The 5 Laws of Value
You know, Ben Affleck said it best in Boiler Room. In every interaction a sale is made, just sometimes the Buyer sells the seller on why they can't or won't buy! As a sales professional, you are responsible for both how the value of the product and/or transaction is portrayed, and in my humble opinion, the deal killer is usually.... US!
I'll let you off the hook... slightly... and acknowledge that SOMETIMES customers can get price fixation, and thereby overlook the true value of the produce you are selling. We've all been there - the buyer has been given or set a specific price in their mind, and all logic, begging, and value-adds cannot budge them. What I am suggesting today, however, is that this is rarer than we like to believe. That the price argument is merely a replacement for a true VALUE discussion that should be taking place. That being said, I submit to you the 5 laws of Value, extremely summarized for this blog:
Law #1 - Every buyer likes to feel like they received a "good deal." How often have you talked with a friend that recently bought a new car, and the conversation drifted to price?
So, NICE car. What'd it set you back?
I dunno. I probably got hosed. I'm pretty sure I took a bath. Paid 'em exactly what they asked
No, you probably haven't had that conversation, because people like to feel like they paid the right price or lower. It's in our DNA, and it's logical! And you know what - a great salesperson makes sure the buyer knows where the value is so they CAN feel that way! When this law is broken, the request for price concessions usually begins.
Law #2 - Value includes, but is not limited to, price - You see, when Law #1 is broken, both parties naturally gravitate to Law #2, which is a mistake. I have seen crazy concessions that have nothing to do with price directly - entire free rooms of flooring, landscape upgrades, delay of terms, percentage rate on loans, extended warranty (in some industries, not typical in housing), sizes, colors, consultative services, advertising rights, etc.) Because of law #2, I recommend that price is the LAST thing 2 parties should debate on.
Law #3 - Value is impacted by the budget. I have seen many attempts over my career by salespeople to try to fit a square peg in the proverbial round hole. When this is attempted, the value suffers and efforts to minimize the price and value are begun. If you are reading this, chances are very high that at some point in your life you have enjoyed... or... at least tasted.... Taco Bell. On occasion, nothing else will satisfy my hunger. However, I much prefer sushi, or Shula's steakhouse, or a nice meal at Capitol Grille. Whoa! What a contrast! Now, how ludicrous would it be for me to take the established "value" system of Taco Bell, and attempt to apply it at Shula's:
"Oh yes, let's start off with a nice Wedge salad, then I'll enjoy a terrific 8 oz filet. Oh.. and.. throw in a drink, all for $4.95. That's what the restaurant down the street charges!"
We have all accepted one value system for Taco Bell, another for Chili's, and a third for Shula's and Capitol Grille. Chances are you haven't lost any sleep on it recently, and it hasn't caused you to go hire an economist to help you make sense of it. Yes, this blends with the quality equation, but it goes beyond that. Typically, your budget helps determine your perceived value.
When I'm in the mood for a cheap lunch at Taco Bell, I probably don't spring for the whole "Grande" lunch special for $8.99. At that moment, I'm perfectly happy with the $2 combo. I don't personally need or see the value in the grande lunch, only to further expand my waistband. However, I don't blink later that very same night at dinner, when my starter salad costs the same $8 before I even get to the $35 entree. Am I confused? Am I in internal conflict? How can I cascade such contrasting value systems on food in the very same day?!? Well, because perhaps for these two events my BUDGET was different, merged with my perceived value and purpose of the two dining events.
Coming back to homes, if someone believes they should not have to pay over $200,000 for a home, then all the selling in the world won't work until we re-establish their budget as it relates to your product, location, service, quality, and their ABILITY to purchase. If their budget simply cannot be reset, they may be shopping in the wrong location! You and I wouldn't turn down a $2 meal at Capitol Grille, and I bet your buyer wouldn't turn down a ridiculous deal that "fits" their budget.
I heard just today that a buyer came into one of our locations with an unrealistic budget. Once the sales counselor convinced them we were in two different price brackets on expectations, he calmly responded, "Wow, you're a huge company - I really thought you could make this ($25,000) difference just work somehow" It's not a bad idea, then, to establish that expectation at a high level on the front end and avoid an awkward, clumsy conversation hours or days later.
Law #4 - Value is impacted by internal forces, such as quality and expectations. Ever been dragged kicking and screaming to a yard sale, only to find a recently manufactured iPod or laptop for $75, or perhaps a mint condition Nolan Ryan baseball card in a box marked "5 cents"? You clutch the item quickly, eyes darting to the left and right to see if anyone else is about to witness what is truly a theft in progress! I mean, when you're not expecting much, you are shocked when you get so much more. When you are expecting much more, you are highly disappointed when the quality disappoints.
Law #4 prescribes that unless you establish those expectations and place a frame of reference around the quality, you will not receive proper credit for it! One example: While walking into church last week, my kids and I walked by a brand new Rolls Royce Silver Shadow parked in the parking lot. I was admiring the car, while my 9 year old simply quipped "I don't get it - that car is black, not silver ?!" She had no clue what the real value of the vehicle was, as she had even discounted the value in her mind due to the obvious confusion of the naming convention!
Law #5 - Not unlike securities and commodoties, value is impacted by outside forces - The news came out last week "Apple is history's most valuable company". http://www.forbes.com/sites/benzingainsights/2012/08/21/apple-now-most-valuable-company-in-history/
Now, simple, logical question - what changed last Monday that made Apple more valuable? Answer: Nothing, really. The Market cap simply reached that magical level surpassing Microsoft's 1999 market cap. They didn't go hire the technical business equivalent of either Peyton Manning ior Andrew Luck. They didn't announce a newer, cheaper, faster iPad. They haven't figured out how to come up with the first cell phone that works easily and legally on airplanes (but that would be nice). No, the MARKET raised their value through trading.
Likewise, and this is SO important, as you work on the client/provider relationship, the overall value, or "market cap" on the transaction rises and falls. If you are difficult to deal with individually or as a company, the consumer puts a negative on the value of the transaction. If you have a communication style, product, delivery, or uniqueness to bring to the table, the market value rises of the actual transaction. Third party opinions that flood your purchaser's mind create a positive or negative value on the transaction itself. So, to summarize, build value in the transaction by first building value in what is probably the highest value component, the relationship.
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