Many of us fear saying “No” to a potential customer…

…yet it can be one of the most effective tools for building rapport.

When you’re approached by someone interested in your offerings how do you react?  Do you go into your sales mode?  Do you get a queasy feeling in your gut and a nagging voice in your head saying “Don’t blow it!”  Or do you begin listening to see whether this prospect is a good fit for your business?

Unfortunately too many of us experience the fear I just described and we begin selling to people who aren’t a good fit for what we’re offering.  How can you avoid this mistake?

1. Remember that your greatest profit margins come from your ideal customers.
2. Whenever you stray from that path it adds dramatically to your infrastructure costs.
3. You risk your reputation by selling something to someone whose needs would better be served elsewhere.

These are compelling reasons for saying “No” to prospects who don’t fit your ideal-customer profile. How can you say “No” and enhance your reputation in the marketplace?  Simply say to the prospect “We’re not the right solution for you.  You’re looking for … and we provide ….  Here’s the name of someone who will meet your needs.”

It’s counter-intuitive, but you will create a lasting memory with this prospect as someone of incredible integrity who genuinely cares about him/her.  This memory will create additional referrals down the road as the individual to whom you said “No” relates the story of your ethical business practices.

The key lies in the language I provided above – “We’re not the right solution for you.”  This language removes all the judgment that could so easily creep into the conversation.  By saying that “we’re not right for you,” you acknowledge the validity of the buyer’s choice without denigrating it.  It’s you who is not the good fit, not them.  The final step of referring them to a better fit seals their perception of you as an incredibly ethical and caring business person.

Buyers want this kind of integrity and concern for their welfare and they’ll pay premium prices to get it.  It’s another way to assure that you’re getting compensated well for the value you provide.

Discover how easy it is to break the bonds of industry pricing.  Call Dale at 314-707-3771

What impact do sales quotas have on pricing?

Is that the result you really want?

You know that value buyers are willing to pay higher prices to get value.

The question is “How much more?”

If you were able to get 5% more than you’re currently getting for your offering, what would that do for your bottom line?  How about 10%?  25%?

I’m sure some of you are feeling your throat constrict and your chest tighten as you contemplate charging 25% more for your offerings.  The reality is that these are modest percentages in light of the premiums buyers pay for what they truly want.  How much will they pay?

Regardless of what benefits your offering possesses – quality, dependability, convenience, image, innovation, knowledgeable salespeople, etc., you’re basically selling one of three things, image, innovation or time- savings.  What kind of premium does each command?  Let’s take a look.

If image is your value proposition, how much is a buyer willing to pay for that image?  Let’s compare the Chevy Aveo sedan which retails about $12,500 and the Mercedes smallest S-class sedan which rings the register at $90,000+.  The Mercedes is more than 7 times as much as the Aveo.  That’s on a big ticket item; a sweater at Nordstrom’s will cost you about 12 times as much as at WalMart.

How much will innovation buyers pay?  Both VCRs and DVDs give us a clear picture of the innovation pricing cycle.  Early adopters paid about $1,200 for the early players (not recorders, just players).  Dependability buyers got into the market when a player/recorder was about $400, a third of what the early adopters paid for less capability.  The late adopters paid between $85 and $100 dollars, a twelfth or less than the early adopters.

Time-savings premiums depend on whether you’re selling retail or business to business.  Retail buyers use time savings for recreation and it’s not unusual for them to spend 3 times or more of their hourly compensation on recreation.

Business customers, at least the more savvy business people, look at time savings as a way to increase revenues without adding resources.  The gross profit from these additional sales falls directly to the bottom line because the most significant overhead cost, labor, is being held constant.  This additional revenue generating capability has 2 to 3 times more value than the cost savings associated with not having to add staff.

Those modest increases suggested in the first paragraph don’t seem so outlandish now, do they?

It’s counter-intuitive, but you also limit your investment when you’re able to command these higher premiums.  Using the Nordstrom/WalMart sweater example above, WalMart needs 12 times as many customers to generate the same sales volume as Nordstrom.  That means that WalMart needs more facilities, more distribution centers, larger staffs and greater inventories than Nordstrom.  The same is true any time you sell value over low price.

To discover the true value of your offerings call Dale at 314-707-3771.

Can you use pricing to create name awareness?

You can, but it may not be how you want to be known.

