Cut your price or let them walk?

39 replies
Hypothetical scenario here...

It costs you around $33 per lead to attract the prospect to your business.

You sell a product for $500 where you make a 10-15% net profit.

A customer offers $450 for the product.

There is an upsell of $50 and 20% of purchasers take the upsell.

The upsell has a 50% net profit.

20% of purchasers make another purchase within two years that has a similar net profit.

Do you take their money?

Do you try to convince them the first product is worth $500?

Do you let them walk?

OR ???

Please share your thoughts and why you would take one particular course of action?
#cut #price #walk
  • Profile picture of the author Claude Whitacre
    Originally Posted by Oziboomer View Post

    Hypothetical scenario here...

    It costs you around $33 per lead to attract the prospect to your business.

    You sell a product for $500 where you make a 10-15% net profit.

    A customer offers $450 for the product.

    There is an upsell of $50 and 20% of purchasers take the upsell.

    The upsell has a 50% net profit.

    20% of purchasers make another purchase within two years that has a similar net profit.

    Do you take their money?

    Do you try to convince them the first product is worth $500?

    Do you let them walk?

    OR ???

    Please share your thoughts and why you would take one particular course of action?
    If you work by referral, I wouldn't cut the price. Otherwise, sure. But I would try to add something instead of lowering the price.
    {{ DiscussionBoard.errors[10120597].message }}
  • Profile picture of the author Michael Nguyen
    A $50 difference is not going to make a huge difference in the grand scheme of things for the buyer. They're NOT going to be broke/poor from a $50 difference.

    Stay strong on price and close on why it's worth the extra $50. In my limited experience with some closing skills and an extra 3-4 mins of time, you would get that $50.

    Maybe qualify better at the start to see if they can afford it?
    Signature
    {{ DiscussionBoard.errors[10120753].message }}
    • Profile picture of the author Claude Whitacre
      Originally Posted by Michael Nguyen View Post

      A $50 difference is not going to make a huge difference in the grand scheme of things for the buyer. They're NOT going to be broke/poor from a $50 difference.

      Stay strong on price and close on why it's worth the extra $50. In my limited experience with some closing skills and an extra 3-4 mins of time, you would get that $50.

      Maybe qualify better at the start to see if they can afford it?
      When I'm actually closing, and someone suggests a lower price, I say that we can do that, and I suggest what we can leave out to arrive at that price. Of course, it's all nonsense. I'm just giving them something to not get....which we'll just add back in, once they agree to buy.

      When someone asks for a discount, my response is, "Is that what I'm going to have to do, to get you started on this?". After they say "Yes", now the deal is done. Then I'll suggest what we can take out. You see, after they say "Yes"...all of these things become just details. Whereas before, they were roadblocks.

      So, let's take the OPs example. (assuming a larger ticket) I would;
      Ask if the deal is done, if we give the discount.
      Try to rewind them back up to the price (if that fails...)
      Offer something for free instead of a lower price, (if that fails....)
      Give the discount, unless they are a referral from a client.

      The offering of something for free is a quick and easy way to get someone out of "discount mode" and get them into "better deal mode".


      Another question is, "How long are you willing to pitch, for that $50?"
      {{ DiscussionBoard.errors[10120806].message }}
      • Profile picture of the author qu4rk
        Originally Posted by Claude Whitacre View Post

        So, let's take the OPs example. (assuming a larger ticket) I would;
        Ask if the deal is done, if we give the discount.
        Try to rewind them back up to the price (if that fails...)
        Offer something for free instead of a lower price, (if that fails....)
        Give the discount, unless they are a referral from a client.
        Claude, this is money. Just to make sure that I understand what you're doing here correctly, you do something like this?

        You: So, If I give you the $50 discount then you would buy right now (today)?
        Them: Yes.
        You: I can do that, but I would have to remove the ______ (shiny object that they want).
        Them: Well, then I can't do it then.
        You: How about you pay full price & I include _____ (this other thing that sounds great).
        Them: Well, I don't think so.
        You: Well, (since their not a referral) I guess we can discount it $50.
        Them: Ok.

        Is that about the way it flows or did I miss something?
        {{ DiscussionBoard.errors[10121675].message }}
        • Profile picture of the author Claude Whitacre
          Originally Posted by qu4rk View Post

          Claude, this is money. Just to make sure that I understand what you're doing here correctly, you do something like this?

          You: So, If I give you the $50 discount then you would buy right now (today)?
          Them: Yes.
          You: I can do that, but I would have to remove the ______ (shiny object that they want).
          Them: Well, then I can't do it then.
          You: How about you pay full price & I include _____ (this other thing that sounds great).
          Them: Well, I don't think so.
          You: Well, (since their not a referral) I guess we can discount it $50.
          Them: Ok.

          Is that about the way it flows or did I miss something?
          That's the way it flows, but the language you are using is all wrong. Take the first step;

          Them; "I want a discount of $50"

          Me, ""Is that what I'm going to have to do, to get you started on this?"

