In the last issue, we discussed how to determine what the customer really needs as the first step of our “NaB & CaPTuRe” roadmap: Need, Budget, Conviction, Presentation, Transaction, Reward.
The Budget Step
The second, and most often skipped step in the selling process is the BUDGET. As soon as the customer realizes that they have a NEED, they start worrying on how much the solution will cost. And yet, they hesitate to breach this topic because people are reluctant to talk about money.
In the Guerrilla Selling Seminar, I ask a volunteer:
Orvel Ray: “Bob. How much money did you earn last year?”
Bob: “Well, let’s see, if you mean after taxes, then it would be somewhere in the range of, oh, I don’t know exactly, but,. . . uhmmm … something like. . .”
Orvel Ray: “Well Bob, would you agree that we have just effectively demonstrated that you would rather discuss your underwear in public than to talk about money.”
This game ALWAYS produces the same response.
While more pronounced in some cultures, this resistance to discussing money is universal. And salespeople are not immune. If you ask, point blank, “What’s the price?” most will stutter, stall, and stumble rather than say it out loud. Guerrillas inoculate this resistance by bringing up the topic of price, and establishing a budget based on the potential value of investing in their product or service.
Once you’ve identified their NEED, you can ask, “How much would it be worth if we could solve this problem?” and, “How much will it cost if things remain the same?” It’s important to ask both of these questions, because about half your customers will be motivated Toward some future outcome or reward, while others are motivated Away From the threat of some cost or loss. (People who are Toward motivated buy lottery tickets. People who are Away From motivated buy life insurance.) Guerrillas are adept at selling both ways.
Generally people are more motivated to keep what they have than to acquire something new, so another very useful question to determine their budget is, “What have you used in the past?”
It may be easier to start out by establishing a range, and then narrowing down the budget.
Guerrilla: “What kind of budget do you have in mind for this project, in round numbers?”
Customer: “Somewhere between $1,000 and $2,000.”
Guerrilla: “Closer to $1,000 or closer to $2,000?”
Customer: “Closer to two.”
Guerrilla: “How close?”
Once you have gotten a specific amount, it will be easy to position your product as a good investment, compared to the alternatives, and then focus on benefits.
It’s also useful to ask, “What alternatives have you considered?” Don’t be naive. They are talking to your competitors, and if you know their pricing (and you should) then you will know how competitive your offering may be. Remember that doing nothing may be an attractive option.
Verify their ability to pay by asking, “How do you plan to finance it?” If they say, “I’ll pay cash,” that’s a very strong buying signal. If you can accept installments, or arrange financing for them, you’ve gained an advantage.
Be prepared to offer strong rationales for the price you charge. Is it made from more expensive materials? Is it built to tighter tolerances? Does it have a longer useful life-span? Is it labor-intensive? Does it require special handling? Is it more environmentally friendly, organic, or Fair Trade? Does it require less maintenance, or have a higher salvage or re-sale value?
Cost of the Alternative
Recently, I did some sales training for a bearing services company in Houston, and as part of my research, visited one of their customers, a factory that makes cake mix. This factory is nearly fully automated. Tanker trucks loaded with flour pull up at one end of the building. Hoses and blowers move the flour into storage hoppers. Augers measure and feed it, together with all the other ingredients, into big mixing bins. Huge mixers churn it into the final product. At the other end of the building, machines fold and glue boxes and send them along a conveyer. In the middle, the product is measured into a plastic liner, sealed, trimmed, slipped into a box, closed, glued, stacked in cartons and then piled on pallets, ready to ship.
This machinery is made up of dozens of motors and servos and thousands of bearings. And if just one bearing fails, the whole line grinds to a halt. It costs this manufacturer $90,000.00 (ninety thousand dollars) an hour to shut down, so Mean Time Between Failures is much more important than price. To buy a cheap replacement, or save a few cents on lubricant, simply isn’t economical. In fact, they want to buy the most expensive, highest quality bearings and lubricants available, and they want them backed up by a technician who is available 24 hours a day!
By focusing on the value rather than selling on price, the guerrilla changes the arena of competition, and virtually eliminates cheaper vendors from the running. This actually makes it easier to sell at higher prices.
Most salespeople, when challenged about their price, will simply cave. And nearly two thirds of salespeople will volunteer to cut their price, without being asked, because they do not believe in the value of their product or service. That’s just stupid.
A simple way to gain confidence when quoting prices is to double your price, whatever it is, then practice roll-playing with a colleague as you justify why they should pay that much. Then, when you roll the price back for a real customer, it will feel like a bargain.
As soon as you say, “Our normal price is . . .”, or “Our list price is . . .” then you have already surrendered to the negotiation. Quote your price in the same tone as if you were telling the time.
“What time is it?”
What’s your price?”
“Two twenty-five.” No hesitation. No qualifiers. No equivocating.
One exception: if you put the word “only” in front of any amount, it sounds like a better deal. “I bet you could buy the Nairobi Hilton Hotel for only $300 million.”
The About Face
The customer may balk, and say, “Your price is too high.” Don’t fall into this trap.
Recognize that you do not know what this customer means. It could mean that he has a cheaper quote from a competitor, or it could mean he can’t afford it, or perhaps he’s just testing to see if the price is negotiable. You don’t know, so don’t guess. Before you go any farther, ask, “Too high? (pause) When you say ‘too high’, what do you mean; too high relative to what?”
One of my favorite responses is, “We have no argument with those who sell for less. They know best what their products and service are worth.”
In future installments of this series, we’ll explore each of the steps of “NaB & CaPTuRe” in more detail, and perhaps double or even quadruple your sales.
(This article is part of a series published by Marketing Africa magazine.)