October 8, 2008

How much can you afford?

Filed under: For Managers, Interviewing, Making money

Many years ago I worked for a small, scrappy, successful company that cut the floor out from under its competition every day. No one could touch us — not on value, and not on price. But we always turned a very nice profit. Our competitors could never figure out how we did it. It’s a lesson in shrewd customer relations and sales.

When a sales rep would moan to the company president (and founder) that a prospect could not afford our price, his answer was always the same. “Sure they can afford it. Just lower the price.”

This drove new sales reps to distraction because they were not permitted to sell at a loss. “But we’ll lose money!

“No we won’t. Take something out of the product to reflect the drop in price. Then show the customer which part of our great products and services she’d have to forego to save a few measley dollars.

Ask the prospect how much they can afford. How much do they want to spend? Lower the price if you have to. Remove features from the product or service to make the product reflect the price. (Or, offer a different product that costs less.) But never walk away from the deal. Always let the customer spend what the customer says she wants to spend. Your job is to sell the benefits of the product, and to help the prospect realize she will get what she pays for. (And, of course, be ready to deliver everything she needs if she is willing to pay for it.)

At that little company (which became a very big company through acquisitions), the most valued sales skill was knowing how to give customers what they asked for, and then to show them the benefits of buying greater value. In other words, how to get lots more value in exchange for spending just a bit more money.

My good buddy Bob Lewis discusses this in another context in his Keep the Joint Running newsletter. Never say no, even when you can’t say yes, suggests Bob. “Your alternative to yes and no is, as always, “here’s what it will take.” You can get from here to there, but not for free. Some alternatives will require investment; all will have risks attached.”

When a manager suggests a job offer at salary $X, you can tell him you’d accept it, “if what you’ve described as the job is all you want me to do for you.” When the manager gives you a quizzical look, offer more. “Well, I could do the job you want. But I could do a lot more. For example, I can show you how I believe I could increase your departmental profitability by 5%-10%. I’d expect a higher salary for that, but that’s up to you.” (That’s at the heart of The most important question in an interview.)

What someone can afford is always a function of how much they get for their dollar.

One Comment on “How much can you afford?”
By Margo Wei
October 11, 2008 at 1:49 pm

Well written. I like the comparison of a sales job and accepting an offer. It is crucial to negotiate for the salary you want and need. http://www.newoutlookcoaching.com

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