          Them; "Yes"

          Me; "I'm willing to do that. But to be fair to both of us, I shouldn't provide the exact service for a lower price. What minor part would you want to take out to get the price lower?'

          Them; "I don't need the articles written. I have articles myself"

          Me, "I think that is fair. let's do that. (filling out the agreement..because it's now a done deal)

          Me, "May I make a suggestion?"

          Them; "Sure"

          Me, "This would be stronger if I used your articles, but them added my own. If I include my own articles, and submit your articles as well, at no additional charge, could we just go back to the original price?"

          (Whatever they say, I'll agree to)

          Now...what if it goes like this?....


          Me; "I'm willing to do that. But to be fair to both of us, I shouldn't provide the exact service for a lower price. What minor part would you want to take out to get the price lower?'

          Them; "I want everything. I just want to pay less"

          Me; "Is it that you just want a better deal?"

          Them; "Yeah"

          Me; "Them why don't I include this $150 service at no no additional cost, instead of a discount. Would that be agreeable?"

          Them; "No. I just want the discount"

          Me; "Done. I just needed to give you options"

          I should say that I can't remember a conversation ever going like that. In the rare instances when they ask for a lower price, adding a service or product for free, has always sufficed (at least, that I remember)


          When you are really willing to give a discount, but are looking for more profitable options, it's important that you don't take a hard stance. You can't say, "I can do that, but I would have to remove the ______ (shiny object that they want)."....and in the next statement, give in.

          So, I say things like;
          "I shouldn't"
          "It doesn't feel right to..."
          "We don't normally..."


          I actually said this once, "If I give you that discount, it will make me cry. Are you willing to risk that?" The guy laughed out loud. Honestly, I can't remember if I still gave the discount. But I remember that he bought.
          {{ DiscussionBoard.errors[10122667].message }}
          • Profile picture of the author misterme
            Originally Posted by qu4rk View Post

            Interestingly enough, I just got an email response that says: "I got a quote that was more than half of your price. Thanks for your interest, but I think I am going with the other quote."

            How would you guys handle that?
            What you're doing wrong is in giving them price (via email?) and letting them go think on it instead of closing the deal on the spot. Armed with your price, they think they have all the information they need. You didn't build your value up enough where they desire having you work with them. So in the absence of that desire, they only think price. So they're going to shop your price, like this one did. That is, if they're being honest and not just trying to get you to comeback at them with a price match. Or if that wasn't their way of saying they don't wanna spend the money at all and they're making it sound like they found it somewhere else for less..

            Originally Posted by Claude Whitacre View Post

            "I want a discount of $50"
            Me: "I can appreciate you asking, but I can't do that. It wouldn't be fair to my other clients."

            Them: "Understood. I was just asking."

            See, when you make it about a higher moral issue than their selfishness in saving some money, they can't argue it as well. And if they're the type that doesn't really push back, 99.9% of the time this'll do the trick.
            Signature
            "Best book on answering objections I have seen... it's for photographers but it has brilliant techniques you can use in any business." - Claude Whitacre. When They Say That, You Say This (Amazon Kindle)
            {{ DiscussionBoard.errors[10142218].message }}
            • Profile picture of the author Claude Whitacre
              Originally Posted by misterme View Post

              See, when you make it about a higher moral issue than their selfishness in saving some money, they can't argue it as well. And if they're the type that doesn't really push back, 99.9% of the time this'll do the trick.
              As always, advanced thinking.
              {{ DiscussionBoard.errors[10144117].message }}
            • Profile picture of the author Oziboomer
              [QUOTE=misterme;10142218Me: "I can appreciate you asking, but I can't do that. It wouldn't be fair to my other clients."

              Them: "Understood. I was just asking."

              See, when you make it about a higher moral issue than their selfishness in saving some money, they can't argue it as well. And if they're the type that doesn't really push back, 99.9% of the time this'll do the trick.[/QUOTE]

              Thanks Misterme for your observations...

              ...reminds me of a few occasions when I've put it back on the client and said..

              "What do you think is fair and reasonable?"

              Not so much from a pricing perspective but usually from a conflict resolution standpoint.

              One would often assume a client's demands are far greater than what they actually want.

              Once you use the "fair and reasonable" they often suggest a solution that is in many cases much better for you...than them.
              {{ DiscussionBoard.errors[10145374].message }}
      • Profile picture of the author Oziboomer
        Originally Posted by Claude Whitacre View Post

        When I'm actually closing, and someone suggests a lower price, I say that we can do that, and I suggest what we can leave out to arrive at that price. Of course, it's all nonsense. I'm just giving them something to not get....which we'll just add back in, once they agree to buy.

        When someone asks for a discount, my response is, "Is that what I'm going to have to do, to get you started on this?". After they say "Yes", now the deal is done. Then I'll suggest what we can take out. You see, after they say "Yes"...all of these things become just details. Whereas before, they were roadblocks.

