Pricing Experiments. So, You Think Your Price Matters?

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I was being interviewed today about selling techniques...and the subject of price came up.
I'm going to shorten this to just give the essentials about pricing experiments I did in the past, and their results.


I had an office with about 8 salespeople. We were selling our vacuum cleaner (in people's homes) for $1,589. One of the sales managers suggested we would sell more, if the price was lower. Of course everyone chimed in that it was a great idea.

So...'Claude The Terrible' said "OK, pick a lower price, whatever you want. For the next 30 days we'll sell for that price. Right now, our office closes 41% of our presentations (them, not me). Just remember that our costs are the same, so much of the lower price will come out of commissions paid...so decide on the price. They picked $999.

For the next 30 days, we sold the machine for $999 (not me, them)....and at the end of the month...yup, 41% of the people bought. The lowering of the price made no difference.

A few decades ago, I was getting tired of hearing objections like "Bad time of the month", "Can't afford it" "Have to think about it". Sure, I was making sales...and making money, I just hated hearing the objections. So I decided to sell something so inexpensive, that I'd never hear another objection again. They would either say "Yes" or "No".

I went from a $1,200 vacuum cleaner to a $24 set of home medical books. I created a short presentation...maybe 5 minutes...and started knocking on doors.

Guess.......Yup, even though it was only $24, I was still hearing the same objections about not having money, having to wait, wanting to think about it...the exact same objections. What did that teach me? That the objections were automatic and had nothing to do with the price or what I sold. If they didn't want what I had, they gave an objection. If they wanted it...they bought.

So...why didn't they just say "No"? Rapport. They didn't want to break the rapport we had, so they would invent an objection that prevented them from buying from me. They thought they were being kind...polite.

Some things are very price sensitive...groceries, fast food, gasoline, mortgages...

But mostly what we offer, services and products that can't be shopped easily...price isn't as important as presentation. What value does the prospect see in what you are selling? And who controls the value they see? Us.

I hope this helps someone.

Added a tad later;

I remember being on a presentation and quoting the price as "Nineteen ninety five". (Meaning $1,995)

The guy started giving several objections.....he had to wait, he had to think about it...

Finally he said "You know..$19.95 is actually a pretty good price, but I just have to think about it."

Honestly, I think if I had the ability to sell at twenty dollars...I still would only sell slightly more vacuums.

One guy told me "I can't afford the payments"..to which I said "It's only $1 a month". I did that to prove a point to a trainee I had with me . The guy said "Yeah, you make it sound good, but I may get laid off, you never know".
Sometimes I just enjoy myself.

If they want it, they will justify any reasonable price. If they don't want it, price doesn't matter.
#experiments #matters #price #pricing
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  • Profile picture of the author umc
    Love this! Claude is dropping gold in here this week.
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  • Profile picture of the author rhealy29
    Great post Claude!

    Question for you on your thoughts on objections. In a B2C setting, door to door or otherwise, do you still take time to attempt to handle objections and consider it an important part of the sales process, or do you view that as more or less a waste of time since, as you've shown, often times the objections are arbitrary to begin with?
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    • Originally Posted by rhealy29 View Post

      Great post Claude!

      Question for you on your thoughts on objections. In a B2C setting, door to door or otherwise, do you still take time to attempt to handle objections and consider it an important part of the sales process, or do you view that as more or less a waste of time since, as you've shown, often times the objections are arbitrary to begin with?
      If you qualify well, and perfectly fit your offer to the prospect, you'll get far fewer objections.

      Objections are usually either stalls (to give them time to think), or a polite was to say "No" while maintaining rapport with you. For example, in 12,000 in home presentations, I've only had one person ever just come out and say "No". Everyone else either bought or created an objection that gave them an excuse not to buy, without offending me (in their mind).

      Objections are a way to keep rapport...to stay polite.... most people have an overpowering need to not reject another person. So they let their "objection" do it for them.

      But if I've invested an hour presenting a product, I'll answer the objections.
      But I'm not really answering their objections, because the objection almost always isn't real...

      What i'm really doing is showing the offer from different angles as they allow the price and offer to sink in. Some people give objections to slow down the buying process, to give them time to think.

      And here is the single most important thing about answering objections...
      As you are answering objections (however you want to do that), the prospect is doing one of two things....they are either slowly going toward you (figuratively speaking) or pulling away from you (again, figuratively speaking).

      I'll keep answering objections as long as I can see that they are getting closer to buying..even if that takes another two hours. But if I see that they are pulling away...I know I've lost them. And I politely stop selling, and let them go.

