solid profit or breaking even. In the following story, Jeffrey Gitomer, an author, motivational speaker, and business trainer, shares his experience with understanding customers and how discounting isn’t always the key to earning business.
I went to the National.
I collect sports memorabilia, and the National is the place where everyone who is a serious collector or dealer goes. People fly in from all over the world to buy and sell every kind of sports collectible imaginable. And 50 sports celebrities are there signing autographs (for a fee).
One of the most interesting elements of the National is that each of the dealers (more than 500 of them) has their own museum. Collectibles dating back to the turn of the century. Every form of ball, bat, glove, helmet, card, jersey and autograph are available. Prices range from one cent to $100,000.
When I go to a dealer’s booth, I look very carefully at the items for sale. If I like one, I ask the price — even if it’s marked on the item.
As you know, asking, “How much is it?” is the second-biggest buying signal on the planet. “I’ll take it,” being the first.
Once I ask this question, every element of salesmanship is revealed. I’ve basically told the seller that I want to buy what he’s offering. How much more of a signal can I throw out? More than 90 percent of the sellers will say something like, “I’m asking $150 for it, but I’ll give it to you for $100.”
Now maybe this is a ploy on the part of the seller to make me feel like I’m getting a bargain, but the bottom line is he just cut his price by one-third as an incentive for me to buy.
BUT, my real incentive was I wanted it.
And I was willing to pay $150 for it. Holy cow!
A small percentage of the dealers will say, “I’m asking $150.” And I’ll say, “Is that your best price?” Or I’ll say, “Is that your cash price?” And then the bargaining begins.
But there are a handful of dealers who will look me straight in the eye and tell me that $150 is their firm price. And you know what? I pay it. The same guy who reduced his price by one-third could have had more money if he had just changed his language, if he had just changed his manner, if he had more self-confidence or belief in what he was offering, or if he hadn’t developed the habit over the years of having to haggle over the price with each customer.
As I said, maybe it’s a ploy and the seller only wanted $100. But the bottom line in sports memorabilia is that it’s a supply/demand marketplace driven by both desire, perceived value, actual value, and pride of ownership.
By now you’re wondering what does my sports memorabilia buying have to do with your selling structure or strategy. And the answer is: The price process of the memorabilia dealer is no different than yours. Your customers ask for discounts, and the first thing you do is try to figure out how low you can go, still making somewhat of a profit, and complete the deal. Big mistake.
Regardless of your thinking (because many people think that their product is becoming a commodity — bad thought), if you were able to stand your ground by proving your value, and having your customer perceive that the value was there, not only would you earn your price, and get your price, but you would also have the beginning of a mutually respectful relationship that will end with customer loyalty rather than customer satisfaction.
CHALLENGE: What stories are you telling? What value are you proving? How deep is the engagement with your customer?
REALITY: If your engagement boils down to a proposal, or if your main contact is a purchasing agent or someone in a procurement department, you lose. Even if you win the order, you lose the profit.
I’m a loyal customer to sports memorabilia. I will continue to go to the National and try my best to negotiate price at the point of sale. But the bottom line is if any dealer put up a banner behind his booth that said, “Our prices are fair, and our prices are firm,” they’d make a heck of a lot more money at the end of a show, and so would you.