The Fallacy of “It’s All About Price”
When a client states he can only spend $500, the subject is not all about price.
Oh, that’s what most people think the topic of conversation is. But it’s not.
I’m here to explain why people honestly and sincerely believe in this fallacy. I’m going to show you how you can accept your clients’ objections about price and also explain what the real topic of conversation is.
It’s Not All About Price, It’s Really About Value
I had the “it’s all about price” conversation last week during an insurance class I taught. Many students insisted their clients refuse to listen to advice about what policy or coverage to buy. They swore their clients simply want to purchase the least expensive policy available.
I believe that’s how the conversation often goes between these agents and their clients. I just don’t believe their clients really mean what they’re saying. When agents buy into this scenario, they’re actually handicapping themselves and their clients.
This story plays itself out in every business industry and consists of two foundational elements:
- People who don’t understand what they’re buying focus on what they are familiar with: cost.
- People who don’t know how to sell value have only one commodity to offer: price.
People who focus on price
do not understand The value a product holds.
This is true of both the buyer and the seller!
If a client says, “I can’t spend more than $500 a year,” we should accept and respect that statement. I don’t advocate for pressuring clients to spend more money than they have or are comfortable spending.
Some clients do truly have financial constraints. And you know what? Their financial situation is theirs. We’re not responsible for advising them about how to manage their money.
It’s our job to offer them the product that best meets their stated needs. It’s their job to state their needs and make the final decisions. In a sense, we’re professional matchmakers. We show clients the value in what they’re buying and help them spend their money wisely by matching a product to their needs.
Extolling the virtues of the product–whether it’s an insurance policy or a refrigerator–is NOT the best way to go. That’s telling, not showing.
Here’s a blog post I wrote that provides the details about Why Selling Based on Price is a Bad Idea.
Ask the Crucial Question
The best way to determine value is to allow the customer to do so. You can get the ball rolling by asking a single question:
What do you want to spend your $500 on?
I promise, it’s better for the client to realize on his own that he can’t answer the question because he doesn’t understand how the policy works. Much better than you spouting your superior knowledge and him feeling … inferior.
How will the client respond? With a deer-in-the-headlights look. Complete silence. Befuddlement. Or in a similar fashion–generally without words.
Why will he be so surprised? Because he’ll expect you to argue with him. To tell him he has to spend more than $500 to get a good policy. Or, at the very least, he’ll envision you jabbering insurance jargon.
In his wildest dreams, he will not suspect you’ll make him and what he wants the topic of conversation.
This eye-opener is the first step toward establishing value. You show the client you not only know how to listen, you also do it. Which means you care. Caring is value.
Next, the client will realize you just put him in the driver’s seat. More proof that you care. More value.
Although he’ll be driving, your client won’t know where to go. He’ll need you to navigate for him. So, he’ll say something like: Huh? What does that mean? or I don’t understand. A wiseguy, or someone who’s defensive might say: What the hell are you talking about?
Regardless, any of these responses launches you into the second step toward establishing value.
What Does Your Client Value?
In many cases, your client won’t have a clue about what he wants, needs, or holds dear. This is especially true when clients buy insurance because they’re forced to do so. Like by a mortgage company, the state workers’ compensation laws, or a fearful spouse.
Here are two non-insurance situations that clearly show how people value products differently.
#1.
Let’s say a brand-new smartphone costs $1,000 and is on sale for $500. One woman might think both prices are too high because she seldom uses her phone. She’ll opt for an entirely different model that costs $400.
Another woman might grab the phone that’s on sale, thrilled to take advantage of the 50% discount.
A third woman might not like the requirement to opt-in to a three-year contract to get the 50% discount. Instead, she’ll pay $1,200 upfront to buy a different model without a contract.
#2.
Assume the cost difference between a case of 1-ply and ultra soft toilet paper is $10. Most people will happily pay the extra money to pat their bottoms with clouds rather than sandpaper. However, a fellow with septic problems will tolerate the sandpaper if it helps him postpone having to install a new system that’ll cost him a minimum of $25,000.
Let’s get back to the critical question: What do you want to spend your $$ on?
Once your client finally answers the question, you say something along the lines of:
Insurance policies pay for certain types of claims. First, give me a list of the claims you want the policy to pay for. Next, I’ll tell you what coverages will pay for those claims, and I’ll give you the associated costs. Then, you tell me what coverages you want to spend your $500 on.
In some cases, $500 will be more than enough to cover the cost of what the client wants. If so, it’s a win-win: client gets what he wants and agent makes a sale to a satisfied customer.
In other cases, $500 won’t be nearly enough. If so, the agent can make this into a win-win for everyone by letting the client figure things out for himself.
Let the client prioritize the types of claims he wants to be covered. Let the client consider different amounts of coverage to raise or lower the associated costs. If he sees no value in a coverage or feature, he’ll kiss it goodbye. If he finds value in a particular coverage, he’ll be willing to spend more money.
Unless he doesn’t have the money. Admittedly, this happens. And in certain economies it happens a lot more than at other times. However, in my experience, it occurs far less often than not understanding value does.
Clearly, this is a simplified explanation. For a more detailed illustration about how to help clients determine value, check out What Do Clients Want?
No, It’s Not All About Price
We tend to make quick judgments about our clients and their needs. Here’s a final, classic example to illustrate my point:
The agent is writing auto insurance for his client, a family that consists of father, mother, and adult daughter. Each family member owns and insures his/her own vehicle on a separate policy.
When discussing the available coverages, the agent assumes Rental Reimbursement Coverage isn’t necessary. Why? Because if one of the vehicles becomes undrivable, the family still has two vehicles that are. Therefore, the agent suggests each family member save $50 per year (a total of $150) by NOT purchasing this coverage.
The problem: The agent assumed the clients’ primary concern is money rather than asking what their needs and priorities are. A family’s collective ownership of three vehicles does not automatically equate to all three vehicles being available whenever a family member needs a car.
Mom’s car may be used to commute back and forth to work … at a location 40 miles from home.
Dad’s car may have a standard transmission, and he’s the only family member who can drive a stick shift.
The daughter may be a single mother of three children under age five who absolutely MUST have a car available at all times.
Maybe the parents are retired and all too willing to let their daughter use one of their vehicles if hers is totaled in a car accident.
Regardless, our clients should decide what their needs are … and what value they place in the products we help them choose to buy. Because no, Virginia, it’s not all about price.
Feel free to share your comments and viewpoints below.
