The “backward sale” happened again as it does thousands of times each day throughout the world. The checkout clerk attempted to embellish my purchase at the last minute by shoving the extended warranty brochure into my hand.
The resulting dialogue was as commonplace as the “How are you?…I’m fine, how are you?” obligatory conversation of feigned interest. The extended service contract is met with the skepticism that it must be bad for the buyer or else it wouldn’t be proposed. The buyer issues a “Thanks but no thanks” that starts before the sales pitch is even completed. The sale is subsequently rung up and another chance at a mutually beneficial exchange is missed.
Sales 101 dictates that the seller establish value before offering the price. In the case of extended warranties, the dialogue begins backwardly with the price offered before the value is established. The salesperson paints a picture of future crisis as an appeal to the buyer’s emotions. It’s too late because the buyer is already rationalizing away the idea of spending more money.
You may ask how this possibly matters to the LBM industry. It matters because your salespeople make the same mistake with walk-in consumer customers by engaging in the practice of “Good-Better-Best” selling…which is backwards. Your customers make the same mistake with their customers.
The “Good” offer creates the basis point of negotiation, something we call the “anchor.” It establishes benchmark pricing before the option to spend more. The Good-Better-Best approach is backwards because it neglects the emotional connection necessary to justify a higher price. The better approach is “Best, Better, Good” selling. Here is why:
- Instead of selling a product or a price point, the seller is offering a vision of the future. The buyer is invited to envision the situation in which they own the premium product and fulfill a dream.
- The law of contrast creates more sales to the middle offer, the “Better.” Studies have shown that starting with a lofty vision for the future enables buyers to justify a step down to the The “anchor” in the negotiation to the top-priced product sets the standard and allows the buyer to spend less, a choice much more comfortable than the implicit choice to increase the cost with a good-better-best approach.
- The Best-Better-Good approach implicitly demonstrates that the salesperson has already done the shopping for the buyer by providing all the options necessary to make a decision while establishing a consultative dialogue of trust. The backward good-better-best approach tacitly encourages buyers to validate the starting price by shopping at competitor branches.
- You shouldn’t spend your clients’ money for them. The sales profession is one in which we worker bees are often selling products to clients with access to greater resources than we can ever hope to acquire. It’s an insult to presume they should start their buying journey by investigating the best ways to save money when they can already afford the dream.
Imagine a computer salesperson telling the walk-in buyer, “Every computer in our store comes with my company’s bumper-to-bumper warranty. If your computer crashes, we’ll have you up and running within 24 hours. How does that sound?” It’s a great way to start the dialogue. If the buyer later balks at the purchase, the salesperson can offer to remove the cost of the extended warranty as a money-saving tactic.
My belief is that the computer salesperson would sell more warranties with this “Best-Better-Good” approach. Set the anchor high in your pricing strategy. It’s easier to come down on the anchor price than it is to raise it.
See Rick Davis at the LBM Strategies Conference on September 18-20, 2019 in Austin, Texas, where his new book new book, “Sales Economics,” will be pre-released for attendees. The book will be available for purchase in mid-October. For more information, visit www.buildingleaders.com.