One of the more common reasons I hear for using a low-price strategy is that “we don’t have the name awareness the big boys have.”  Typically this reasoning is used by organizations in their first three years of existence or by established companies entering a new market.  Is it sound reasoning?Here’s the approach I used with a homebuilder who was using low prices to create name awareness.  First, let me give you a little background information.  This homebuilder was adamant, and rightfully so, that his quality was better than the big boys.

I asked him whether he advertised in the real estate section of the newspaper.  He did.  Then I asked him to envision that he and two well-known, well-respected builders had subdivisions in the same area with the same style homes of comparable size and amenities.  Finally, I asked him to envision that his and his two competitors’ ads appeared side by side and his price was 10% lower than his competitors (it was).

My question to him was “If you were the buyer and saw these ads, what would you think about your homes?”  He said, “I think we were taking short cuts to keep costs down – that our quality was inferior.”  Indeed, the message this homebuilder was sending was exactly the opposite of what he believed.

It’s counter-intuitive, but name awareness should be created by your marketing efforts and supported by your pricing.  Whether you’re touting high quality, quick delivery, innovative ideas, image or productivity make sure that your price supports your marketing claims.

Incongruity between your marketing claims and your price leaves buyers in a quandary.  Do they believe your marketing claims or the price?  Which would you believe?  Given our natural skepticism toward what others tell us, especially if they’re trying to sell us something, we’re going to believe the price.

This homebuilder was struggling to generate sales and profits because he was sending conflicting messages to the market.  Are you?  If not, congratulations!  You’re ahead of many businesses out there.  If you are, now you have a more effective approach to employ.

To discover how you can break the bonds of industry pricing call Dale at 314-707-3771.

‘Twas the night before Christmas

The store had just closed
I tallied the receipts
Adding to my woes

The Grinch had stolen Christmas
Before my eyes, without even a hint
He’d stolen my profits
Leaving my pockets with lint

In an economy blue
Battling high unemployment and costly fuel
The Grinch was heartless and cruel
He made me lower prices to get sales – even a few

I lowered prices to all
Yet sales and profits continued to fall
So did my holiday cheer
The Grinch had stolen Christmas again this year

Weary and disheartened I drifted into sleep
A welcome respite, a bit of relief
A way to deal with the season’s defeat
Alas, it was a mistaken belief

In my dream the Grinch lowered prices
He lowered them early
He lowered them often
Yet buyers’ resolve did not soften

I saw the Grinch smile
He thought with guile
“I know this won’t work!”
He cut prices and continued to smirk

A voice cried out
“Low prices won’t get people to buy!
Of this there can be no doubt.”
Wasting money makes buyers cry or at least pout

People buy what they want
Price doesn’t matter if they really care
The Grinch knew this, yet continued to taunt
As he pressed me to lower my fare

Wait, what do I see?
The picture becomes clearer
As the Grinch comes nearer
The Grinch is me

It’s counter-intuitive, but “I have to lower my prices to remain competitive” is as much an excuse as “The dog ate my homework.”

In every human interaction one person is training the other how to behave. When you lower your prices to remain competitive you train your competitors to take the lead. You, in essence, tell them that you’ll follow their lead regardless of what they do.

Similarly, you train your customers to wait for a deal. That’s one of the reasons why Chrysler and GM are in such trouble. They trained us to wait for a rebate. Then they added 0% financing. Finally, they gave us employee pricing. Now, unless we get a rebate plus 0% financing plus employee pricing, we feel that we’re being gouged.

Let’s be honest with ourselves. Between relinquishing industry leadership to competitors and training customers to wait for a deal, we’ve sentenced ourselves to a life of hard work with little compensation.

If that’s the life you really want, go for it. If not, if you’re truly tired of trading dollars, hold your prices and focus your attention on marketing. Look for ways to distinguish yourself that are fun and exciting for you and your customers.

I’m sure that some of you are thinking “If only I had the budget for that kind of marketing.” The reality is that, given your current strategy, you’ll never have the budget. Start small! Fun and exciting doesn’t have to be costly. If you don’t have the skill to pull off a fun party, contact a party planner and have them create something that fits a modest budget.

If you’re still skeptical, do the math. Many of you are offering 20% to 50% discounts. How much additional profit would you gain if you stopped offering those discounts. It’s simple math 20% or 50% times your current revenues. Now ask that party planner how much it would cost to create something fun and exciting. It’s been my experience that the additional profits gained by eliminating discounts returns at least ten times the party cost.

Stop being the Grinch that steals your holiday season. Hold your prices. Then find new and exciting ways to attract your ideal customers.

For help in keeping the Grinch from stealing your Christmas call Dale at 314-707-3771