Three Tools to Use

“No business buys a solution for a problem they don’t have.”  So said Seth Godin.  That’s understandable.  No one goes out looking for something if they don’t have a want or need that has to be satisfied.

But having a prospect looking for something you offer doesn’t mean you’ll get the sale.  You have to do more than that.  And you may provide clients with excellent customer service, but many of your competitors will make the same claim.

It is a reality of life that those who make the most money in any field, industry, or profession are not necessarily those who have the most knowledge, are most experienced in their craft, or sell the highest quality service.

"The fact is this: those who make the most money selling their services in any field are not necessarily the best at their profession or craft ... they are the best at marketing and selling their product or services to others."  (Bob Bly - one of the most successful copywriters in the world.) 

What this means to you is that it's not enough to be good or even great at what you do.

You have to be great at convincing others that you are the one they should hire instead of your competitors.

There are many tools to use to do this, but in this blog I want to touch on a three tools relating to pricing you can use in your sales copy that you might like to consider.  They follow on from some of the techniques in my previous blog:

  • Reciprocal concessions
  • Price anchoring
  • The strategic use of discounting

Reciprocal Concessions

A reciprocal concession in your offer sets a peg then rolls it back... then rolls it back some more. With nuance. With patience. But absolutely, with purpose.   (John Forde)

As an example, here’s a study undertaken at the University of California (LA) where groups of students negotiated over a pile of money.  They were told observers would measure their negotiation skills.

Beforehand, one student was secretly instructed to try three different negotiation tactics with three different sets of students.

With the first, he demanded all the money and wouldn't budge. 

With the second, he made a reasonable demand only slightly in his favour. 

With the third, he made the extreme demand and then backed off to something more agreeable.

Guess which group gave him the most money?   In every test trial, the third group was the most generous.

The study found that...

(a) The second group who "gained" the concessions felt like they'd created the deal and were now obligated to uphold it, even if they didn't actually force the concessions, and...

(b) The third group who felt like they'd brokered the concessions and controlled the deal were actually more satisfied with the outcome -- even though they had foregone more of the money.  Why?  Because they believed they had controlled the deal.  They were played by reciprocal concessions.

Anchoring

Anchoring is an idea about how to set a frame of reference for a number or an idea.   It's used most often when you introduce a product price, in the close of a sale.

The logic goes, you mention a big number...   Any big number...

And then mention your price, which -- of course -- is lower.  By comparison, the price will look small.

"If that's too much," you're saying to the customer "how about this?"

Knowing, of course, that the "this" you wind up with was what you were hoping to nail as the final price all along.

So how might that work in your next sales pitch? Maybe something like this...

"To get the same kind of service from a top-level pro, you might pay $1,500 for a three-hour consultation. That's what I've charged my private clients for years..."
"And frankly, it's well worth it."

"But I know this is new. And I know, from where you stand, it takes guts to be a pioneer. So I've set the launch price at just $749. That's a great deal.

"However, let me do you one deal better.

"For the next 24 hours, you can grab an early-bird discount of just $499.

"And there's only one catch: To get that price, you HAVE to let me hear from you by midnight. Make that deadline and the steep discount is yours."

You get the idea. And note the use of “Urgency” to help close the sale.

Sure, you could always just start by mentioning the lowest price you'll take. And maybe it will still feel too low, compared to what you're offering.  Then again, it might not.

So why take the risk?

Test it. Try starting with a big price. Or even just a big number, even an unrelated one, before you mention a better bargain deal.

Maybe even try knocking the price down twice after you set the initial anchor in place.

Not only will you be more likely to get the sale, you might also get a customer who feels a lot more satisfied for getting such a good deal.

Sometimes you see the same technique used by comparing the price to the cost of a daily cup of coffee.

The Strategic Use of Discounting

Now I’ve railed against discounting many times, including in my last post, but it can be used strategically, and cleverly.  I’m indebted to Dr. Greg Chapman for this example. It also uses anchoring. 

Everyone (including me) says discounting is a bad idea if you are using it as a way to increase gross profit through sales volume.  For example, if your gross profit is 30% and you offer a 20% discount, you will have to double your sales, just to break even.  It also creates a reputation for your business that your prices are negotiable.  Not a great strategy.

Most people discount when they see their stock just sitting on the shelves and then they panic, but what if you planned to discount from the start.

What might such a plan look like?

Let’s say the product cost you $30. Keeping the arithmetic simple, you decide to sell it at $100, a 70% margin.  You don’t expect to sell many at this price, perhaps 10% of your overall sales.  Next you decide to announce a 15% discount to your customers as part of a ‘mid season’ sale.  You expect to sell 30% of your stock at this price.  Remember, by having priced it at $100 initially, the 15% discount seems like good value, with the initial price being an anchor point.

Finally, you offer the product at your ‘end of season’ sale at a massive 40% off where you expect to clear the remainder.  Of course, at this price, you still have a 50% margin and over the whole season, you have achieved a 58% margin.

Does this strategy create a reputation as a discounter?  Not if there are ‘good reasons’ for the discounting which don’t include ‘you can’t pay your bills’. Such reasons might include a new model or end of financial year sales.

The discounted value is relative to the significantly higher initial price that you set as a reference point.  Your focus is on achieving the average price target you have set, and discounting is the tool you use to achieve it!

Is Your Marketing Performing?

When clients approach me for coaching, so often, they are not getting the clients they need, the right clients, or the sales they need at the margins they need.  Eight times out of ten this comes down to not knowing what is working, and how to develop compelling offers for their customers.

For more than 30 years I’ve been helping small business owners use the right tactics to plug the profit leaks in their business and restoring their cash flows by assisting them understand how to use the 80-20 rule to determine their most profitable customers, and to determine the offer to bring them on board.

If you would like to discuss with me how you might do that, book a Strategy Consult here. 

 

© Copyright 2018 Adam Gordon, The Profits Leak Detective  Except for those bits by Greg Chapman.

Add comment


Security code
Refresh

Opt in above and get instant access to our exclusive report including…

Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?

  • Get 21 Questions that help identify tell-tale clues of a profit leak.