It’s difficult, if not impossible, to cut prices on products or services and make it up in volume. It is possible, however, to raise your prices, lose some volume, and make far more money. That’s the key tenet behind How to Sell at Margins Higher Than Your Competitors, a newly revised edition of a classic business title from business consultants Dr. Lawrence Steinmetz and William T. Brooks.
According to the authors, there are five main factors involved in selling a product or service: price, quality, service, sales capability, and ability to deliver to the customer. They contend that price is the least significant of these factors to customers. “If price were the only reason why people buy something, we wouldn’t need salespeople,” the authors state.
Other key ideas relevant to independent jewelers include:
Just because your competition is selling at a price lower than yours doesn’t mean you can or should meet their price—most companies operating at that price are going broke.
Many salespeople believe that price is more important to the customer than it really is—and they project this feeling to their customers, inviting themselves to get beat up on price.
Failing or delaying to discuss price tells the customer you’re scared of the price and believe it’s too high.
You must sell your product or service based on some competitive advantage.
Many people get nervous buying the lowest-priced item—most of us intrinsically equate price with quality and value.
Salespeople who sell at premium prices know they can use a high price as a credibility statement about their product being better than the competitor’s.
Service as a competitive advantage can make or break a sale. Most salespeople and businesses don’t like to provide service at all.
It’s difficult for many salespeople to understand there are customers known as “price buyers,” who have just one goal: ensuring that “you will never make any money off of me.” It’s foolhardy to waste time trying to sell to customers with this mindset.
When customers say they can get the same product for less somewhere else, they may actually be attempting one of three ploys: lying to get you to bring down your price, misrepresenting a competitor’s products and prices (comparing apples to oranges), or coming to you because your competitor can’t provide the product at this time.
Co-author Steinmetz, who has worked directly with numerous jewelers and has consulted for Jewelers of America, discussed with JCK some of the key issues addressed in the book, and how they relate to retail jewelers.
In terms of price, what are some of the key mistakes you see jewelers making?
Many salespeople make presumptions about a customer’s ability to pay based on his look. Luxury businesses like jewelers are especially guilty of this. Seasoned salespeople know you can’t judge a customer by how they’re dressed.
How can the independent jeweler justify his higher prices when customers can get product cheaper via discounters, TV shopping, the Internet, and other mass retail channels?
Jewelers have to define who they are and what they will focus on so they aren’t competing just on price. You have to let the customer know you’re providing more quality and service than the mass merchants, and you are offering timeliness—the ability to deliver the product right here and now. If you have successfully differentiated yourself, your higher prices even increase your credibility. It’s a mistake for a jeweler to compete on price. I would have trouble telling my wife I bought her a diamond from Wal-Mart.
What’s your position on the Internet? It is clearly the fastest-growing retail sector and is having an impact on the jewelry industry.
Most people are still uncomfortable buying big-ticket items off the Internet. Especially for a custom or designer piece, people want to see it and try it on before deciding to buy it. There are a select few who are capable of selling on price, such as discounters or Internet retailers. But if price were the only reason people bought, we would all go broke. Jewelry stores are still selling a lot of jewelry. That means that we still need salespeople, and salesmanship has a lot to do with selling a product like jewelry.
How can you hold your ground and not sell on price, particularly if you are in a mall setting where everyone is competing on price?
Sometimes it’s difficult, but you need to stand tall, chest out, and back up why your price is 20 percent higher. Once you go down the road of competing on price, you’ll never be able to sell in any other way in the minds of customers. So many retailers out there offer discounts right away to customers before they’ve even had a chance to determine how much they can afford to spend.
I know of one instance where a customer was looking at a $16,000 pair of diamond earrings. The first thing the salesperson says is, “I will save you the state tax if we can ship the product to you out of state.” By pulling out all the stops to sell on price, you’re not just telling the customer you can’t give it to them now in the store, you’re also saying that you’re a crook. If the retailer is ready to screw the government, what makes you think he won’t screw you, too?