Five seconds, ten seconds max. That’s how long he had to size us up, evaluate our buying potential, determine our most likely language, and make us a plausible offer.
“You are American. Welcome,” he said.
We gave him a second look but didn’t break stride.
“You need taxi? I have best deal. Where you going?”
Our second look determined that he was neatly dressed, efficient and courteous in his approach to us, and spoke enough English so that we wouldn’t have to test our fractured Spanish in our first moments clear of customs last month.
“City Center, Santiago,” Chuck said. “Hotel Foresta, across from Santa Lucia. How much?”
“Sixteen thousand pesos. Standard price.”
Reflexively, Chuck responded: “Fourteen thousand.”
“No, no. Standard price. Sixteen thousand.” He showed us an official-looking printed price list as confirmation.
The three of us stopped. “Thirty-three bucks?” I said. My sons, Will and Chuck, agreed. They’d made the same instantaneous calculation. Having just negotiated an all-night flight from Atlanta en route to our backpacking destination in Patagonia, none of us had interest in negotiating a few bucks off a cab fare.
“Where’s the car?” I asked. We were hooked.
During the ride from the airport to the city, I thought about the sales skills of the taxi company’s “finder.” He wasn’t a driver – his talent would have been wasted behind the wheel. He was with us no more than five minutes before he handed us off. No money exchanged hands, but somehow he had an IOU from the driver, presumably to be collected later. A 10% commission? 20%? If he could do four or five of these an hour, I thought, he could probably make a decent living, depending on what he had to pay to keep the airport authorities off his back.
It was pure, honest hustle. There is such a thing. He served us well in those five minutes.
I didn’t have to go to Santiago to witness a talented salesperson in action. I see them all the time in my client companies, men and women of varying ages and experience, the most successful of whom reflect a fortuitous marriage of a great product or service and a true believer with excellent inducement skills.
Like my man in Chile, they thrive on competition. They work their leads, assess the customer’s needs, get the signals from their managers, and deliver their pitch. But often they don’t close the deal, at least not on the first pitch. It turns out that a lot of customers have figured out how to “work the count” (to push the baseball metaphor).
“Your basic product [or service] is good as far as it goes,” they say, “but if we just had a little tweak here, or maybe some customization there, it would be much more useful for us. And, by the way, we’ll have to have a price break – our web research indicates that we have a number of alternatives.”
What then?
Too often, inexperienced sales people apply the pressure in reverse. They come back to the office and tell their product or service team, “We can’t sell this in its current configuration. You’ll have to go back to the drawing boards.” Or they say to the Boss, “We may have a premium product, but you can’t get a premium price for it. There’s just too much noise in the marketplace. Everyone wants a deal.”
Whether you’re selling at the low end, the high end, or someplace in between, the economic model has to work. The owners, the sales manager, and the full sales team all have to understand the internal price-cost equation before applying market dynamics to their deals. Armed with this knowledge, they can push back more effectively when they run into inevitable sales resistance.
Here are the basics – the questions that your sales people should be asking of your finance team in order to close favorable deals for you:
- What’s our mark-up? What’s our margin? What’s the difference? (It’s impressive how many people don’t understand this concept.)
- What goes into determining the direct cost of our products or services?
- What are the major elements of our overhead expenses? What portion pays for marketing, for sales? How much is needed to offset the accumulated cost of the R & D that got us here? What makes up General and Administrative expenses?
- What’s our budgeted bottom line? What’s our actual? What has caused the difference?
- To what extent does reducing our margin – by lowering the price – impact the bottom line? And what ways have we explored to reduce costs to achieve lower prices or higher profits?
- What are the margins for the other product groups in our Company? How do you, our CFO, determine what share of overhead each group carries?
With this information at hand, they will be much more confident going back to the field and saying to the prospective buyer, “We can do some reconfiguring for you, but it’s going to be expensive. Let me tell you why… And I can also say with some certainty that the lower price you’re seeing elsewhere isn’t for the same product. I know our numbers, and there’s no way that we can be beaten with this quality level [or service speed, or at this price].”
Our taxi salesman in Santiago knew his market. He undoubtedly knew his costs – what his (presumably) independent driver would charge him for our fare. And for sure he knew that his bottom line was impacted if he had to spend much of his precious time closing the sale with us. His urgency was equal to ours, but all of the market information – supply, demand, costs, price, availability, etc. – was on his side.
He was dealing with a full deck. Fortunately, it cost us only $33.