        So, let's take the OPs example. (assuming a larger ticket) I would;
        Ask if the deal is done, if we give the discount.
        Try to rewind them back up to the price (if that fails...)
        Offer something for free instead of a lower price, (if that fails....)
        Give the discount, unless they are a referral from a client.

        The offering of something for free is a quick and easy way to get someone out of "discount mode" and get them into "better deal mode".


        Another question is, "How long are you willing to pitch, for that $50?"
        Thanks Claude.

        I love your insights into the getting them to "YES"

        Often once that outcome happens the real profit making starts.

        In many circumstances whether it is because they have learned to "negotiate" or been told they can get a better deal until they feel they have negotiated and had a win it is hard to push them towards the solution you know they will eventually take.

        It is surprising how after someone has said yes they will then take upsells and cross-sells at will and the profitability of the encounter can be multiplied.

        The thread wasn't so much about the "numbers" but about the thought of creating momentum once someone has made that offer and the seller has recognised where to go from there.

        Perhaps a little bit like the Persian carpet seller who understands the "big picture" of getting the tourist to agree to buying something....a bit like the tripwire offers you see in the market.

        Most times that first "YES" is the start of many more....

        ...if you are patient and persistent.
        {{ DiscussionBoard.errors[10122602].message }}
        • Profile picture of the author Claude Whitacre
          Originally Posted by Oziboomer View Post


          In many circumstances whether it is because they have learned to "negotiate" or been told they can get a better deal until they feel they have negotiated and had a win it is hard to push them towards the solution you know they will eventually take.
          Yes. In most cases, it isn't the amount of the discount, or even if they just get something for free...some people just like feeling like they got a better deal. I'm like that a little.


          Originally Posted by Oziboomer View Post

          It is surprising how after someone has said yes they will then take upsells and cross-sells at will and the profitability of the encounter can be multiplied.
          .
          Yes, once the buyer feels like they have said, "Yes"....the entire dynamic changes. It's like a speed bump....they go slower, more cautious....until right after they get over that speed bump...then it's back to normal.
          It's much easier to sell upsells after they have agreed to buy. Now, to them, it's just a detail....and not part of the buying decision.
          {{ DiscussionBoard.errors[10122679].message }}
        • Profile picture of the author savidge4
          Originally Posted by Oziboomer View Post

          The thread wasn't so much about the "numbers" but about the thought of creating momentum once someone has made that offer and the seller has recognised where to go from there.
          As much as its NOT about the numbers.. I get it.. but ultimately it is about the numbers. in the scenario you provided. there was a $50 margin, and a potential $33 loss if they walked. How many times do you break even and or take a $33 loss before you are not there in 2 years to see through all the hard work and effort to see the fruits of your labors in the 2 year waiting gap before the next round of buying occurs?

          I perceive lifetime of customer as a tactic used by a more stable business to adapt and change their efforts. looking long term and using that as a strategy to "Make It" is what start ups do. The concept works so well the SaaS industry looks to this business model almost exclusively - with a 90%+ failure rate.

          Long term potential without no short term gain is a looser every time. well 90% of the time LOL
          Signature
          Success is an ACT not an idea
          {{ DiscussionBoard.errors[10123756].message }}
          • Profile picture of the author Oziboomer
            Originally Posted by savidge4 View Post

            As much as its NOT about the numbers.. I get it.. but ultimately it is about the numbers. in the scenario you provided. there was a $50 margin, and a potential $33 loss if they walked. How many times do you break even and or take a $33 loss before you are not there in 2 years to see through all the hard work and effort to see the fruits of your labors in the 2 year waiting gap before the next round of buying occurs?

            I perceive lifetime of customer as a tactic used by a more stable business to adapt and change their efforts. looking long term and using that as a strategy to "Make It" is what start ups do. The concept works so well the SaaS industry looks to this business model almost exclusively - with a 90%+ failure rate.

            Long term potential without no short term gain is a looser every time. well 90% of the time LOL
            This is why new business owners fail so frequently.

            Generally they don't understand the numbers and just look at established businesses that know how to extract LTV from building a client relationship.

            The newbie just sees the "visible" prices in their chosen market and usually chooses to take an average position.

            We all know where average gets you.

            Also understanding that someone who is "In the market" for what you are selling will likely find a supplier or solution that fits their needs.

            If you do become that solution you have the potential to meet most of your costs and also gain an entry into a relationship where you can make some significant profits.

            It is easy to theoretically say "you wouldn't lower your price" (not you personally) but when faced with the situation on a regular basis and when you do have an established business with certain fixed costs there is a need to have a plan of action to take which is why I like Claude's approach of getting the "YES" and looking at the structure of the sale so you can move a client in a particular direction.

            Often people focus too much on one sale and fail to look at the big picture of putting together a string of sales and building a solid client base.

            Numbers are vitally important and understanding your specific numbers and what effect a particular action will result in is why experienced business operators have distinct advantage over inexperienced or under capitalized operators.