      Once they start pulling away from the idea of buying, it's impossible to reverse the direction they are going in.

      The thing is...you have to be able to recognize signals that show they are getting closer to buying...or moving away from buying.

      Answering objections is like watching them go around in circles...in orbit...with you at the center of the circle. Nobody stays in a stable orbit. They are either slowly orbiting closer to you...or slowly orbiting away from you. As soon as you recognize which way they are going, that's the moment you know if you are going to make the sale.

      But if they are moving closer to you (and your offer), never try to speed up that process, or you'll interrupt their buying process. Just be nice, patient, answer their questions...until they are comfortable buying.

      When "answering objections" I just keep asking questions about them and answer how our offer will benefit them. No hard closing, no "alpha male" dominating....just getting them comfortable with the idea of buying.

      Eventually I see that they are ready to buy, and I just ask "Is that OK then?" or "Is that what you want then?".

      By the way, at any time, they can just say "No" or "I'm just not interested"..and that really means "No".

      Even if they say "Like I said before, we'll let you know". That means "No". In fact, if they ever say "Like I said before....." and repeat an objection...that is a hard "No".

      Once someone indicates, in a matter of fact manner, that they aren't getting closer to buying, you may as well politely let them go, because they are letting you know that they aren't buying. In other words, once they no longer show a real desire to maintain the same level of rapport with you, it's over.

      In extremely rare instances, the prospect just stays at the same point.....not indicating that they aren't buying, but not getting closer to buying. In these rare cases, what they are doing is simply refusing to break rapport and say "No" or "Sorry, no". Some people will never say "No" and will keep you engaged forever. In these cases, I eventually take it as a "No" and let them go. they have no intention of buying, but they also refuse to say "No". Frankly, it's hard to recognize this.

      Added later; This post was for sales that are made that day. There are legitimate reasons to postpone a sale....
      In corporate sales for example, or large sales that are made by committee.
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  • Claude,

    Thanks for sharing this, excellent post! If you provide something of value, people will buy from you.

    Chris
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  • Profile picture of the author Alexandar33
    Price always matters and it depending on how you will represent that price to the others. Choosing a smaller price will not necessarily brings you a profit. You need to made marketing move in order to show why that price is SPECIAL to your customers and people who wish to buy your product.
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    • Originally Posted by Alexandar33 View Post

      Price always matters and it depending on how you will represent that price to the others. Choosing a smaller price will not necessarily brings you a profit. You need to made marketing move in order to show why that price is SPECIAL to your customers and people who wish to buy your product.
      Price matters when people can compare what you sell to other similar offers....when you are competing with a commodity...a loaf of bread, credit card processing fees, life insurance, buying a home, etc.

      But most of us sell services that have highly flexible prices, depending on how you position yourself and how you position your offer.

      In my retail store I sell vacuum cleaners. You would think that these are commodities that have very strict prices. ..

      But I mostly sell at suggested retail prices. If they want to pay less, I show a less expensive model. I also include plenty of free services in the deal that makes the deal very hard to shop.
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  • Profile picture of the author ryanbiddulph
    Hi Claude,

    Good stuff.

    For me, it is about getting clear on price points, and simply meeting folks, creating value and allowing sales to increase over time. No convincing. No persuading. Just clarity, a detached attitude, and over time everything keeps growing.

    Don't worry too much about pricing guys. Focus on getting clear about your prices, have posture and sales increase over time.

    Ryan
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  • Profile picture of the author JohnVianny
    it's all about BRAND

    People throw a lot of money, a salary or even more, for a cell phone like Iphone, just to buy another one more expensive the year after.

    The dont watch new features, etc....they want to be a part of an "elite" a "crew", and they are fallen in love for the brand.

    If you win the battle in their mind and are perceived as a state-of-the-art the golden maximum of your field, there's no price that people cannot afford.

    It's never about the price, it's about the marketing
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    • Profile picture of the author DABK
      In that case, go buy a Bugatti Veyron today.

      I am saying, yes, marketing matters. So does price. Even when you qualify well and they fit your other criteria. Some people spend their marketing money unwisely, then you come along. Or they're cheapskates. Or illogical.Or clueless....

      I know of a lady who went to a mortgage broker for a $300k loan. She didn't mind that the broker would make money, she said, but $6,000 was too much. He asked how much was not too much... Turned out $0 was perfect for her. In no case should he have made more than a couple of hundred dollars.

      No broker around here does it for a couple hundred dollars.

