Friday, 5 October 2012

'Anchoring Sales Technique’: Sales Pricing Strategy for more Upselling (secretly used by Gucci and Apple)

‘Anchoring Sales Technique’: Sales Pricing Strategy for more Upselling (secretly used by Gucci and Apple): by Jason Li 2012 ©
 

The anchoring sales technique is used everywhere...

It’s a trap to get you to open your wallet...

And amazingly: as consumers we love it...

In fact, there are even times when you’ve got caught up in it and paid more than you budgeted due to a sophisticated anchoring marketing technique – it’s like legitimate robbery.

What is the ‘anchoring sales technique’?

Almost anyone who has looked at a product or service by a reputable brand would have been introduced to the ‘flagship product’- like the ones you see in shop windows....

This is the product that is the most expensive in the range...

Yet rather than put the prospect off, it will help the business make more profit... and here is how.

What happens here, is that the business will show the prospect the most expensive product with all the bells and whistles, which has the biggest profit mark-up, possibly with features and benefits that the user would likely never use; and then your customer is framed to believe that if they had the budget, they would willingly get this version with all the bells and whistles.

Straight away, your prospect is reasoning that your sales pricing strategy for the products in the range make sense. They’ll even agree with you that the best one in the range really is desirable and well worth selling your grandmother for.

But right now, your prospective customer is just looking for a product within their current budget range. So they start from the most expensive product pricing backwards to the one they can afford based on stripping off the other features and benefits.

But here’s the killer part in this business pricing strategy...

Most people who have a budget range may take a few minutes to work out what they can spend, or are a bit worried about spending money. So when they see the most expensive product priced at let’s say five times the cost of the product they want, they feel like the product they are buying is reasonably priced.

Masterfully, you have in one go taken away any objections based on valuation and pricing.

This is because some people just look at price (see Quality,Price, Delivery article). By framing the customers mind to think of the most expensive price first, it reduces the objection raised at the current price for price buyers.

And here’s the real kicker – the prospect thinks their budget purchase is associated with the premium version, they will perceive the budget version as premium quality – but just a cut-down version.

Anchoring marketing technique

Let’s take Gucci as an example. Gucci will display in their shop windows and on stands in their shops the very finest and most expensive products. The most luxurious products are displayed to raise the prospects expectations.

When a prospect comes into the shop and thinks of getting a little purse for £50, they see the amazingly beautiful purse or clutch bag on the stands. And the stand allows you to touch it and hold it, open it up, hold it some more in different ways, and smell the brand new smell.

At this point, you start to look for your purse. Now if you are a price buyer, you will stick to your £50 purchase rules.

If you are a bit flexible on your budget, then the anchoring marketing technique has got you involved in enjoying products at a higher quality. You have actively told yourself higher quality holds more value to you. And so you are likely to upgrade your search to a product to be closer to the most expensive and luxurious product in the shop, which could be ten times the price at £500 for a purse!

Anchoring telesales technique

In telesales, you can also have an anchoring telesales technique by making sure you have more than one product to your prospect. Of course, this depends on if your business does have a variety of products to offer prospects.

You can offer three alternatives and packages available to help prospects upgrade to a mid-range package if you have a basic, middle, and an ‘all the bells and whistles package’.

Anchoring sales tips

Make sure that the most expensive product is credible so that price buyers understand there is a lot of added value in the most expensive product or package.

But what strategy would you use to price the middle product? Is it cost of production or cost of doing the job? Well try to do the following and test your results.

Help the customer by pricing the mid-range product at a price closer to the cheapest price so that even price buyers can be drawn to pay a bit extra for the better quality offer. You’ll be anchoring more sales of people buying the cheapest to the next level up.

Anchoring marketing tips

Make sure that your most luxurious product is the best value product you can possibly offer. Let’s say you are selling carpets, then it has to be the finest rugs so that prospective customers know you can cater great quality if they are willing to pay for it.

Make sure the product is prominent for all prospective customers to see, can feel, touch and dream of having.

The price rise then drop method: helping prospective customers think you have ‘bargains’

Some retailers use this method to increase revenue with this anchoring price technique. They raise the price of a brand new product that is superior to the current product line. For a good few weeks, they get all the people who are not price sensitive to buy the brand new latest model. Then when sales drop off: they drop the price to a new lower price. But remember, this lower price is already profitable and is close to the price they would be happy to take orders at anyway.

Now check out the price of the older product when the next brand new model is on offer. You can work out the margin difference with the new model, and what the business can accept as the price for the older model. Don’t think businesses are losing money at the lower price or doing you a favour. They’ve been stuffing the tills from people who have to have the latest products for weeks on end.

So the original high price is in fact extra cream for their profits

And it makes prospective customers think they are now getting a bargain; how nice of the retailer or manufacturer! Hey, you want to believe in the hero brand right?

It happens a lot with technology. For example, when Apple bring out a new iPad or iPhone, the current line drops in price. But remember, Apple are not losing money because the price has dropped; no, they are still making a good profit. If they were losing money, then they would immediately discontinue the line instead.

What product could you have that is the absolute premium in quality and profit for customers?

What mid-range products can you add that take customers away from the low cost low profit margin products?

Please Pay It Forward by sharing this article. Someone you know might find it useful and it might help them generate more revenue or profit. It only takes a minute and they might even like it.

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