If you could [quickly] increase your income 100%, what would that mean for your life and business?
Take a moment and just savor that thought… What would it mean? How would you live differently? How would it affect people you love? What would your days look like…? How would that feel? It’s a question worth exploring, because if we can figure it out, our lives do change. An income increase of 100% is uncommon for most–yet it’s expected, and achieved, but others. Wouldn’t it be nice to know how those who leapfrog up 100% do it? There are distinct differences between the two. Let’s take a look so you can get on the track you want.
John Eliason, Chief Experimentologist
My name is John Eliason; I build my own businesses and I work with people who are building theirs. Working with thousands of people who sell all kinds of things, one of the biggest problems I see is that they simply don’t price their products or services right and they suffer because of it. When it comes right down to it, they just don’t have a very effective way to determine what to charge. Often they’ll look around at what everyone else is doing to decide. I hear things like, “I looked around at what the market would bear and decided that way.” They say this with a look of complete satisfaction, as if clearly this is how they teach you to do it down at the local business school.
The end result is pricing that’s somewhere in that general range of everyone else, or going cheap and to sell on price. thinking that undercutting the competition will surely help them stand out. This might seem like logical way of launching business, and it is how 98% of people go about it. But let me ask you, what percentage of businesses out there seem to really be thriving, with their owners living the kind of life you would want to live? The answers we see are usually about 2%.
Hmmm… So if 98% do it this way, yet only 2% end up with a business that supports an awesome lifestyle, that means there’s a problem somewhere. Exactly. So, what is it that those 2% are doing? What they’re doing represents an upshift in thinking, an upshift in the value provided, an upshift in satisfaction and a massive upshift in their profit.
That’s what we’re going to shine a big bright light on today.
Good news! There are only two (2) ways to make more money: 1) make more sales and 2) make more profit per sale. Even better news, one of those two things can be tweaked right away to increase your income 20%, 100%..300% or more. So, to begin, we’ll focus on one area, which is profit per sale. And the easiest way to increase profit per sale immediately is to increase your price.
But isn’t that business suicide? Perhaps.
But let me ask you, are there other people out there selling basically what you are and making 2x-10x the money you are? So what are they doing differently? If you don’t know exactly, I bet we can figure it out. What do they know that you might be missing? What are they doing that you could model to start? If you could increase your income 100%, what would that mean for your life and business? The question is worth figuring out.
At the end of this session you’ll have more than one idea you can start testing right away.
Two steps, one funky First, understand that charging more money can be a big trip down a funky psychological rabbit hole as much as an exercise in business. Fear of the unknown keeps us from so many things in life and business, and this is one; after all, what if there’s mass exodus?! What if all your clients leave and nobody ever does business with you again? You will suffer, you’ll have to move back in with your parents, people will talk, you’ll look foolish, your kids will have to dress in rags and beg in the streets… Hey, we’re human and that’s how we think, but there’s a way to change that thinking. And what if charging more does work? Life and business both change–and how! Sometimes you just need to see what others are doing to glean a simple answer; you’ll wonder why you never thought of it before.
The #1 thing you need to consider is this: you set your pricing based on your clients’ motivations, not yours. But my motivation is to sell stuff so I make more money. True, but right now the money is in someone else’s pocket. You need to understand what moves them, you need to understand their hot buttons. You need to understand your target’s motivation. What do you mean? Let’s say you sell sporting goods, specifically for baseball. If you sell baseball bats and focus on the bat, you’re likely to get lead down the path, focusing on all the features of the bat, like… Is it made from wood or aluminum? How long is it? What’s the type of grip? Then you’ll look around at everyone else who sells that same bat and price it that way, or sell it cheaper. But selling this way is really difficult. Ask anyone who does it this way if they’re making money and having a good time. Why? What’s wrong with selling on price? Selling this way is what we call Trailer Park Pricing; it’s just not where you want to go. You’ll work like a dog and never understand why you didn’t have success. Trailer Park Pricing..? Let’s look at the three (3) pricing models (Trailer Park, Beverly Hills and Value). Then you can decide what’s best for you.
