Value + Leverage = Your Price
I was fifteen years old when I learned a valuable selling lesson of which I was reminded just this week.
My family lived near the beach on the south side of eastern Long Island. A couple of income levels to the west of the Hamptons. Every teenager that I knew had some sort of marine craft. A rowboat, a fishing boat, a ski boat, a paddle boat, an inner tube - whatever could get you onto the ubiquitous water around which our lives revolved.
Me, I had a sailboat. A sixteen-foot wooden behemoth that my Dad had convinced me to buy when I said that I was in the market. I had a little Sunfish in mind but my Dad knew a guy who had a real sailboat in his backyard that needed a little work. A little work turned out to be about 100 hours of sanding and painting and fiberglassing and epoxying. But, when we finally launched it the boat was beautiful and I was its Captain.
One problem was that the boat was difficult to get in and out of the marina. I had to try and paddle it out without crashing into other boats or the dock. Not too easy and very frustrating. So, the next year I bought a 2 h.p. motor for the boat. My life suddenly got a lot better. No more struggling to get out of the marina and no more wild chances trying to sail as deep into the marina as possible with full sails flying! The motor was a godsend.
The next year was 1977 and I was ready to buy a motor boat. I wanted to ski and hang out in the open water. Truth be told - girls dug a ski boat a lot more than they dug a sailboat. For some reason this had started to matter.
My Dad suggested that we put the sailboat and the motor into a newspaper that specialized in marine classifieds. And, so we did. I remember that we offered the motor separately from the boat and put a price tag of $285 on it.
We had come up with this number after researching the price of similar motors for sale. Now, $285 was pretty expensive for a 2 h.p. motor but for whatever reason that's how much they were worth. You could easily buy a 20 h.p. motor for that same price but the specialty use of the 2 h.p. was for sailboats and I guess that made them expensive.
A week or so goes by and we got a couple of calls inquiring but no lookers. Until one Saturday a guy calls and asks if the motor was still available. My Dad asks him where he is coming from so that he could give him directions.
"Queens", the guy says.
A couple of hours later there is a knock on the door and we go outside to demonstrate the engine to our only interested prospect. After being satisfied that the engine started and worked in both forward and reverse we had the following exchange:
Prospect: "I would like to buy your 2 h.p. motor. What will you take for it?"
My Dad: "$285"
Prospect: "That's kind of steep. I've seen others advertised for less. I can offer you $225."
My Dad: "We did a little research before deciding on our price and we think it represents fair value. Thanks for coming out to see us but we're going to hang onto the motor."
We then shook hands with the man and went inside. I was dumbstruck. We had only one looker and the guy had offered us real money - he even showed it to us - and my Dad had turned him down flat.
Me: "Why didn't you take the deal? We might not find someone else to offer us that much and besides you didn't even ask me if I wanted to take it. It's my motor."
My Dad: "Do you realize how far that guy drove to get here?"
Me: "Well, he came from Queens so it's probably 60 or 70 miles."
My Dad: "Right. And it's 60 or 70 miles back home. That's maybe 140 miles and 3 hours for nothing if he doesn't buy your motor. Do you think he is really going to drive all that way and waste 3 hours for $60 bucks?"
Me: "Wait a minute. You think he is going to come back and give us full price?"
My Dad: "I'm sure of it."
FLASH FORWARD TO THIS WEEK!
I am having lunch with my buddy. Mike travels a fair amount for his job and he always uses the same airline. So, he has plenty of frequent flyer points. In fact, he has more than he can use so he has started a cottage business of selling his points on Craig's List. While we were at lunch he took a call that he explained was from someone responding to his ad.
His prospect was planning a trip to L.A. (from Atlanta) for this weekend and wanted to buy enough points from Mike to book two round trip tickets. Mike knew the cost of these tickets was about $1,200. He offered his points for $650.
His prospect demurred and said they would find another source. Mike cheerfully replied, "Okay, let me know if you change your mind."
———————————————————————————————————————————————————————————————————————-
Five minutes after we came back in the house that Spring day in 1977, my Dad's prediction came true and ten minutes later we were waving goodbye to our friend from Queens while I walleted his money.
Thirty minutes after I said goodbye to Mike this week, he called to say that he had received an e-mail from his prospect and was consumating the deal at full price.
Mike and my Dad both understood that when your product has value, and you have leverage, you will get your price.>
>.
My family lived near the beach on the south side of eastern Long Island. A couple of income levels to the west of the Hamptons. Every teenager that I knew had some sort of marine craft. A rowboat, a fishing boat, a ski boat, a paddle boat, an inner tube - whatever could get you onto the ubiquitous water around which our lives revolved.
