Name Your Price

As promised in the prior two blog posts, I want to discuss in this post a new approach to sales that may help you get through these unprecedented financial times (especially now that the Supreme Court has shredded credit protection law).

What would happen if you told your customers that if they needed a new system, they could name their price and you would build a system for them that met their budget? Do you think they would find that worth looking into? Better yet, would it tick off your competitors? (A good sign you are doing something right!)

So imagine a conversation that goes like this: “Mr. and Mrs. Jones, as our service tech Garfunkel told you this morning, your compressor is kaput. We can fix it for you, as Garfunkel informed you, but the cost was a shock, which is why you agreed to his suggestion that I see you about some options. You will probably need to replace your unit. But here’s my dilemma-as a dealer for (fill in the brand name here), I have literally hundreds of ways to solve your needs, with prices that range all over the place. I want to be sure I design the best solution I can for you that meets your budget. So I am going to do something you may have never heard of- I am going to let you set the investment you are willing to make, and I will then build a solution that meets your budget. Sound fair to you?”

I advise you to bring smelling salts with you on sales calls-your customers are likely to faint at this statement.

But why is it worded the way it is- “hundreds of possible solutions”? Because that is literally true (unless your brand only has one model of condensing unit, coil and furnace).

Consider why. This graphic shows what many would consider to be a broad product line (any major manufacturer has this) for condensing units or heat pumps.  Similar charts can be made for furnaces (5 options), air treatment (5 options), energy recovery  (2 options), air flow (5 options), and warranties (5 options). These few options give rise to 5 x 5 x 5 x 2 x 5 x 5 or 6,250 combinations! If your product line is broader (and some are), the count can reach into the tens of thousands; and if we add cased and uncased coils in various airflow options, and small package units, you could easily have 50,000 ways to solve a homeowner’s comfort needs. Did you know that?

So perhaps I get out of my briefcase a piece of foam core board 14″ x 18″ or so in size. On the board, I have drawn two axes at right angles to each other-the horizontal axis is labeled “Efficiency” (or whatever term you think is best) and the vertical one “Investment”. I then open a small bag of different colored foam core pieces like the blocks on the diagram, each labeled, such as “14 SEER CU” [blue blocks] or “10 year P&L Wty” [yellow blocks]. I show the customer how I can mix and match the colored blocks to build various solutions, and that each combination has a different height- a different investment to obtain.

I then say to the customer, “I have shown you only four or five ways to do your job. I could actually lay out for you 6,250 total combinations, but neither of us has time for all of that, do we? So perhaps now you can understand my dilemma- and help me help you. As you can see, on the center of this board is a blank with a dollar sign on it. Can you help me by telling me the how much you think you’d like to invest on this project? I will then design the solution that best meets your needs for the money you wish to invest.”

The customers clearly grasp now the relationship between efficiency and depth of offer versus how it affects the investment required.  Suppose the couple looks at each other, and the woman says, “$3,000.”

I say, “Great! $3,000 is the goal then.” And I write that on the foam core board with one of those erasable markers (so I can use the board on other sales calls).

Next, I begin my discovery process, asking them about their concerns, needs, issues and so on so I can get a good idea what it will take to make them happy with the job.

But suppose they looked at each other and then turned back to me and he said,  “Man, we have no idea! We’ve never done this before!”

I then say, “Well that’s ok. Most folks have not! Let’s see if we can work together then to figure out what makes sense to you. Let’s just suppose, for instance, that a solid solution to your needs would run, oh, I don’t know… let’s say, $10,000. How does that strike you?”

She with defiance in her voice: “No way! That’s totally out of line!”

I reply, “I understand. I did not say, though, that the job would take that much. I just used that number as a starting point for our budget process. Let’s aim lower. Would $7,500 be too high?”

She may come back with, “Yes!”

I can then say, “But we are getting closer?”

She: “Yes.”

Me: “Ok, now that you have the idea, how about naming a figure you are comfortable with?”

Once a budget has been set, and I know their issues, I tell them I’ll need a few minutes to design a solution and that they are free to return to what they were doing before I arrived, and that I will let them know when I am finished. (And if they want to stay at the table and watch me work, that’s also ok.)

I then try to compile a solution that meets as many of their needs as possible for the budget they have set.

When it comes time to present the solution, I may want to draw up several alternatives. One or two may be a little higher than their budget, but solve a lot more of their issues.

And in some cases, the budget will be set so low that you cannot meet their needs with anything in your product line. What do you do then?

You call them back to the dining room table after trying to find an economic solution and say something like this: “I have tried every combination I can think of to address all the needs you said you wanted to address, and I cannot get there for $3,000. Here is what I CAN do for that money…” and then present my $3,000 solution, pointing out that they will have higher operating costs than they wanted, or more noise issues, or that the hot/cold back bedroom cannot be addressed with this budget, and so on. I can then say, “Now if you’d consider moving the budget up to $3,500, I can solve that bedroom problem and go with the programmable thermostat; and for $4,000, we can meet every need to specified-lower operating costs, lower noise, stronger warranty. The works. Do you want to talk it over?”

Notice how this approach differs from the normal sales approach of breaking the ice, asking a lot of questions, designing one (or three) solutions, presenting them, and then tossing out the price (like a live hand grenade) and getting their reaction- which will range anywhere from delight to outrage. What a time to see if we just blew the sale-at the end, when it is too late to fix it!

I often have contractors tell me in sales workshops that you cannot ask a customer what their budget is. That is like a longhorn steer- a point here, a point there, and a lot of bull in between.

I usually ask those same protestors, “Have you ever bought a house?” (Or a car.) They invariably have. I then ask, “What was one of the first questions the realtor (or car salesman) asked you?  How much did  you want to spend!  And  you gave them your budget. And you didn’t even know the person!”

There is a right way to ask for the budget and a wrong way. I think this method may have merit as being a no-pressure right way to advance the sale to a successful conclusion for all the parties concerned!

Think about it.