Price is Immaterial

Fortunately I learned very early on in my career about a key secret that makes the difference between a business that makes significantly more profit than another business that does exactly the same - even though the conditions, circumstances and location are also the same.

I was brought up to watch every penny: to turn off lights when you leave a room and not to be long on the phone for example (40 years ago a call cost a fortune in relative terms – though petrol was 25p a gallon, but that’s also relative!) I had a variety of jobs from labouring to delivering bread in large vans – at that time the famous Mother’s Pride.

At 21 I got a great sounding job entitled Estate Manager – really a rent collector, which brought with it a myriad of challenges. My employer however taught me to think big and to break the rules.
Indeed I was the first person in the UK, under his direction, to break the 1974 Landlord and Tenant Act. I even got to be on television because of it – but not in a flattering way.

Within 2 years my employer was unfortunately spending time at Her Majesty’s Pleasure and I was left to run his business under the direction of the receiver. Actually my employer was innocent and became the fall guy for a cartel – but that is another story.

I chose the leading Estate Agent in the area and offered my services free for 30 days. Fortunately my success at selling houses ensured that I was given a job – and within 2 years was running the new Country Office – but that also is another story.

What I learned during my years as an Estate Manager (Rent Collector) and in Estate Agency was that it was infinitely easier to collect high rents and sell luxury property than anything else. Same effort involved but as much as 5 times the commission. You can imagine this went against everything I had been brought up to believe.

Collecting high rents was never a problem, however selling Luxury Property was a delight. The challenge in selling low priced properties was a nightmare, unless an investor was buying.

I then started my own property development company: Paramount Homes. I only built very few houses and made them the very best. I was one of the first, if not the first, in the UK to build bespoke homes from the plans. In that way buyers chose everything they wanted at every stage and paid for it.

Now this is commonplace but at that time I attracted the interest of other developers and I sold my company to Bovis Homes, part of The P & O Group, in the mid 1980’s. At the time every local estate agent, whom I knew, were adamant that my prices were far too high. They were stubborn (actually they were a bit envious that I had left the herd) to the point that they would not even take on the instruction to sell unless I dramatically reduced the price.

I did not, not that I was stubborn, but because I had learned that people don’t actually buy on price. If anyone really, really wants something then somehow the money will be found. My first development was Heron’s Reach. I placed a couple of ads in the Sunday Times entitled: Improving Lifestyles while Providing Investments and sold them all myself.

My Turning Point here is clear: when it comes to buying what a customer really, really wants, and is determined to have, then the price is immaterial.

But there is one major absolutely essential criterion. Whatever you promise, you must over deliver. It must exceed their expectations. It must blow them away. For example my ergonomically designed Poggenpohl Kitchens, which they paid for were not less than £10,000 (Remember that is 30 years ago – the equivalent of at least £50,000 for the same style of kitchen).

This Turning Point ties in with another factor: Sell your products to the affluent. For example if you have a standard chair that sells for £40 and that is your main business and you enjoy many orders, you must also develop a bespoke chair that sells for £400. Now you may only sell 10% of these with your standard chair bringing in the other 90%. But the return on the 10% is the same as the return on the 90%. And you get less hassle and more pleasure.

The good news is that you need the basic chair to bring in the customer that in time will want the bespoke chair. In addition you attract customers that are seeking something special and you are able to offer it to them.

On one occasion my full-page property advert ran the message:

“Only 3 individually designed luxury dwellings
to be built to your order within award-winning design.
Can you afford to live here?”

No price was mentioned. Interested parties would be interviewed – yes interviewed to qualify them – sometimes I can’t believe I did that, I was only 29! But it worked.

Indeed one purchaser that had bought changed his mind and decided to place it on the market to sell it on. I immediately sat down with him, agreed a deal which we were both happy with and bought it back. I then sold it for a great deal more than he had paid for it, as this time I could afford, having sold the others, to wait until the whole site was completed. I then went on to develop unique business units including Skypark at Exeter Airport and luxury commercial buildings for tenants, including The DVLC because they wanted prestige yet practicality.

Whatever business you are involved with you must not operate with price sensitivity. Now clearly there are businesses that operate on tight margins due to their highly competitive industry. Plant Hire for hire for motorway and major building construction requiring heavy machinery for example, can operate on margins of less than 1%. The sums are large of course, but in my book if you run your business on low margins then you will be in for serious challenges at tough times.

Most businesses operating in niche markets can raise their prices without any discomfort from customers.

• The key is to make your offering stand out.

• Make it so good that people extol its virtues.

• It makes them feel good.

• It provides their solution.

• Ensure that you add value with add-on service.

• Do not make discounts.

• Instead give them something.

After 35 years of selling experience I am absolutely convinced that price should not be the issue. It is the perceived value, the superb quality and the excellent service that really counts and this provides the opportunity to in turn provide the add-ons. Luxury cars are expensive but the add-on in service is worth it and is designed to retain customer loyalty.

This turning point is a tough one for people to buy into as it goes against so much of our prior conditioning: to buy on price alone. But I urge to review your business in this respect and make this Turning Point one that will increase your margins, profit, enjoyment, customer delight and, of course, your prosperity.

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