            In one of the other posts Peter Lessard mentioned the "Local Family Pizza Store" who whenever a new operator came to town would totally blitz them on price. They were quite happy to work at break-even for extended times to maintain market share and eliminate the competition.

            In your personal situation you know that when you close a client for some online services there is a high propensity for them to use your sign printing services or to add other highly profitable additions as you move forward.

            To the uninitiated who only saw the front end sale their opinion if you "offered" a competitive deal would be you were nuts...or losing money...or going out of business...etc...insert reason here....

            ...but you know the full spectrum of what you can offer and you also know the full value you can extract....

            ..so yes, front end profits and short term gain is vital....

            but...

            does every first sale really have to be profitable?
            {{ DiscussionBoard.errors[10124278].message }}
            • Profile picture of the author qu4rk
              Interestingly enough, I just got an email response that says: "I got a quote that was more than half of your price. Thanks for your interest, but I think I am going with the other quote."

              How would you guys handle that?
              {{ DiscussionBoard.errors[10124491].message }}
              • Profile picture of the author Claude Whitacre
                Originally Posted by qu4rk View Post

                Interestingly enough, I just got an email response that says: "I got a quote that was more than half of your price. Thanks for your interest, but I think I am going with the other quote."

                How would you guys handle that?
                Me? I'd let it go.

                If you are going to be competing on price, how will you win? By having the lowest price?

                You can't argue quality, before the services are performed. If you have a side by side comparison, maybe you can compete, but why would the guy go through that trouble?

                If the guy is getting more than one quote, he thinks of you as a commodity, and that's where you lost him. Not strong positioning. He didn't see you as an authority.
                {{ DiscussionBoard.errors[10124523].message }}
              • Profile picture of the author savidge4
                Originally Posted by qu4rk View Post

                Interestingly enough, I just got an email response that says: "I got a quote that was more than half of your price. Thanks for your interest, but I think I am going with the other quote."

                How would you guys handle that?
                Set a standard of professionalism. Reply with a thank you for the update if there is anything in the future we can do for you keep us in mind type of thing.

                The reality is this is probably a play on the other halfs part in some way or another. To get a response from an e-mail is rare enough..to get a response that says im sorry you were underbid have a nice day - just sounds iffy.
                Signature
                Success is an ACT not an idea
                {{ DiscussionBoard.errors[10124727].message }}
              • Profile picture of the author ewenmack
                Originally Posted by qu4rk View Post

                Interestingly enough, I just got an email response that says: "I got a quote that was more than half of your price. Thanks for your interest, but I think I am going with the other quote."

                How would you guys handle that?
                I'd seriously look at making your business
                not comparable.

                If you can't, then take a part of it and sell it at cost price
                and make the core product/service plus big add-ons at full
                profit margin.

                Best,
                Doctor E. Vile
                {{ DiscussionBoard.errors[10138404].message }}
                • Profile picture of the author Oziboomer
                  Originally Posted by ewenmack View Post

                  I'd seriously look at making your business
                  not comparable.

                  If you can't, then take a part of it and sell it at cost price
                  and make the core product/service plus big add-ons at full
                  profit margin.

                  Best,
                  Doctor E. Vile
                  Thanks Ewen...

                  ...making your business not comparable....

                  ...this is the key and perhaps where in the hypothetical situation the point of difference is not great enough to resist the discount and in some of the responses some believe they don't have the core value or high profit add ons nailed down.

                  You've given me some ideas on how I could "unbundle" some of the services I provide so utilise this tactic. Easy then to negotiate the segments where we can dominate....

                  ...reminds me to study the phone resellers and the various mobile plans, data bundling etc. Easy for them to offer $0 for X when total cost of contract is $2624 over 18 months in fine print.

                  The other key point that your comment brings up is that once your business positions itself to become non-comparable the work doesn't stop there.

                  In the past you could differentiate and due to slower adaptation by competitors you could maintain that advantage for longer without having to continuously innovate.

                  Now the innovations have to be part of the everyday running of the business to maintain that advantage and out position your competition repeatedly.

                  Temporary laziness used to be ok...not anymore.
                  {{ DiscussionBoard.errors[10139017].message }}
                  • Profile picture of the author ewenmack
                    Originally Posted by Oziboomer View Post

                    Thanks Ewen...

                    ...making your business not comparable....

                    ...this is the key and perhaps where in the hypothetical situation the point of difference is not great enough to resist the discount and in some of the responses some believe they don't have the core value or high profit add ons nailed down.

                    You've given me some ideas on how I could "unbundle" some of the services I provide so utilise this tactic. Easy then to negotiate the segments where we can dominate....
                    How do home electronic stores and tire companies
                    compete when other retailers sell the same brands?

                    Best Buy sells at their cost.

                    They make their money on service insurance and their geek squad.

                    I forget the tire company name, however they sell their tires
                    at cost price and make their money on fitting and balancing.