Me, I had a sailboat. A sixteen-foot wooden behemoth that my Dad had convinced me to buy when I said that I was in the market. I had a little Sunfish in mind but my Dad knew a guy who had a real sailboat in his backyard that needed a little work. A little work turned out to be about 100 hours of sanding and painting and fiberglassing and epoxying. But, when we finally launched it the boat was beautiful and I was its Captain.
One problem was that the boat was difficult to get in and out of the marina. I had to try and paddle it out without crashing into other boats or the dock. Not too easy and very frustrating. So, the next year I bought a 2 h.p. motor for the boat. My life suddenly got a lot better. No more struggling to get out of the marina and no more wild chances trying to sail as deep into the marina as possible with full sails flying! The motor was a godsend.
The next year was 1977 and I was ready to buy a motor boat. I wanted to ski and hang out in the open water. Truth be told - girls dug a ski boat a lot more than they dug a sailboat. For some reason this had started to matter.
My Dad suggested that we put the sailboat and the motor into a newspaper that specialized in marine classifieds. And, so we did. I remember that we offered the motor separately from the boat and put a price tag of $285 on it.
We had come up with this number after researching the price of similar motors for sale. Now, $285 was pretty expensive for a 2 h.p. motor but for whatever reason that's how much they were worth. You could easily buy a 20 h.p. motor for that same price but the specialty use of the 2 h.p. was for sailboats and I guess that made them expensive.
A week or so goes by and we got a couple of calls inquiring but no lookers. Until one Saturday a guy calls and asks if the motor was still available. My Dad asks him where he is coming from so that he could give him directions.
"Queens", the guy says.
A couple of hours later there is a knock on the door and we go outside to demonstrate the engine to our only interested prospect. After being satisfied that the engine started and worked in both forward and reverse we had the following exchange:
Prospect: "I would like to buy your 2 h.p. motor. What will you take for it?"
My Dad: "$285"
Prospect: "That's kind of steep. I've seen others advertised for less. I can offer you $225."
My Dad: "We did a little research before deciding on our price and we think it represents fair value. Thanks for coming out to see us but we're going to hang onto the motor."
We then shook hands with the man and went inside. I was dumbstruck. We had only one looker and the guy had offered us real money - he even showed it to us - and my Dad had turned him down flat.
Me: "Why didn't you take the deal? We might not find someone else to offer us that much and besides you didn't even ask me if I wanted to take it. It's my motor."
My Dad: "Do you realize how far that guy drove to get here?"
Me: "Well, he came from Queens so it's probably 60 or 70 miles."
My Dad: "Right. And it's 60 or 70 miles back home. That's maybe 140 miles and 3 hours for nothing if he doesn't buy your motor. Do you think he is really going to drive all that way and waste 3 hours for $60 bucks?"
Me: "Wait a minute. You think he is going to come back and give us full price?"
My Dad: "I'm sure of it."
FLASH FORWARD TO THIS WEEK!
I am having lunch with my buddy. Mike travels a fair amount for his job and he always uses the same airline. So, he has plenty of frequent flyer points. In fact, he has more than he can use so he has started a cottage business of selling his points on Craig's List. While we were at lunch he took a call that he explained was from someone responding to his ad.
His prospect was planning a trip to L.A. (from Atlanta) for this weekend and wanted to buy enough points from Mike to book two round trip tickets. Mike knew the cost of these tickets was about $1,200. He offered his points for $650.
His prospect demurred and said they would find another source. Mike cheerfully replied, "Okay, let me know if you change your mind."
———————————————————————————————————————————————————————————————————————-
Five minutes after we came back in the house that Spring day in 1977, my Dad's prediction came true and ten minutes later we were waving goodbye to our friend from Queens while I walleted his money.
Thirty minutes after I said goodbye to Mike this week, he called to say that he had received an e-mail from his prospect and was consumating the deal at full price.
Mike and my Dad both understood that when your product has value, and you have leverage, you will get your price.>
>.
Most reps lack the confidence to defend the value of their offerings, at times it I think it is a lack of understanding of the value they can bring. Once they have that not only are they more confident, but are able to communicate that value in a much more effective way.
Tibor
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Great post! The takeaway close is a classic and this is a bit of a variation on it but most sales people are afraid to use it for fear that they will loose control when in reality it is the tool that is keeping you IN control. The minute you start to negotiate on price control of the situation has begun to shift from you to the prospect.
-Brad
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