We call it Trailer Park Pricing because if you operate like this it’s where you’re headed. And if that’s where you live now, well now you can identify what you may be doing wrong, change it, and get out. Trailer Park Pricing is selling on features (what it’s made of, what it looks like) and price. There’s never really a connection made between buyer and seller, it’s just a transaction predicated on price. The seller doesn’t take the time to build value in the product or understand what the buyer wants or ask questions to sell solutions; the seller just wants to be able to make a quick sale to move on. It’s like the guy selling baseball bats, not really asking questions to help determine what’s best for the customer to buy, just wanting to make a sale and pushing the sale based on the bat being cheap. We see this a lot in two types of people: the miser and the novice. The Miser: The miser is a shopper and a comparer; he’ll invest wild amounts of time researching up and down and comparing and then thinking he’s got a PhD in whatever he’s been looking at. He’ll make a purchase, often discovering that he made the wrong choice (but that’s a point for another day). You’ll hear the miser say, “But if they can go online and find it cheaper, then they’d be pissed at me.” The miser will sneak his own popcorn into the $1 movie matinee. All that’s fine if that’s you; just realize operating like this almost always pulls you into pricing super cheap (because you’re cheap) and boring the hell out of your clients with all the data you’re forcing on them. When they don’t run from you because you’re choking them with data, you’ll go to the poor farm from no margins.
When you assume your prospect is interested in the same thing you are, you make an ass-out-of-u-and-me. Ass-u-me.
The Novice: This guy starts selling on cheap because he’s new in business, has low confidence, and figures that undercutting his competition on price is the way to get farther faster. It’s not, though it is a way to go broke faster. But they figure they’ll just do a couple for cheap and then get on to making the real money. Yeah.
The problem is that, if he doesn’t go broke right away, he gets in a rut and never gets out; he’s sold on price for so long it seems very uncomfortable to actually make money on a sale (sounds weird but we see it all the time). He ends up selling on cheap and never gets out. He’s always looking for that secret trick to get everyone to say yes – and then his ship will come in. Of course it never happens. Meanwhile, others around him in the same industry make the same money in half the number of sales (breathing space) or 2x, 3x..10x the money and live a completely better life (breathing space and happiness).
Both the Novice and the Miser need to get clear on one thing; it’s not about their perspective at all, it’s all about the buyer’s. They need to think about what the buyer wants and why.
Before we dive into that little bit of psychology that makes all the difference, let’s take a look at one other pricing model, Beverly Hills Pricing.
Beverly Hills Pricing
Beverly Hills Pricing is super high because you can get away with it – at the time or for a time. Think $8 for a Coke at a pro ball game. Or a $500 autographed football from Johnny Manziel (Who? Exactly.) A $2,000 last minute airline ticket. $20 cover charge at the new club where all the cool kids are hanging out. $200,000 speaking gigs because you’re popular today.
Beverly Hills Pricing is based on supply and demand or perception. In both cases it’s an end result of real thinking… Is the price worth it? It is at the time to enough people.
The point is that it’s perceived value.
So while Trailer Park Pricing is pricing from an almost defensive or scared position, Beverly Hills Pricing is bold; and we pay it.
Notice we’re now talking “value,” and that word just increased profit exponentially. You can add value to pretty much anything you sell. Value justifies price. Add value and you can increase your price – and people will happily pay for it.
Let’s look at how.
NOTICE: Watch for the subtleties here. Applying this one thing can change your fortunes immediately and forever.
One of the most astute and wealthiest men ever, Warren Buffett says, “Price is what you pay, value is what you get.” Let’s slow down and dig through this for a moment. What does he mean, “Price is what you pay, value is what you get?” And who gives a rat’s behind what Warren Buffett has to say, he’s super rich and his opinion doesn’t count. Well hold on there, next time you go to Omaha, Nebraska – where Warren lives – swing by 5505 Farnam St. and check out his home; the man is fruuuuugal. So how did he end up so rich? He understands one thing really well–what other people want, and what they’re willing to pay.
He studies psychology, human behavior, human thinking…He understands his targets’ motivations.
He’s figured out:
1) You DON’T set a price the same as everyone else because everyone else is doing it that way.
2) You DON’T price low just to undercut the competition.
3) You stop and think about your targets’ motivations, then set your price based on the value you’re providing and what that value means to your target.
It’s brilliant. It’s uncommon. And he’s made a fortune this way. You can do the same.