                    Perry Belcher put out of business the largest and oldest candle maker
                    by offering wicks at his cost price. All the other ingredients like wax
                    and scents were sold at much the same price as others.

                    The printing industry is ripe for doing this
                    as nobody is doing it, not even Vistaprint.

                    All demonstrate that if you have the same product line
                    and service as others, you can dominate a market.

                    The other way is to re-position the business.

                    We've seen the Bob Ross 9x12 postcard ad platform.

                    I've taken that and combined it with a fast growing trend
                    online.

                    It's put in a different category altogether.

                    I own that category.

                    I've shown the carpet cleaner postcard where he now owns
                    the dust mite removal market in his city.

                    Best,
                    Doctor E. Vile
                    {{ DiscussionBoard.errors[10139478].message }}
                    • Profile picture of the author escribe
                      I don't think you should lower your price. Make sure they see how your product or service will save them time and money in the end. Really hit on those points. Also be sure they are someone you'd like to build a business relationship with. If they seem like someone who is going to demand too much for what you're offering, let them go. But $50 isn't much and that should not be a problem for any business especially if it's a one-time fee. If you have lower-end versions of your offer, that can also be an option.
                      Signature

                      Content Creation and Publishing Design Specialist!

                      {{ DiscussionBoard.errors[10140893].message }}
                      • Profile picture of the author Oziboomer
                        Originally Posted by escribe View Post

                        Also be sure they are someone you'd like to build a business relationship with. If they seem like someone who is going to demand too much for what you're offering, let them go..
                        This relationship thing usually is something that happens after the sale...

                        ...but when you consider the approach of generating a relationship in advance you tend to attract the clients that already "feel" they have a relationship with you.

                        Sometimes those people are the ones that want to "stretch" the relationship with you even though they have never really had one with you in the first place.

                        You may find that because most people are "Clumsy" when starting a relationship that they make a few mistakes like "asking for a discount"....

                        ...which sometimes might really be like... "do you find me attractive?"

                        If you don't start somewhere you may not ever find out how much "VALUE" is really there in what starts out as a price request.

                        When someone doesn't know you they often ask the only thing they can...

                        "How much does XXXXX cost?"

                        Anyone who has been encouraged to negotiate by their (insert significant influencer here) will question price....

                        ...but is "Price" really what they are questioning?
                        {{ DiscussionBoard.errors[10142020].message }}
                        • Profile picture of the author Jason Kanigan
                          Originally Posted by Oziboomer View Post

                          This relationship thing usually is something that happens after the sale...

                          ...but when you consider the approach of generating a relationship in advance you tend to attract the clients that already "feel" they have a relationship with you.

                          Sometimes those people are the ones that want to "stretch" the relationship with you even though they have never really had one with you in the first place.

                          You may find that because most people are "Clumsy" when starting a relationship that they make a few mistakes like "asking for a discount"....

                          ...which sometimes might really be like... "do you find me attractive?"

                          If you don't start somewhere you may not ever find out how much "VALUE" is really there in what starts out as a price request.

                          When someone doesn't know you they often ask the only thing they can...

                          "How much does XXXXX cost?"

                          Anyone who has been encouraged to negotiate by their (insert significant influencer here) will question price....

                          ...but is "Price" really what they are questioning?
                          Great point that they're asking about price, especially at the beginning of the conversation, because that's all they know to ask about.

                          Here's my explanation on how to handle that if it comes up first:

                          http://www.warriorforum.com/offline-...vanishing.html

                          Works in person as well as on the phone, and it's used by all the franchisees of an Inc. Top 500 business.
                          {{ DiscussionBoard.errors[10144231].message }}
              • Profile picture of the author bizgrower
                Originally Posted by qu4rk View Post

                Interestingly enough, I just got an email response that says: "I got a quote that was more than half of your price. Thanks for your interest, but I think I am going with the other quote."

                How would you guys handle that?
                Probably too late for this one, and maybe/probably value and goals and ROI did not get established in the interactions, but maybe you could politely email back something to the effect of :

                "Thank you for letting me know.

                I'm very sorry I did not establish how my work would help your reach your personal and business goals. I'd be more than happy to revisit any such concerns.

                Thank you again.

                Very Truly Yours,
                qu4rk"

                Of course we don't know if the half-price offer is worth as much as yours, and we don't know the
                sophistication of the prospect. Maybe he just wanted a prettier website because all his friends say so.

                Dan
                Signature

                "If you think you're the smartest person in the room, then you're probably in the wrong room."

                {{ DiscussionBoard.errors[10138486].message }}
            • Profile picture of the author savidge4
              Originally Posted by Oziboomer View Post

              It is easy to theoretically say "you wouldn't lower your price" (not you personally) but when faced with the situation on a regular basis and when you do have an established business with certain fixed costs there is a need to have a plan of action to take which is why I like Claude's approach of getting the "YES" and looking at the structure of the sale so you can move a client in a particular direction.
              So let me throw this at you in a not so theoretical direction. December 2013 I had to make a very drastic business shift. I was one of those high dollar html snobs that looked down on wordpress for the piece of crud that it is. Prior to that, there was no way I was going to build a site for less than 5 digits let alone for $400.

