Peter Smith says customer budgets are rarely a true indicator of what they are willing to, or likely will, spend.
Peter Smith is president of Memoire and Hearts On Fire. He is author of two books, “Hiring Squirrels,” and “Sell Something.” Connect with Smith on LinkedIn or at [email protected]. In recent weeks, my colleague Krista and I conducted a series of 35 interviews with some of the best salespeople in top-performing jewelry stores. We were trying to understand the bridal landscape and whether the pandemic had wrought any noticeable changes.
One of the questions we asked related to customers’ budgets. Specifically, we wanted to know how budgets came up in conversation and how often they were adhered to.
In short, we learned budgets are usually arrived at organically—as opposed to a customer being asked specifically—and once established, were rarely, if ever, adhered to.
As one salesperson said, “Once you get them emotionally engaged, price doesn’t matter.”
When I asked another top salesperson how often she exceeded the customer’s budget, she replied, “Every single time.”
If I didn’t already know these salespeople as top performers, I might have suspected a little self-congratulatory hyperbole afoot.
However, there was no doubting their pedigrees, and even if they engaged in some subtle rounding of the sharp edges (I mean, surpassing the budget every single time!), the pattern of exceeding budget was consistent across virtually all interviewees.
Naysayers might argue those salespeople are engaging in predatory practices, that they are cajoling and coercing their customers into spending more than they want to. Alas, the science suggests otherwise.
Research shows customers not only want to spend more, but feel better when doing so, and, as if to put a cherry on top, perceive the quality to be better when they do spend more.
Whether it is offered or uncovered during the sales process, the budget is a function of a cognitive process; cool, calculated, and sober.
It lacks context beyond the most basic measures, and it is rarely indictive of what the customer is willing to spend, or likely will spend, unless they are underserved by a salesperson.
To a great extent, a customer’s budget expands commensurate with the level of their emotional engagement with the salesperson. It’s as if the customer is saying, “Here’s my budget, but feel free to inspire me.”
In “Handbook on the Psychology of Pricing,” Dr. Markus Husemann-Kopetzky wrote, “Higher prices induce consumers to perceive product quality as better during actual consumption.”
There have been numerous studies over the years, across myriad product categories, to support Husemann-Kopetzky’s hypothesis.
As one of the bridal interviewees suggested, “Customers want to be guided.”
The salesperson who uttered that beautifully uncomplicated, yet profound, opinion might have said, “Customers want to be guided by a competent salesperson, interested in delighting her customers, and inspiring them to higher ambition, and who recognizes the budget for what it is, arbitrary and devoid of context.”
Even the most jaded observers might concede the best salespeople have a way of working their way into the emotional fabric of their customer’s stories and, as such, succeed in influencing their buying behavior.
A Gallup study some years back concluded that emotionally engaged customers deliver a 23 percent premium over average customers. We see that reality play out consistently, thanks to top salespeople.
In “Brainfluence: 100 Ways to Persuade and Convince Consumers With Neuromarketing,” Roger Dooley wrote: “On one hand, we know that the pain of paying kicks in when people perceive that a product is overpriced and makes people less likely to make a purchase.
“But now we have multiple studies showing that people enjoy a product more when they pay more for it.”
The hypothesis naturally assumes that the product is, in fact, better quality, and that customers are not being asked to overpay for mediocre or subpar jewelry.
A wonderful vehicle to help increase sales is utilizing a combination of two principles: the paradox of choice and the contrast or anchoring principle.