      Should the loan officer have talked to her? Yes. She qualified for the loan, she had a ARM that was about to adjust upwards. I guess she chose to pay more than a broker would cost over a longer period of time.

      Originally Posted by Connann View Post

      it's all about BRAND

      People throw a lot of money, a salary or even more, for a cell phone like Iphone, just to buy another one more expensive the year after.

      The dont watch new features, etc....they want to be a part of an "elite" a "crew", and they are fallen in love for the brand.

      If you win the battle in their mind and are perceived as a state-of-the-art the golden maximum of your field, there's no price that people cannot afford.

      It's never about the price, it's about the marketing
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      • Originally Posted by DABK View Post

        In that case, go buy a Bugatti Veyron today.

        I am saying, yes, marketing matters. So does price. Even when you qualify well and they fit your other criteria. Some people spend their marketing money unwisely, then you come along. Or they're cheapskates. Or illogical.Or clueless....

        I know of a lady who went to a mortgage broker for a $300k loan. She didn't mind that the broker would make money, she said, but $6,000 was too much. He asked how much was not too much... Turned out $0 was perfect for her. In no case should he have made more than a couple of hundred dollars.

        No broker around here does it for a couple hundred dollars.

        Should the loan officer have talked to her? Yes. She qualified for the loan, she had a ARM that was about to adjust upwards. I guess she chose to pay more than a broker would cost over a longer period of time.
        The problem was that the consumer had the information about how much the broker made.

        In any business I've owned (including the current one), my cost and profit were never a consideration.
        "How much can I charge and the customer still feel they are getting a good deal?" or sometimes "What selling price would position my offer where I want it?"

        For example, I sell something in my store for $500. Sometimes my cost is $400...sometimes $200, and sometimes $50. It depends on where I buy it, and if I'm paying factory direct pricing or through a wholesaler.
        But my cost isn't anyone's business. And if I get a product that is a closeout...I will buy in huge quantity, and not pass along the savings. I've bought entire store's inventory for a few hundred dollars (because it was a bankruptcy), and resold it for tens of thousands of dollars. And if I were going to close my store, that's the kind of offers I'd get too.

        I'm selling a product priced to sell, and not getting a consistent price objection. To me, that's the right price. To charge too much more is to kill sales. To charge less is to cut the perceived value.

        My cost? That's my business.
        Anyway, it's my perspective.
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        • Profile picture of the author DABK
          In the mortgage business, in my part of the world, brokers had to disclose how much they made, banks did not. Now, brokers have to disclose when they are paid directly by the borrower. If paid by a wholesale lender, they do not.

          Originally Posted by Claude Whitacre View Post

          The problem was that the consumer had the information about how much the broker made.

          In any business I've owned (including the current one), my cost and profit were never a consideration.
          "How much can I charge and the customer still feel they are getting a good deal?" or sometimes "What selling price would position my offer where I want it?"

          For example, I sell something in my store for $500. Sometimes my cost is $400...sometimes $200, and sometimes $50. It depends on where I buy it, and if I'm paying factory direct pricing or through a wholesaler.
          But my cost isn't anyone's business. And if I get a product that is a closeout...I will buy in huge quantity, and not pass along the savings. I've bought entire store's inventory for a few hundred dollars (because it was a bankruptcy), and resold it for tens of thousands of dollars. And if I were going to close my store, that's the kind of offers I'd get too.

          I'm selling a product priced to sell, and not getting a consistent price objection. To me, that's the right price. To charge too much more is to kill sales. To charge less is to cut the perceived value.

          My cost? That's my business.
          Anyway, it's my perspective.
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  • Profile picture of the author helisell
    I had a similar situation a few years back.

    One of my sales team (the moaner) started complaining about the amount of commission I paid.
    It was a fixed fee commission product.

    He said "pay us more per deal and we'll sell more"

    My brain said quietly..."pay you more per deal, you'll sell less"

    One short (very short) experiment later........the result was....?

    Answers on a post card please?

    .
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  • Profile picture of the author zeus136
    $1589 or even $999 are both ridiculous prices so it is no wonder you couldn't sell this product.

    People know how much a good vacuum cleaner costs so why would they pay that price?

    Kathleen
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    • Profile picture of the author helisell
      Originally Posted by zeus136 View Post

      $1589 or even $999 are both ridiculous prices so it is no wonder you couldn't sell this product.

      People know how much a good vacuum cleaner costs so why would they pay that price?

      Kathleen
      Oh Dear,

      The machines sold very well at the higher price,
      That's kind of the point of the whole post.
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    • Originally Posted by zeus136 View Post

      $1589 or even $999 are both ridiculous prices so it is no wonder you couldn't sell this product.