Merchant Card Processing
As you probably know I’m a principal in a merchant payment processing sales company, First Financial USA. Our Advisors (sales team) are their own bosses and can approach the sale from almost any angle they choose, but when they follow what we call the Sideways Sales Piece we see 2x-3x increase in profit and 2x-4x more sales. The piece starts with conversational questions that serve to build rapport and really understand what the merchant likes, needs, wants…and doesn’t. From there we can make a couple recommendations to help them buy better. They seem to appreciate the approach, since they buy frequently and refer more business to us. Seems that just demonstrating sincere interest in your prospect’s situation and asking good questions to help them figure out what’s best for them is providing value.
What you’ve really done is shift from a salesman to a value-providing consultant, and consultants are valued much more than a salesman.
So why would Advisors sell it any other way if the Sideways Sales Piece works 2x-4x better? Good question. I ‘d say their motivation and habit. Motivation, as in: they apparently make enough money selling in a very ineffective way and don’t have enough motivation to change. Habit: habits are hard to break, and when you’re used to doing things a certain way, you have to work really hard to change. Good reason to force yourself to do things the best you can; it can really cost you or it can set you up for a great life.
Let’s go back to the sporting goods business and selling baseball bats and see what we might be able to do to increase value, price, and profit. Lets say you start with a question like, “What brings you in today?”
1) “Are you familiar with the layout of our store? Not really. No problem. Glad you’re here. I’ll show you.”
[As you’re walking] “What kind of baseball equipment are you looking for? A bat. Ok. Is this for you or someone else?”
“Ok…[walk walk walk]… How long have you been playing ball?
“So this bat, what do you want to do with it? What do you mean? Like, are you wanting to practice (indoors, outdoors?), slug, swing faster, slower, bunt..? How have you been hitting?”
Answer, answer, answer [= you have loads of information now].
“Ok… so you want to speed up your swing, improve your average, hit a few more home runs…Yeah! Why?”
What do you mean, why?
“What happens when all that happens; speed up your swing, improve your average, hit a few more home runs…?” [Why do I ask this question and nobody else in the world does? Because it’s really what I’m after–the why]
This guy might say, “My girlfriend loves it when I win, I could get a scholarship, we could win state…
[And all ll this info helps me help him best. Now I can talk to him about what he needs and we’re clearly in a zone that probably doesn’t mean the cheapest bat in town. This kid and I are now talking winning, girls, college – we’re both excited about his future, we’re friends now, and I want to help. I might suggest three different bats, a basket of balls, joining our batting cage club, weights to help his strength and other equipment for his agility, turn him on to private coaching and invite him over on Wednesday when a pro player is in the store signing balls. Of course I’m going to suggest he bring all his buddies and his dad too. I want to meet them all and show them all the same interest I showed this kid.
What do you think that’s going to do for my sales?
Do you think this kid is going to tell other people the story of meeting me and being invited back to meet the pro, bat in the cage?
What do you think that’s going to do for people’s perception of me and what I sell? What do you think this does for my enjoyment of my career? How much could I sell that bat for now?
[A lot. Because it’s no longer about the bat, I’m now a consultant].
It doesn’t matter what you sell when you are truly interested in what your customer is looking for. When you ask questions that open them up, then help them find a couple of options and lead them to making a decision, they value that in a huge way. Now that there’s value, raise your price and increase your profit 2x, 3x…and more. Your client will happily pay, and refer you to their friends.
Let’s think about what you sell and how you can increase value, price, and profit. If you wanted to double your income, working no more than you are now, how much would you have to profit per average sale? Adding no more sales than you have now, how much more profit per average sale is that? Can you simply increase your fee because you’re Trailer Park Pricing?
Back in the dark ages when there were video stores (think VHS), they all thought the most you could rent a VHS movie for was $0.99 and they all stayed there for years making little money. Then some brave soul went to $1.29 and the world didn’t end. In fact it set off a profit explosion in the industry and everyone realigned to $1.99, 2x the price and probably 3x profit. Their life and business changed overnight.
