Why You Should Sell Higher End Products
May 01, 2017
I read an article recently that made sense and really resonated with me in our current market of LVT. So here is the skinny on the article and how it relates to LVT.
Are you just as busy at work as you were a year ago, but not seeing the returns like you did a year ago? You actually have more sales even? What's going on? Here might be the reason:
Today the buzz is all about LVT and to be more specific floating click-together LVT. This is great because I'm guessing your showroom is loaded with all sorts of brands and styles and designs from every company imaginable. A year ago you had 4 main lines of LVT in your store and the margins were comfortable. Each one had their own story as to why it worked for different individuals. You could get a decent margin out of jobs because there wasn't as much competition in the market.
Fast forward 1 year and now you have over 10 new displays and your margins are low. Why? If you take a look at your average selling prices most are probably around that high $3 sqft to low $4 sqft range. A year ago they were probably closer to $5 or $6 sqft. Okay so you are competing with your competitors. How else are you going to get the sale?
How about this. Instead of focusing on what the competition is selling things at, find something that is unique to your business or to you. Higher Prices Means You Need Fewer Customers.
First off, if you want to make $1 million this year, you’d have to sell 20,000 pieces of your LVT at $50. Or 2,000 pieces at $500. Or, better still, 200 pieces at $5,000. It’s a lot easier dealing with 200 customers than 20,000. Think of all the cu omer service and infrastructure you’d need to handle a crowd of 20,000. Plus, as a general rule, the buyers of a high-priced product or service are easier to deal with than someone who bought a $.99 item. Plus a higher-priced product is usually appreciated more by the consumer than a product that isn't as good in quality or style and design. That means higher-priced products are actually better for your customers, because they are more committed to benefiting from them. Think about it. If I bought a nice brand new Chevy truck valued at $40,000 that I'm making payments on compared to a used one valued at $5,000 that I just paid off. Which one do you think I went mud bogging in and didn't value as much? And there’s still more to consider on the economics side ... Which sale do you think you made more Margin on? (Commission). You guessed it the higher end pickup.
Now, a lot of people think selling high-priced products is a lot tougher than selling low- priced products. Not true. They both take about the same amount of effort. However, many sales people make the mistake of trying to “1-step” it. That means doing nothing more than sending customers to a rack to choose a color. Only a small percentage will buy a high-priced product that way.
Instead once you have qualified the customer as to what product type best suits their needs start adding value to the higher end products that you have in your store. Tell them why a product is valued higher then another. Spend more time in the higher end products than the lower end ones. We are not trying to be pushy or to gold dig here. Remember the truck. Yes it was more expensive, but boy would I baby it and Value it so much more. The same is true with LVT flooring.
Higher Prices Means Bigger Profits
And, yes, there’s more money in it for you. If you’ve got a high-priced product, it should have a very high built-in margin. If it doesn’t, raise the price even higher. Don’t be uncomfortable with this idea. Most people undercharge for the products and services they provide.
Of course, to charge a high price, your product has to deliver. You will be richer by enriching others 10 to 100
times what they pay you in return. If you sell a product for $1,000, you want to make sure it delivers $10,000 in value for your customers. If your product isn’t good enough for you to raise its price ... make it better!
Bottom line: If you’re over-delivering on value (as you should) – hold your breath and add an extra zero to your price. You’ll thank me for it!
“Apple ... has a policy of pricing slightly above the PC – a la Bosendorfer or Harley- Davidson.” – Nat Friedman