The Green Sheet Online Edition
June 09, 2008 • Issue 08:06:01
Make low price low priority
Through the years, many merchant level salespeople (MLSs) have asked me how to close sales without resorting to offering the lowest price or giving too much away. New MLSs trying to make it within our competitive, complex industry often wonder the following:
- Where do I fit in?
- What do I lead with?
- How do I compete without just doing the price dance?
- Does this industry really revolve around price?
- How do I sell or lease equipment and compete against the "free" movement?
There are too many answers to these questions for one article to address. However, we can identify several of the most powerful ways to deal with a problem that plagues salespeople within virtually every industry: price.
Low price (lowest rate, transaction fee and so on) is not the fundamental reason people buy. In every survey of buying motivations I've ever read, low price is never the primary motivation.
Is price in the top three to five reasons? Yes, and it's important. When everything else is equal, price is the deciding factor. But very rarely is everything else equal. And few people buy anything exclusively on the basis of low price.
I have a challenge for each of you: On your next 10 to 20 completed sales or installs, ask merchants the following: "I know there are many competitors in my industry, and we are doing some research. Would you mind telling me exactly what made you decide to move forward with me and my company?"
I asked a series of merchants that question, and the answer was almost never price. Even when I was selling based on "savings," the motivating factor that caused merchants to move forward was rarely price.
How many of you are wearing a suit you bought at a garage sale? Or watching a 13-inch TV? Or taking a date to McDonald's? Or, buying your child an Atari as opposed to the Nintendo Wii? I'm sure you've got the picture: You don't always buy on the basis of low price, so why should you think your merchants do?
Here are the top reasons merchants decide to buy (in no particular order of importance):
- Comfort level (gut check)
- Risk (pain)
- Overall value
- Potential for improved business
I will cover comfort level and risk here, saving the other topics for future articles. I believe comfort level (gut check) is directly tied to the risk (pain) factor. Indeed, they very much blend together.
Risk or pain can be defined as the potential cost to the merchant if he or she makes a mistake in choosing you. It's not just the money, although that is part of it. It is also the psychological and emotional cost your merchants will pay if their choices aren't the best.
The lower the perceived risk of the decision to use your services, the more likely your customers will say yes to you, regardless of the price.
The merchants' perspective
Consider the risk for your typical merchant in making a decision to move forward. Then think of the typical terms you ask when signing a new merchant account. For example:
- Forty-eight-month noncancelable lease
- You and your company controlling up to 50 percent (or more) of merchant revenues
- You and your company determining the equipment or software used for processing
- Leaving a comfortable situation to learn something new
- Potentially large cancellation or early termination fees
- Cash flow slowed down or held because the merchant's account is once again considered to be new
- Potentially poor service
- Possible undisclosed or hidden fees
What will happen to a new merchant customer if you or your company mess up? Keep in mind we are talking about their life blood: cash flow. And don't say there is no risk or pain involved because you'll take care of any problem that might develop. Your merchant doesn't know that upfront. And remember, you're trying to see this from your merchant's point of view, not yours. The amount of risk is what your merchant perceives it to be.
A crucial reason sales are not closed is because MLSs do not ask about or understand merchants' pain, do not overcome it with enough value or are unable to make merchants feel comfortable enough to accept the risk.
Many salespeople ultimately walk away from closing opportunities without understanding why merchants didn't move forward. Walking away marks the difference between an order taker and a top producer. If you do not understand why a given merchant didn't buy, you have not done your job. And if this is a recurring problem, you need a strong sales coach or mentor to assist you.
A CEO's lesson about risk
I read a great example of the role of risk in sales several years ago. A young chief executive officer approached a sales trainer to help his company with its sales efforts. The company was selling a product that was, at the time, a real breakthrough.
The company designed state-of-the-art, computerized controls for production equipment. If these controls were used, the savings in energy consumption, efficiency and labor costs would pay for the equipment in less than a year.
It looked like an innovative and great product. But he couldn't sell the equipment as rapidly as he wanted.
When the trainer asked the CEO to describe his sales process, the CEO said, "We qualify our prospects to the point where we know we have someone who could use the equipment.
"Then I phone the production engineer or the plant manager and gather some information about the type of equipment they use. Then I create a written proposal showing the economic payback and mail it to him. Next I call and try to close the sale."
"Let me see if I understand correctly," the trainer said. "You're calling a plant manager on the phone. I would guess that most plant managers are men in their 50s, probably with advanced degrees, who have been in the plant for a number of years, is that right?"
"So, you're calling someone twice your age, asking him to spend $20,000 to $30,000 on equipment he's never seen - from a company he's never heard of - and from a salesperson half his age who he's never met. Is that right?"
The client became a little defensive and replied, "If you put it that way, I suppose you're right." "Well it must be put that way, because that's the way your customer sees it," the trainer said.