              I had found myself in a ever dwindling market. I WAS accepting work at or below cost to keep my team together. I by the grace of God had other avenues of income that kept the whole thing a float. I would never wish that amount of stress apon anyone. It sucked!

              So the phrase "If you can't beat em, join em" came into play. I changed up my whole marketing strategy, and went after local wordpress work. Started at the bottom, like everyone here looking for answers. 15 yrs in the business and starting at square 1. Granted I had experience on my side. I had systems already in place, but from the business acquisition level. it was a humbling experience.

              It didn't take long to develop a good reputation. It didn't take long to figure out I need to systemize site development down to just a few themes. ( freakin every one is so different - I don't know how guyz jump from one theme to the next at the customers whim ) I used trip wires I gave discounts... I did so because I was DESPARATE.

              I will tell you right now if I ever go there again. I wont budge like I did. At about the 1 year mark there was that transition period from giving.. to asking for what I ( my company ) was worth. it was a struggle. Lesson learned.

              I mentioned this in an earlier post.. if you are placed in this situation on a regular basis, you REALLY need to look not at the situation and the plausible answers.. you need to look at how you are getting there, and stay away from the hole all together.

              If the fixed costs are that tight... you need to diversify. you need to find those avenues that remove the pinch. you need to change how you present yourself so that you can get more.

              Imagine Claude with a 7 year cycle breaking even with the ideas he will make it up with future sales. He would be back to knocking on doors.

              If the upsells and if the ideas of getting a customer in place because on the short side you get get more... I would be all for it. ( I don't even go there anymore - you simply don't have to ) you want to trip wire a G+ set-up so you can get into SEO and maybe a site redesign - that's cool man. Short term loss for long term gain.

              Its there, the results are not instant but the wait is short lived. that concept I can get behind. 2 years? wow not a chance in some hot place below us! LOL

              Originally Posted by Oziboomer View Post

              Often people focus too much on one sale and fail to look at the big picture of putting together a string of sales and building a solid client base.
              I will absolutely agree with this. a single small yes, that leads to a big yes. Is far more achievable for many than just chasing a big yes.

              I am sure many of us have all read the principles of yessing your way into a sale. I have been an absolute goof and no'd my way to a sale. the final line in the sale was "you just cant turn that down, now can you?" they said "no" I said "sign here"
              Signature
              Success is an ACT not an idea
              {{ DiscussionBoard.errors[10125080].message }}
  • Profile picture of the author jbreeden
    My biggest thought is why would you only make 10% - 15% net on the front end offer. With profit margins like that you will need to move quite a bit to make a decent living. Now if the volume is there and this customer can bring in referrals I may consider it.

    How much is your time worth for that initial $50 - $75.

    Make the initial offer so attractive with implied value that you can at least earn 33% on the front end then with the 20% up-sells you can deliver more implied value.

    The key to this is what is the perceived value of what you are offering.
    {{ DiscussionBoard.errors[10120792].message }}
  • Profile picture of the author Michael Nguyen
    ^ Claude

    When someone asks for a discount, my response is, "Is that what I'm going to have to do, to get you started on this?". After they say "Yes", now the deal is done. Then I'll suggest what we can take out. You see, after they say "Yes"...all of these things become just details. Whereas before, they were roadblocks.
    I always learn something from you when post! Thank you.

    Regarding how long to pitch for the remaining $50...If I had to put a maximum time (if it ever got to it) probably an hour, if I knew he's just needed to be worn down. I cant imagine closing and negotiation for more than 5-6 mins on the last $50. OP said net is 10-15% so I don't think I'd even bother for the last $5.

    Just get the sale done and move. Make a sale to gain a customer - I think Jay Abraham said this.

    For the sport of closing, I think its worth 3-4 mins to keep closing skills sharp.
    Signature
    {{ DiscussionBoard.errors[10120849].message }}
    • Profile picture of the author Claude Whitacre
      Originally Posted by Michael Nguyen View Post

      ^ Claude



      I always learn something from you when post! Thank you.

      Regarding how long to pitch for the remaining $50...If I had to put a maximum time (if it ever got to it) probably an hour, if I knew he's just needed to be worn down. I cant imagine closing and negotiation for more than 5-6 mins on the last $50. OP said net is 10-15% so I don't think I'd even bother for the last $5.

      Just get the sale done and move. Make a sale to gain a customer - I think Jay Abraham said this.

      For the sport of closing, I think its worth 3-4 mins to keep closing skills sharp.
      Thank you.

      In my experience, the single most profitable use of your time, when selling...is another closing attempt. Nothing even comes close.

      That being said, Speed is important. So, if I've already spent an hour selling someone, I'll keep closing, until I can tell that thy are backing away from me...or they buy.

      But if a sale is faster, with a very small discount, I'll take the sale.

