Crippled CEO Blog #061:
Why aren’t you only selling to the customers who want to pay you more?
Seth Godin has been a hero of mine for two decades. I recently heard him articulate something that I had always known intuitively, but he explained perfectly, as he always does.
Some customers like to pay less for things. That is how they identify themselves. They are bargain hunters, looking for the cheapest price. My friend Jen was like this. She once made us drive to another liquor store to save roughly 1 dollar on a bottle of rum. Jen would also always pick the generic brand over the “real” one. Jen was (and maybe still is) all about paying as little as possible.
Some customers like to pay more. It’s true. I know, because I am one of them. When I redid my kitchen, I gravitated toward the better, more expensive appliances, because I wanted to be certain I wouldn’t have to worry about them. When the new iPhones came out, I got the better, more expensive one with the most space, because I didn’t want to have to worry about ever running out. And I’m currently upset that I can’t find better, more expensive lawn care. I used to be upset that I couldn’t find a better, more expensive doctor, but I now have a private concierge doc (you should, too), and I’m much happier. Part of this is because I can currently afford better stuff, but even when I couldn’t, I was always willing to trade dollars for time or convenience or quality or reassurance as much as I could, whenever possible. I was pretty broke when I moved out of my parents’ house and into my first home at the age of 18, but even still, instead of getting a cheaper bedroom set from IKEA or Rooms To Go, I found this amazing dark wood set from a local store. It was more, but I knew it’d last forever and I’d save in the long run. Two decades later, it’s still in my bedroom and looks great. Long story longer, just like Jen HAS to find a deal, this is programmed into my identity (and I might even make a case that it is one reason why I’ve been able to find some modicum of business success, but that’s a different article).
So, some customers want to pay less. Some customers want to pay more. It takes the same effort to the sell to both groups, each has their own set of challenges, so why do so many businesses pick the customers who want to pay less? The answer: because it’s easy to hide there, to use it as an excuse for remaining average. Picking customers who prefer to pay more means you have to be worthy of the extra expense.
But if you’re charging more, you can afford to be better. And there is nothing wrong with being the more expensive option. If someone walks into a Rolex dealer and says they want to buy a $100 watch, they will politely suggest going to look at the Citizens a couple doors down because Rolex doesn’t sell $100 watches. Rolex made the choice to sell to customers who want to pay more, and then built their business (and watches) accordingly.
I have a massage therapist friend who charges $200 for a 60 minute massage. I believe you can get a massage at a place like Massage Envy for around $50. And depending who you get, it might be just as good. But also… maybe not. And because of what she charges, my friend only has wealthier clientele. When they take their yacht to the Bahamas, they invite her to come along to be their on board massage therapist. She made a conscious decision to be the more expensive therapist, and the result is she gets clients who want to pay more.
Sometimes, though, a customer comes along who you want to serve, but who you can’t charge the proper price, and you don’t want to lower your price, thus signaling that you are a business for people who want to negotiate on price.
Funny enough, Seth suggests something we’ve been doing for years.
You give it away for free.
Life Saver Pool Fence is the most expensive pool fence. It’s also the best pool fence. It’s worth more than what we charge, but it costs more than all the others.
The first time a family called me whose child had just had a non-fatal drowning and wanted to buy a pool fence, I knew I couldn’t charge them the full price, but I didn’t want to turn them away, either. I gave it to them for free, and thus the Save a Life Program was born.
If you want a Life Saver Pool Fence, you either pay a premium price, or if your family has experienced a fatal or non-fatal drowning, or if you were given free ISR lessons through Live Like Jake, we give it to you for free, but there’s no in between. If you’re the kind of customer who wants to pay less, we politely suggest Pool Corral, our competitor grade, or if you’re handy, Pool Fence DIY, which you can install yourself.
Spodak Dental is a higher end dental campus in Delray Beach. They have all of the most up to date equipment, every service you could want, all in this super cool high tech building. Their prices are set. They don’t give discounts. But a few times a year they have a day where they give away free dental care to underprivileged children. Full price or free.
If you’re doing it right, not everyone is your customer. This is good, because it means that you get to pick. You get to choose the kind of customer you get. If you choose the customers who prefer to pay more, then you can afford to be worth the expense. This seems like a win-win for everybody to me.
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