How much risk do you think the plant manager would be accepting if he said yes to the over-the-phone offer? Put yourself in his shoes. Suppose the equipment didn't work properly? He could be forced to shut down production lines, spend weeks trying to make things right, cause all sorts of havoc in the plant and potentially even lose his job. Now that's risk.
If you were that plant manager, how much more than the original $20,000 quote would you spend to reduce the risk? That should give you a clue as to how to fight the low-price issue. Worry less about low price and more about lowering the pain for your merchants.
Seven solid strategies
Here are seven strategies to assist you in mitigating prospects' risk when selling in the financial services industry:
- Build solid, deep relationships with key decision makers and influential members of your community who can endorse you and your services. Relationships mitigate risk: the greater the rapport, the lower the perceived pain and resistance. That's why the salesperson with more established relationships almost always has the benefit of the doubt in a competitive situation.
- Make ample use of third-party recommendations, merchant lists, case studies, testimonials, associations and affiliations. All of these convey that one or more reliable people have used your services, making it less risky for a merchant to buy from you.
- Get your customer emotionally involved with your services. For example, if you're selling POS equipment, take in a demo or a laptop to demonstrate what the new system will do for the prospect. If you are selling gift cards, show merchants how exciting it would be to have their own custom gift or loyalty card programs. Ask them what colors and designs they want and so forth.
For a cash advance sale, understand exactly why merchants need the money, and help them taste having it. Let them explain what this infusion of cash will do for them, and ask what will happen if they can't get the money.
If you can save merchants significant money, ask them how they will reinvest the saved capital, or talk to them about a much needed family vacation. Spend the money with them; get them involved.
The more merchants see, feel and have a sense of possessing the benefits you offer, the less pain they will perceive.
- Understand typical concerns merchants have and why they perceive certain risks to be great. Weave answers to those issues into your presentation. Your professionalism and careful attention to their genuine concerns will absolutely build their confidence.
- Ask great questions. Let merchants explain what they need. All merchants, if asked correctly, will tell you how to sell to them. The question is, Are you listening? Do you grasp what they say verbally and sometimes nonverbally?
Are you a top producer who will persist through brushoffs and smoke screens? Remember, "I want to think it over" is not an objection; it's a prospect telling you that you haven't done your job yet. Try again.
- Facts tell; stories sell. To make your presentations vivid, use business analogies and stories. Explain how others you have worked with have had similar experiences and concerns.
The stories should show how your company applies service expertise, talent and tested processes to analyze and solve problems. This helps prospects envision their companies experiencing the same positive results - an important step toward getting them to say yes to you.
- Work with your company to create offers, marketing and presentation materials, and questions that will reduce prospects' pain. Consider trial periods, money-back guarantees, delayed billing, warranties, testimonials and so forth. All of these reduce your merchant's perception of risk.
Advice from the Forum
When asked about how to close sales without offering the lowest price, GS Online's MLS Forum member Ladera Business Solutions said, "I have always attempted to find the button that would make me the most valuable to the merchant.
"In most cases, it is the local presence that I provide. In some cases it is the value added services, and in some cases it is just the fact that I take the time to listen to the owner.
"The thing that you must remember is that selling [based on] price is the easy way out. If you sell against the lowest price, your job begins after the sale. You must build a relationship with that customer so they buy your service and products, so they will never slip back into lowest price mode."
MLS Forum member Slick Streetman suggested saying the following to merchants: "You wouldn't stay in business very long if you gave away your product or service, would you? I want your business. However, I am not going to lie to you, stretch the truth in any way, or slip in some hidden fees 'twixt the fine print somewhere.
"Also, bear in mind that a 'free' terminal is for you to use, not keep, and it won't work with any other processor. If you return it and it is not in 'new condition,' you will be charged 400 or 500 bucks."
The winners in the competitive selling arena of the information age are those who are the low risk/low pain providers, not the low price leaders.
Carefully consider where you and your company fit into the equation, and make the necessary adjustments to offer your merchants more comfort and less risk. Then prospects will buy regardless of price - including the "free" offers that have become ever so popular.
Sigmund Freud, the father of psychoanalysis, once said, "We will do more to avoid pain than to gain pleasure." Applying this knowledge will increase your sales, resulting in significant pain relief for you and your customers.
Link to Original Article
Jason A. Felts is the founder, President and Chief Executive Officer of Florida-based Advanced Merchant Services Inc., a registered ISO/MSP with HSBC Bank. From its onset, AMS has placed top priority on supporting and servicing its sales partners. The company launched ISOPro Motion, its private-label training program, to provide state-of-the-art sales tools and actively promote the success and long-term development of its partners. For more information, visit www.amspartner.com, call 888-355-VISA (8472), ext. 211, or e-mail Felts at firstname.lastname@example.org.
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