Ron Baron, former CEO and current motivational speaker, dazzled those attending the Sandy ELP Meeting this past week with a low tech, high powered presentation on being a savvy seller to your customers and clients.

Are You Waiting?

He opened up by referencing the current stagnant economy and asking if you are among those business people who are waiting for the economy to recover before expanding, or before you start or promote your business. Then he postulated this scenario. What if it doesn’t happen? What if the economy doesn’t recover? What if the current extremely slow growth is the new normal? You can’t afford to sit back and wait for something that may never happen.

“My Budget Can’t Handle That!”

Then he jumped into the selling game. As you’re trying to sell a product or service to a business or customer, they’ll often respond with, “That’s beyond my budget.” Ron then said, “Budgets are for people who don’t know what they want.” Or in-other-words they use that excuse to deflect the seller and keep from purchasing the good or service. Ron continued by pointing out, knowledge about the buyer’s wants and needs is critical to selling your product or service. “If it’s something that’s suitable for the client, then budgets go out the window.” The buyer buys what he/she needs or wants and rearranges the budget.

Knowing Your Margin is Crucial in Responding to “I Can’t Afford…”

“If you’re not in business to make money, why did you go into business? Most businesses fail or go broke …and your’s can, too.” Then he suggested that knowing your margins is crucial. You have to know how much profit you are making at any point in the business cycle. Business is a game of margins, not volume. Then he gave two math examples:

1) If your cost is $1000 and you add profit of $1000, you present a $2000 job cost to your buyer.  The buyer objects, “I can’t afford that!” You give a $200, 10% discount, which results in $800 profit.  The result is a cut in your profit. But not just 10%. Your cut is 20%.

2) If your cost is  $1000 and you add profit of  $300,  you present a $1300 job cost to your buyer.  The buyer objects, “I can’t afford that!” You give a  $130, 10% discount, which results in $170 profit.  The result is a cut in your profit. But not just 10%. Your cut is 45%.

…all this because the buyer made a simple objection. You now are likely not making enough profit to stay in business. And you can never make up that lost profit in volume.

The Issue is Not Price

Often the problem is you, the seller. You believe, from the buyer’s statements or silence, that the issue is price. So you make the first move to “automatically cut 10% ” which is all the buyer is waiting for. In most cases the buyer would not be talking to you if he didn’t…  a) have the money to purchase at full price or… b) would purchase from a competitor. Ron told a story about running a successful printing business using top of the line printing and cutting machines from the same quality manufacturer. He needed a fourth machine for his expanding clientele. So he called the manufacturer’s rep. The rep told him they could sell him the machine he wanted for $1.3 million. He objected and said he could go to a competitor and get his machine for $1 million. The rep panicked and said he’d talk to his boss. He traveled from Massachusetts to New Jersey, told his boss he had a price buyer. His boss authorized a $100,000 discount. The rep came back and said the best they could do is a sales price of $1.2 million. Ron told us, “I accepted it and bought the machine. It was the easiest $100,000 I made that year. Would I have bought it at $1.3 million? Of course! I needed that quality machine and the top-notch service of that manufacturer that they’d already shown me with the other three machines.” He then told us the same sales rep had sold him the other three machines. Don’t be taken in by the intimidation practices of buyers. They attend seminars to learn these practices so they can get the best of sellers.

Customers don’t buy based on price. He verbally illustrated this by asking me if I’d bought my short-sleeved white shirt at the lowest price I could find. I said I had. Then he asked, “Would you have bought it if it was long-sleeved wool and it was hot outside?” I answered no. “Would you have bought it if it was a dark red or blue shirt with a logo on it?” No again “Would you have bought a polo shirt with a team name on it at a lower price? The answer was again no. He had graphically illustrated that I had made a series of decisions (3-5) pointing me toward that shirt before the price had ever entered into the picture. Price was the last consideration. Customers buy on quality and relationships. If the buyer has been talking to you for 15-20 minutes, they want to buy from you, not your competitor down the road. Buyers know that the cheapest price is the one that burns them every time. The business actually ends up paying more when they have considerable down time from breakdowns in equipment and/or having to replace the equipment early, or having to replace the poor performance service that gave them a bad reputation and lost contracts with the quality service provider they should have gone with in the first place, even though his price was higher.

Another problem you, as a seller, creates, is when you avoid talking price at all. The buyer then knows he can negotiate a lower price. The solution is to talk about price right up front, like this, “After reviewing the criteria to meet your needs, you’ll find that “Package A” for $50,000 is the best option for you. That package meets your needs in the following ways… .” Price is no longer an issue. Now your prospective buyer is focused on the quality he gets and the relationship to you, because you’ve shown your care about the buyer and his business and not the price.

Americans Buy Quality, Not Price 

We Americans buy quality, not price. We buy the house we want at the top edge of our ability to qualify. When our means increases, we go out and buy a better car or a better looking wardrobe. It’s the same in business. Price makes a statement—a statement of credibility. The higher you pay, the more credibility you give to the seller’s product or service. A study noted that the gas stations that charge the most for gasoline are the most successful. Never, ever bid too low. Never, ever lower your price. Walk away first. Often when you are just a few minutes away, you’ll have to pull over to answer the call, from the prospective client you just left, accepting your price and asking you to come back to get the signed contract.

Service is Your Competitive Edge 

Yes, your competitor may charge less, but he can’t compete with your competitive edge. You provide Mercedes type service while he sells Kia type service. Service is your competitive edge no matter what you are selling. And we Americans will always pay a little or a lot more for good service. What distinguished Dominoes from all the other pizza chains? The owner realized, early on, that he was not marketing pizzas, he was selling service. He began to offer “delivered to your door” pizzas. He didn’t worry about being the top quality pizza, just good enough to be decently edible. He prospered as others went out of business. Then he franchised and became wealthy. When Evian water first started out, he two entrepreneurs were discussing the product. They postulated that the customers had to be foolish to buy bottled water when they could get it free. Never-the-less they went ahead and quickly became wealthy. The product gave people quality water in a convenient package they could cap while at their job or out walking and they could trust that quality. Focus on service and you get wealthy. (Note: Evian is naïve spelled backward.) People pay amazing amounts of money for products that provide a service.

Keys To Business Success

Customers need and want quality products, trusted relationships, and service they can count on. When you hear the words, “Thank-you,” you need to raise your prices. Give the customer and client what he really wants and needs and you’ll never lower your prices again or even start them too low in the first place.