      People know how much a good vacuum cleaner costs so why would they pay that price?

      Kathleen

      God bless you.
      You are right..$999 is a ridiculous price to pay for any vacuum cleaner...that you have seen.

      These are not the same vacuum cleaners that you are used to seeing. They are not the same vacuum cleaners you see in stores for $200.

      In fact, the average price of a vacuum cleaner sold in a person's home in 2017 is $2,400. That's a fact. And every day, thousands are sold at that price around the country.

      The average price of an upright vacuum cleaner sold in a retail store is currently about $350. The average canister is about $500.

      When I was selling in people's homes, I sold over 7,000 vacuums between $500 (in 1977) and $1,995 (in 2012)

      At retail (in my specialty retail store) we average two vacuum sales a day. The average ticket is about $650. And I'm just a little above average. But even in our retail store, we have a few vacuum cleaners we sell for over $1,000. And we sell a few of those every week. But these are still not the same as the ones sold in people's homes for $2,000.

      You just weren't aware that there are higher end vacuums that sell for more.

      Personally, I think $40,000 is a ridiculous price to pay for a new car...but thousands are sold for more than that every day. And these aren't the same cars that sell for $20,000.

      I think $800,000 for a home is ridiculous...but lots of people buy them. And they aren't the same homes as the ones for $150,000.

      I've been in fine restaurants where I refuse to pay $50 for a steak. But the restaurant is full of people every day that think it's wonderful.

      See? It's just what we are used to.
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    • Profile picture of the author DABK
      Because they do know how much a good vacuum cleaner costs.

      If what you said were true, nobody'd be buying a Ferrari, nobody'd be buying Starbucks.

      People do not buy based on price. They buy based on the value something has, according to their price-o-meter.

      Based on their definition of 'good,' not Claude's or mine or yours.

      As a marketer / seller, your job is to find people whose definition of 'good' is the same as yours (as expressed by the price you attach to what you sell).

      Originally Posted by zeus136 View Post

      $1589 or even $999 are both ridiculous prices so it is no wonder you couldn't sell this product.

      People know how much a good vacuum cleaner costs so why would they pay that price?

      Kathleen
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      • Originally Posted by DABK View Post

        Because they do know how much a good vacuum cleaner costs.
        .
        To be fair, most people only see vacuum cleaners sold in discount stores.

        Every day or so we get someone in the store expecting a good vacuum cleaner for $150 or less. Unfortunately, we aren't the store for them. But I understand why they think that's a lot for a vacuum cleaner.

        It's all in what you are used to seeing. And it's not like vacuum cleaners are often a topic of conversation.

        So I get the difference in price expectation.

        And most people are aware of one or two brands/models of vacuum...while in the USA there are about 350 different vacuum cleaner models sold every day.

        I think I'll start a thread about using price to position what you sell between a lower and higher priced option. I think everyone would benefit from it, no matter what they sell.
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  • Profile picture of the author Alex Cohen
    All this talk about vacuum cleaners has got me thinking about Rainbow vacuum cleaners. As I recall, they were about $1,500 back in the early 1970s.

    I never did buy one new. I just couldn't bring myself to do it.

    But back in the 1990s, my wife bought one used at a really good price. She got it at a yard sale or flea market... can't remember which.

    Best vacuum cleaner we ever had.

    Alex
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    • Originally Posted by Alex Cohen View Post

      All this talk about vacuum cleaners has got me thinking about Rainbow vacuum cleaners. As I recall, they were about $1,500 back in the early 1970s.

      I never did buy one new. I just couldn't bring myself to do it.

      But back in the 1990s, my wife bought one used at a really good price. She got it at a yard sale or flea market... can't remember which.

      Best vacuum cleaner we ever had.

      Alex
      The vacuum cleaners sold in people's homes always have one thing in common...they have at least one outstanding feature that makes them unique.

      By the way, industry average, about one in three people that see a demonstration of a "Door to door" vacuum cleaner, buy it. It doesn't matter which brand it is...

      And because it doesn't matter which brand it is, I suspect what this means is that about 30% of the people that let a salesperson in their home..are simply predisposed to buying whatever they want.

      Yeah, the Rainbow is a very fine machine. Almost everyone that brings one in for service, really loves it, and wouldn't think of trading it in. But it's like that with pretty much all the door to door models. They all have features that make them highly attractive.
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  • Profile picture of the author gainerp
    Banned
    Hi,

    Could you give me some tips about the marketing the product through online.
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