I know a masseuse who hadn’t raised his fee for years and was getting burned physically and financially. He fretted about raising his fee (he was thinking 100%). Even if he did go to 100% increase, he was still in the market–a bit high, but this guy had a solid clientele and he was a real pro, not some right-out-of-school fluff and buff outfit: his clients appreciated his value. He finally decide that he would raise his fee 100% and if half his clients left he’d still make 100% the money he’d made before, yet he’d only be working half time. Bottom line: a few did leave, less than 10%. He increased his income 90% in one move.
Do you need to add value, then charge more?
Credit card terminals are boxes with a little software in them, that’s it. Who’s going to pay much for that, electronics are cheap. But that’s not the point; it’s not what it is, it’s what it does. Show your customer what it can do for them; in this case, accept money any way it comes in the door. Customers will buy more because what’s available on their card is more than what’s in their checkbook and more than the cash they have in their wallet. All of a sudden that little box is a high-value money machine that fits into marketing, sales, and how much money merchants can earn (and how they can then provide for their families). We can charge more because we uncovered value.
And if you sell a commodity, any commodity really, how can you package that into an item of great value?
When bananas first came to the US, nobody was buying them. Then Dole decided to put out a recipe book–and bam! Banana sales took off. The same can be done with most any edible commodity. Make it more interesting and raise the price, people will pay for the entertainment of it all.
To profit even more…How can you increase your fee now AND add more value?
How could you do your own Sideways Sales Piece?
For First Financial USA we have one that’s printed. But for the sporting goods example…I’ll take along a paper and pen for notes about value-related things that I want to remember.
What questions could you ask to open up your potential customers?
What if you asked, “How’d ya get into baseball? How’d ya get into this business?” These are open-ended questions, and they open conversation. If you’re selling engagement rings, what might you ask? Cars? Propane? Farm implements? It all works the same. Where would you want to lead them?
Understand your target’s motivation
Providing value is all about understanding what’s valuable to your potential customer – that’s why you ask them open-ended questions.
If you just start telling them what’s important,they’ll close up fast and you’ll have provided little value. Even if you think you’re telling them things that are really valuable, it doesn’t matter unless you’re talking about what’s valuable to them.
You can pay $100 or $300 for basically the same thing and feel that the $300 purchase is more valuable than that $100.
I work with two attorneys. One costs three times more than the other. But the expensive guy gets 80% of my business. Why? The cheaper guy’s smart and credible, but he’s terrible at follow up. I have to chase him down constantly, looking for answers, finding paperwork, asking about status… The more expensive guy communicates well, is smart, and wraps things up so I don’t have to. The more expensive guy saves me time and gives me more value. I happily spend 3x more for this guy.
Ask yourself, when would you pay more for basically the same thing? Service is an easy one. Think waiters; for one guy you may leave $10 on a $100 bill. For another, $30. (And if service is really bad, you might tip $0 and leave in a huff)> What about someone coming to your home; who would you pay more, a thief or someone honest? Let’s say you’re buying a car for your daughter, wife, girlfriend; how much more would you pay for one that is safe and has a warranty and a roadside assistance?
And who would you pay more? If two people were selling the same thing, and one of them is someone who was referred to you, wouldn’t the referred one get your business?
Who would pay more?
What about time? The Japanese say this is the biggest negotiating lever. You can simply be on time and dependable. What if you target people with money and sell them on the time you can save them. (Many people will pay huge for that, because people with money value time and will pay big to preserve it.)
Other people value faster service, discretion, safety, security, availability, happiness, more enjoyment, better communication, trust…the list is endless. And if that’s what they value, they’ll pay more!
And that’s what Warren Buffet means by “Price is what you pay, value is what you get.”
All you need to do is pop out a few of the right elements and use them doing what you do right now. Doesn’t matter if you sell the same thing that a million others sell, you can simply and easily set yourself apart from the competition in a valuable way, and that sets you apart by miles.
Before we go…
The one thing you need to do is act.
Do one thing. What’s your one thing?
Test it. Most of your competition never will. You can do it differently, and the chances of them ever copying you are near zero. Go your own way and prosper! I realize it can be scary, but testing removes the fear and turns your business into a sandbox for breakthroughs. Whether it’s running your own business, or whether you’ve you’re selling as a career, it’s worth figuring out.
1) increase sales: REWIRE to, 2) Tap into Other People’s Networks , 3) Shortcuts