      For example, in my store I sell vacuum cleaners. If I can see that they are going to buy a $500 vacuum cleaner, I'll take the sale, rather than taking time to upsell them to a $600 vacuum. But it's only because i don't want to risk the sale, and I have other customers/duties.
      {{ DiscussionBoard.errors[10121140].message }}
    • Profile picture of the author DABK
      So, if they pay the full price, the profit is $50. If they buy the upsell, it's 50+25. Within 2 years, 1 in 5 makes you a profit of at least 50.

      Or

      Your profit is $0, unless they buy the upsell, then it's $25. And there's 1 in 5 chances you'll make at least $50 more within 2 years.

      So, worse case scenario is you make $0 and lose $0 profit. Best case scenario, you make 25 on the spot and $100 over 2 years.

      If you take that into account and the fact that you have some fixed expenses this sale helps covers, I'd take it (assuming I make many sales a month and most buy at the full price).
      {{ DiscussionBoard.errors[10121212].message }}
    • Profile picture of the author savidge4
      I would do 1 of 2 things. 1st being let them walk. and 2nd being offering a 10% off second purchase with the purchase today of full price.

      The greater question becomes how often is this question arising? once in a blue moon? let them walk without question. More often than you are willing to admit? Then I would be looking at the presentation and trying to understand what is allowing for the idea of a possible discount.

      Is the discount squeeze occurring with you the owner, more so than the other sales staff?

      The last question I would be asking myself is why on earth would you be selling a product with a 10 to 15% profit margin? That is as close as you are going to get to being a loss leader, without kind a being one. You bring 2 people in to make the pitch. it costs $33 to bring each of them in, and you sell to 1? you are out $13 already. Selling 1 in 4.. that light bill must be a bitc-

      This for me is the type of product that is laid out and then there is the upsell and down sell presentation. In each case the profit margin is far greater. Basically when I look at a retailors product line.. and I see a product like that, that is what I focus on blowing out, and never bringing back.
      Signature
      Success is an ACT not an idea
      {{ DiscussionBoard.errors[10121307].message }}
  • Profile picture of the author Ron20
    Are you selling web design/internet marketing services? If so I would drop the price and close the deal. WHY? Because once I do their website they are going to come to me for anything related to the internet again. This is of more value in the long term. I might not be right but this is what I do.

    I have noticed that no matter what you offer, example you are the best web designer and you quoted $500 for the site and your competitor quotes $400, it is very unlikely that the customer will pay an extra $100 and go with you.

    My suggestion is based on online lead generation. Where is the lead from? If it is an online lead they might be getting quotes from 2-3 companies, but if its a telemarketing lead it dont matter that much, you can stick to your price.
    {{ DiscussionBoard.errors[10121298].message }}
  • Profile picture of the author bizgrower
    If I really did not like them, I'd let them walk.
    In a long term relationship, I don't want a headache to me or employees.
    In my hotel, I don't want a headache to my guests, employees, or myself.

    IF I did want them for a customer, I'd counter at $475 or some combination
    of price on the original and the upsell.
    Signature

    "If you think you're the smartest person in the room, then you're probably in the wrong room."

    {{ DiscussionBoard.errors[10121345].message }}
  • Profile picture of the author outlawdawg
    I would not cut my price. I would point out the value the customer is receiving, and move them toward the logical assumption that the product is a value at $500 (verses $600 etc.). Many times sales are closed on the idea of value verses the actual monetary cost.

    My thoughts.
    Signature
    {{ DiscussionBoard.errors[10123763].message }}
  • Profile picture of the author bizgrower
    ^^^^
    “The bitterness of poor quality remains long after the sweetness of low price is forgotten” – Benjamin Franklin

    With that in mind, if you want the customer, I'd counter offer with a higher value package at a good price for both of you. Explaining the returns to them in terms of their business goals.
    Signature

    "If you think you're the smartest person in the room, then you're probably in the wrong room."

    {{ DiscussionBoard.errors[10124498].message }}
  • Profile picture of the author Lance K
    It depends on the type of business. It would help to know the hypothetical overhead expenses and gross margin on the product.
    Signature
    "You can have everything in life you want if you will just help enough other people get what they want."
    ~ Zig Ziglar
    {{ DiscussionBoard.errors[10124837].message }}
  • Profile picture of the author Oziboomer
    Australia Post which has a monopoly on delivering letters to households in Australia has been facing several threats in relation to price and falling demand for postal services.

    They are expanding their parcel delivery services but announced they are slashing 1900 jobs and...

    "We have reached the tipping point that we have been warning about where, without reform, the business becomes unsustainable," Mr Fahour said this morning.
    Full article here Australia Post to slash 1,900 jobs amid $500m mail losses; boss warns of 'tipping point' as letters business plunges - ABC News (Australian Broadcasting Corporation)
    {{ DiscussionBoard.errors[10137412].message }}
    • Profile picture of the author sandalwood
      Originally Posted by Oziboomer View Post

      Australia Post which has a monopoly on delivering letters to households in Australia has been facing several threats in relation to price and falling demand for postal services.

