As someone who grew up relatively poor, I don’t enjoy spending money and tend to be quite frugal. (Or, as my wife Ellen sometimes says, usually when I am wearing my favorite T-shirt, “Sometimes you are cheap to the point of being an embarrassment. You’re not going out with me looking like that. Go put on a nicer shirt.”)
Many times, when learning the price of something, I’d think to myself – I cannot believe anyone would spend so much money for that!
So you can probably understand that when I moved into the world of consultative technical sales, where deals ranged from thousands to millions of dollars, I had a lot to learn about money, perceived value, and business.
Fortunately for me, my customers and managers were more than willing to teach me.
Early in my sales career, I was meeting with the IT Manager of a prestigious law firm. I was pitching him on high speed Internet service.
I showed him our pricing sheet him with three options:
- 64K ISDN – $299/month
- 128K ISDN – $399/month
- 1024K T1 – $1999/month
I explained that 64K ISDN would probably be sufficient for his firm of 20 lawyers, but that 128K ISDN would be even better.
I was really hoping to get him to move to 128K because I believed it was the best value, I knew it would more than adequately cover him, it would help me hit quota faster, and I thought the cost of a T1 was outrageous.
He asked about the T1 service and I told him,
“You don’t want that. It’s way too expensive. Plus you only have 20 people. You’ll never need that much bandwidth. None of my customers come even close to maxing out 128K, much less a T1.”
He interrupted me and said,
“Steve, I am going to give you some advice. Don’t ever try to talk someone out of buying your premium product. Just present the options, make your recommendation and then let the customer choose.
People have many reasons for buying. We don’t always buy because we need something.
I know we don’t ‘need’ a T1. But look around this boardroom. We purchase the best of everything. We like to maintain our image as being on the cutting edge and able to offer a premium service to our clients. We’ll take the T1.”
That was how I closed my first T1.
More importantly, that was when I learned to always offer my prospects the choice to purchase my most expensive product – regardless of what I personally felt about its price.
I’m not alone. Many new reps are reluctant to push the most expensive product. New reps frequently lead with entry level products, the fewest number of licenses or the lowest tier service. This may be because the rep lacks confidence to close a larger deal, is concerned about objections, or cannot justify the value.
As Sales Managers, it is our job to prepare our reps to lead with the best solution for the customer. This includes presenting our most expensive product or service when it is warranted and even when it’s a bit of a stretch.
There are prospects out there who want the best. Not only that, after buying it, they will love it. They may brag about it to their peers. They might feel secure knowing they own the fastest/biggest/newest version. They might just not want to worry about upgrading it later.
Whatever the customers’ reasons, it is important that we teach our reps that underselling a customer can be just as detrimental as overselling one.
Here are some other real-world examples of how my teams learned not to undersell:
The 5 Pack – When selling server virtualization software, my reps defaulted to selling 2 licenses because that was the minimum needed to make the solution work. I made-up a 5-Pack (with no price discount) and taught my reps to lead with this. My reasoning was that most customers would quickly consume 2 licenses and soon need a third. Rather than go through the entire purchasing process again, the 5 pack gave them room to grow. (This worked so well, we started teaching other sales teams to offer 5 packs. At some point, our licensing team heard about it and slapped my hand for “making up a product that didn’t have a SKU” but I just ignored them.)
The Company License – Same company, different sales team and different software product. When I first took over the team, I sat in on demos. I noticed that most Closers would end the demo suggesting a customer purchase 1 license to “see how it goes” and then buy more to cover the rest of their employees if they liked it. I recommended that our Closers instead offer enough licenses to cover every employee from the start. I explained that since we knew our product would transform our customer’s business once they started using it, that we owed it to our customer to get it into every employee’s hands as quickly as possible. (Our ASP went from $99 to $149 within 6 months.)
Future Proof – I learned this one from a VP of Sales at a software company. I was struggling to position our “Platinum Version” because it didn’t offer much above our “Enterprise Version”, which cost less. He explained that our Platinum version was the focus of our product development team. Customers who owned the Platinum version would benefit by receiving free upgrades to the latest improvements. He called it “future proofing”. Customers with the Enterprise version who wanted future enhancements would be forced to purchase an upgrade to Platinum. (Surprising both me and my Inside Sales team, our customers accepted this “future proof” pitch and usually purchased Platinum, increasing the ASP of each deal by 30%.)
Since that day in the law firm, over 15 years ago, I’ve been pleasantly surprised on numerous occasions with what my customers were willing to spend.
The majority of the time, my customers have been very satisfied with their purchases.
Now it is time for you to make sure your reps know it too – so they can create many more satisfied customers for your company.
If you want some help building your sales team or improving sales, contact me here. I’d love to hear from you.
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