Slimy, absolutely slimy

I subscribe to an e-newsletter called Early to Rise. Usually contains interesting information and I can ignore the sales pitches, mostly material on how to get rich by investing in real estate or as a direct marketing copywriter (junk mail writer). I found the following article very useful but probably not in the way that the author intended. Further comments following the article.
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How the Difference Between Liverwurst and Pate Can Help You Make More Sales
By Michael Masterson

Nothing sells better than price. No matter how valuable your product is... or how clever your marketing is... nothing will increase your customer base faster than underpricing your competition.

This secret is often overlooked, but it's the most reliable way to grow a brand-new small business or revive a business that's on the verge of failing.

Once you've established a substantial customer base by using this tactic, you will want to gradually increase the quality of your product/service and gradually raise your prices. And while you're doing that, you may reach a point where you can no longer compete on price... but the quality of your product isn't yet good enough to attract luxury buyers.

What do you do then? You make your price seem cheap - even if it's not.

Back in the late 1960s, I worked at a company that sold aluminum siding. The typical "package" we sold retailed at $2,800. That was a lot of money back in 1967, especially in the working-class neighborhoods we sold in. Like all good selling pitches, ours focused on the benefits first. We did a very good job of helping our prospects imagine how much better, easier, and fuller their lives would be once the asbestos shingles that covered their homes were hidden beneath a fine, shiny facade of bright, white aluminum.

It's what happened after we made those big promises that I want to talk about today - what my boss, Harvey Fisher, used to do after the sale was made. By "after the sale was made," I mean after the prospect had emotionally committed to owning the aluminum siding but before he found out how expensive it was.

This is a critical part of any sales presentation, but it's especially sensitive when the potential
customer has little or no idea of the product's price. The challenge: Now that you've lodged a hook deep into his heart, how do you get his brain to interpret your price as a good deal?

An inexperienced salesperson might want to break the price to the prospect slowly - by, for example, first quoting the cost of the gutters and leaders (say, $400), then the cost of the underhangs and fascia (another $400), then the windows and doors ($800), and, finally, the siding itself ($1,000). But, though logical, I learned from Harvey that this method doesn't work very well. "If you want to make the price of a liverwurst look cheap," he used to tell me, "say it's pate."

If I didn't understand what he meant the first time I heard him say that, the principle became clear when I saw Harvey in action. After getting some young couple to "imagine" how much nicer their house would look clad in aluminum, how much the neighbors would admire them, and how generally happy they'd be, he'd ask them, "Now, Mr. and Mrs. Smith, tell me this... how much would you guess it would cost you to cover your house in solid oak?"

"Oak?" they would ask. "But we thought..."

"I'm serious," Harvey would insist. "How much would it cost?"

It was the husbands who always ventured the first guess. "I don't know. Maybe $5,000?"

"$5,000?" Harvey would look at the wife. "Do you think you could do it for $5,000?"

"Gee, I don't know. Probably not."

The number would go up. $6,000. $7,000. $8,000. At each new estimate, Harvey would shake his head sadly and say, "You should be so lucky."

Harvey would pause for a good while, giving the frazzled couple a chance to imagine how they were going to come up with the $10,000 this was bound to cost, and then "hit them with the zinger" (as he liked to call it): "Let me give you 10 good reasons why aluminum siding is better than solid oak!"

It wasn't logical, but it was effective. By the time Harvey finished enumerating the 10 reasons aluminum was better than oak, they were mentally prepared to spend $10,000. When Harvey told them they'd have to fork out only $2,800, they practically jumped with joy.

Harvey's trick has a long history in the business of selling. It's been a mainstay of many of the best salespeople I know. I've used it myself to make tens of millions of dollars worth of sales.

Yes, it's very powerful. It's also very effective and surprisingly adaptable. In fact, it should
probably be a key part of every sales presentation that is made by you or your business.

In his book Influence: The Psychology of Persuasion, Robert Cialdini puts a label to this technique. He calls it "the principle of contrast" and illustrates it with a story from Leo Rosten about the Drubeck brothers, Sid and Harry, who owned a menswear shop in Rosten's neighborhood while he was growing up in the 1930s:

"Whenever the salesman, Sid, had a new customer trying on suits in front of the shop's three-sided mirror, he would admit to a hearing problem, and, as they talked, he would repeatedly request that the man speak more loudly to him. Once the customer had found a suit he liked and asked for the price, Sid would call to his brother, the head tailor, at the back of the room: 'Harry, how much for this suit?' Looking up from his work - and greatly exaggerating the suit's true price - Harry would call back: 'For that beautiful all-wool suit, $42.' Pretending not to have heard and cupping his hand to his ear, Sid would ask again. Once more, Harry would reply '$42.' At this point, Sid would turn to the customer and report: 'He says $22.' Many a man would hurry to buy the suit and scramble out of the shop with his 'bargain' before poor Sid discovered the 'mistake.'"

It's not always true, but most people... most of the time... like a bargain. We not only want what we want and what we hope it will give us, we also want to pay the "right" price for it. The best way to make the price of your product or service seem "right" is to compare it to something similar that costs more. If you happen to sell inexpensive CZ diamonds, this isn't difficult. The stones you can sell for $5 or $10 apiece look every bit as good as the authentic ones going for 1,000 times that price.

But if the price you are asking isn't such an obvious bargain, you need to be more creative. Instead of comparing your product to a similar one that costs the same, find (or create) something special about your product that makes it unique. I did that early in my career when I compared subscribing to the $100 newsletter I was selling to joining an expensive investment club (which sounded as if it should cost $1,000). I've done it hundreds of times since in all sorts of ways. You can too.

Cialdini's principle of contrast is also used to create additional sales. It's done in direct marketing all the time by selling the main item at one price, and then additional similar items at a discount.

When I shop at Saks, Al, my regular salesman, uses the principle of contrast to get me to spend a ton of money on "accessories." Here's how he does it:

First, he sells me on the suit - for $1,000 or more. I'm ready to pull out my wallet, but Al's not
finished with me. He takes me over to the shirt counter to show me some shirts that "will go
sensationally" with the suit I just bought. These shirts are expensive... usually more than $100 each. I don't normally pay that much for a shirt, but after laying out so much on the suit, they seem cheap. When Al is done selling me two or three overpriced (but, by contrast, seemingly cheap) shirts, he hits me with the $70 ties. I'm lucky to get out of Al's grasp at twice the price of the suit.

CP, a real-estate broker I deal with, uses the principle of contrast to get his clients to buy more real estate. If I tell him I'm in the market for a two-bedroom house off Atlantic Avenue for about $350,000, he'll be sure to first show me at least one or two so-so two-bedroom houses that are overpriced at $400,000 and $425,000. After those disappointments, I'll be thrilled when he shows me one for a mere $375,000 - $25,000 more than I was prepared to pay, but a bargain in contrast to what I had just seen.

This technique works. Are you using it effectively in your business?

This article appears courtesy of Early To Rise, the Internet’s most popular health, wealth, and success e-zine. For a complimentary subscription, visit http://www.earlytorise.com
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In order to republish this article I must include the above paragraph.

After reading this article I thought, "Salespeople wonder why they are considered slimy by non-salespeople?" I felt a bit slimy after reading this and I don't work in sales. What I found even more bizarre is that the author recognizes and falls for the technique himself.

I wonder what it really cost to cover a house with solid oak?

I found the article useful in helping me recognize a somewhat slimy sales technique and I hope I can keep my wits about me enough not to fall for it next time I want to buy something.

My emotional reaction to this article has brought free advertising for the newsletter, so I guess it would count as a success.