      They are expanding their parcel delivery services but announced they are slashing 1900 jobs and...



      Full article here Australia Post to slash 1,900 jobs amid $500m mail losses; boss warns of 'tipping point' as letters business plunges - ABC News (Australian Broadcasting Corporation)
      Ozi,

      That sounds like the US post office. Funny how competition actually pares out the losers. Even the government subsidized losers...
      Signature
      Get 30% or More Retirement Income If you are serious about your retirement, you'll love this product.

      The Money Ferret Finance Article Directory
      {{ DiscussionBoard.errors[10137481].message }}
    • Profile picture of the author savidge4
      Originally Posted by Oziboomer View Post

      Australia Post which has a monopoly on delivering letters to households in Australia has been facing several threats in relation to price and falling demand for postal services.

      They are expanding their parcel delivery services but announced they are slashing 1900 jobs and...



      Full article here Australia Post to slash 1,900 jobs amid $500m mail losses; boss warns of 'tipping point' as letters business plunges - ABC News (Australian Broadcasting Corporation)
      What really gets me both here in the States and the AU is how the postal service relies on the "letter business". ecommerce and package delivery is at an all time high and only getting bigger.. and these "companies" are not competing - or appear to even be trying to compete.

      They have the infrastructure... they have the man power... they have the equipment... they lack the foresight and the software to make a go of it. The only reason we use alternative methods in shipping is tracking. ( for me anyways ) And a small bit convenience. ( Its nice to have til 5pm when the UPS guy comes to get all of my parcels for the day )

      I really don't get it
      Signature
      Success is an ACT not an idea
      {{ DiscussionBoard.errors[10137954].message }}
      • Profile picture of the author bizgrower
        Originally Posted by savidge4 View Post

        What really gets me both here in the States and the AU is how the postal service relies on the "letter business". ecommerce and package delivery is at an all time high and only getting bigger.. and these "companies" are not competing - or appear to even be trying to compete.

        They have the infrastructure... they have the man power... they have the equipment... they lack the foresight and the software to make a go of it. The only reason we use alternative methods in shipping is tracking. ( for me anyways ) And a small bit convenience. ( Its nice to have til 5pm when the UPS guy comes to get all of my parcels for the day )

        I really don't get it
        Since 1997, I've lived in rural areas where there is no home delivery by USPS. It's taken this long for almost all the companies (vendors, banks insurance...) to get used to the idea that I have to use a PO Box for mail. Data fields that still don't allow for that little difference. Using PMB xxx (My PO Box #) in my Street address is supposed to help according to USPS. Sometimes it does, sometimes it does not..

        For my most recent credit card and car insurance, I had to go through a lot of hoops because my physical address was not in the national data base for residential addresses. (Scary thought there for the conspiracy theorists. LOL)

        There is a partnership program with USPS, FedEx and UPS (maybe other carriers) where there other carriers will deliver to your PO Box. It seems to work erratically -sometimes Walmart gets it to my PO box via FedEx, sometimes only to my physical address..., sometimes they say they can't ship an item to me at all.

        USPS should have started competing with the others about when FedEx started.
        (My college Prof liked that idea way back then. LOL)

        They do seem to be doing some competing now. Where I am, most cases of Priority are about the same cost as regular mail. I'd raise prices a bit (50 cents to$1.00 per package) and do priority and express only. And, they have the one box, one price thing going. I think their rates are competitive with the other carriers, but I have no real idea as I do not send any volume via any carrier right now.

        The USPS does have all that real estate they could use to their advantage.

        Dan
        Signature

        "If you think you're the smartest person in the room, then you're probably in the wrong room."

        {{ DiscussionBoard.errors[10138122].message }}
  • Profile picture of the author daniyal100
    Originally Posted by Oziboomer View Post

    Hypothetical scenario here...

    It costs you around $33 per lead to attract the prospect to your business.

    You sell a product for $500 where you make a 10-15% net profit.

    A customer offers $450 for the product.

    There is an upsell of $50 and 20% of purchasers take the upsell.

    The upsell has a 50% net profit.

    20% of purchasers make another purchase within two years that has a similar net profit.

    Do you take their money?

    Do you try to convince them the first product is worth $500?

    Do you let them walk?

    OR ???

    Please share your thoughts and why you would take one particular course of action?
    whatever anyone say to upsell his shi* later to you but sometimes it is a must to lower your price just to show them you care and if you don't you lose the sale, it does not matter if you lower only 10$ or 100$ though
    {{ DiscussionBoard.errors[10137542].message }}
  • Profile picture of the author MarcParkinson
    Personally I would always take the customers in even though they haggle initially about the price, from what I have found is, their life time value (With all the the upsells and cross-sales) is way too high to let them go (Even if it means I am taking a loss initially)
    {{ DiscussionBoard.errors[10151927].message }}

Trending Topics