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Buyer and Seller Money Tolerance: What Kills Sales Before They Start

Buyer and seller Money Tolerance differences can kill the sale.

This is a relatively advanced and powerful concept you're unlikely to hear about from other sales experts.

Money Tolerance, as we’ve discussed before, is your personal answer to, “How much is ‘a lot of money’?” This is a sort of thermometer we use all the time in our daily lives, though we are not aware of it.

Everyone is walking around with this number in their heads. The chief problem with it is that they believe this limiting belief, which they are typically not conscious of but heavily impacted in life by, is the same for everyone else.

Not so.

My money tolerance is almost assuredly different from yours.

money tolerance money comparison dollar bills buyer seller sales tactics

Photo by Karolina Grabowska

How Buyer and Seller Money Tolerance Impacts The Sale

In my observational experience over the past decade, for people in North American countries like the United States and Canada, the money tolerance level you’ll usually encounter is $500 - $2500. Anything over that number is “too much money” for the average individual. Translate that into Euros or Pounds and we have something similar for European residents. Now consider:

A woman who works at Walmart and makes $15 per hour walks into a cell phone store. The salesperson knows the latest phone model is $999. The retailer and manufacturer know this, too, so they break the investment down into “Just $33 per month.” This is well within the buyer’s money tolerance, and in fact is such a swallowable amount that she is delighted to be getting the new toy for “such a deal”. Never mind that she’ll be paying this thing off for the next three years—that doesn’t enter into her head.

Buyer Money Tolerance Up Against A Higher Value Offer

This same woman later looks at an advertisement for a Mercedes-Benz SUV. It’s a beautiful car. She loves the ad. But she also knows the price is going to be over $100,000. And her gut tells her the monthly payment is going to be over $2,000. She instantly knows, with a quick sad feeling, that this will never work. She closes the ad and wistfully moves on with her life.

Take a careful look with me at what happened with this second example. Her money tolerance could not allow her to entertain the possibility of getting the Mercedes-Benz. The idea collapsed. She withdrew. She could not even consider the idea of going to the dealership. Consider this deeply.

What "Just Looking" Can Show Us About Buyer and Seller Money Tolerance

In situations where the buyer is “just looking” and not aware of what the price really is, but did manage to get themselves into the showroom…

…you can imagine the seller has the money tolerance required to be comfortable selling $100,000 automobiles. They would be ejected quickly from the organization if not. But the buyer? As soon as they find out the price, they will “pull a fade”. Their money tolerance does not match the situation. They will collapse and withdraw. The buyer physically cannot stay in that location.

As a salesperson, observe your prospects. Whether it’s over the phone or in person, you can witness this behavior. Call up a prospect who was expecting the investment in the offer to be free, for example. You don't even have to see or be in the same room with them. As soon as they find out there is a monetary investment required, observe what happens. They’ll be off the phone with you so fast you’ll be wondering what happened. It is this money tolerance of theirs leading to collapse and withdrawal that takes them away.

In general, you will not hear the words, "just looking," from a qualified, offer-matching money tolerance prospect. Those people are always ready to buy—when the offer makes sense to them. I have to say, I have not said, "I'm just looking," to ward off a salesperson in over a decade. It doesn't match who I am. (I might say, "Leave me alone to look around for a bit," with a smile, which every salesperson understands without hurt feelings).

As a seller, you will become more effective by understanding your own money tolerance and that of your prospect. This is a key qualifying factor. The faster you can identify the prospect’s money tolerance, and see if it is a match for your offer, the better.

How To Uncover The Buyer's Money Tolerance

Some ways of accomplishing this are:

  • Be direct. Ask the question outright: “Before we go any further, Ms. Prospect, I’d like to share that the investment level in our services ranges between $10,000 and $20,000. How do you feel about that?” This is suitable early on in conversations where you have many leads and must filter quickly, or wish to cherry pick and the lead flow can handle doing so. Employ when you suspect their money tolerance may be far lower than your investment requires
  • Use a parallel question. “Mr. Prospect, what’s the most you’ve ever invested in” something similar—a coaching program, agency monthly fee, consulting package etc. Ask follow up questions about the reasons why, and whether that amount was capped artificially, say by the seller’s pricing level, ie. the buyer would have spent more, but that was all the seller asked for (oh look, there's money tolerance again). Utilize in the mid of the conversation, after you've developed some rapport
  • Asking about investments in their personal life during the rapport phase. Examples: skydiving experiences, boat or RV purchases, event facility rentals (they had to have their 20th wedding anniversary hosted somewhere), art investments and the like. By demonstrating their interest in investing over there, they show you their money tolerance and that they could invest similarly in this area of their lives. Best done when the typical prospect you attract is involved in such activities, and you want to know, "Are they one of us?"

As the seller, as always, it is your responsibility to run the process, guide the prospect, qualify the buyer, and manage the sale. Do not blame prospects for having too-low money tolerance to take advantage of your opportunity: they simply do not qualify at this time. It is usually quite clear to both of you when money tolerance is identified. There are no hard feelings. The prospect knows they do not have enough going on to be a fit for your offer. And they will collapse and withdraw.

I share this concept with you so you will understand what is happening. In understanding, you will not become confused, frustrated or disappointed. You will get a sense of how good the marketing is in attracting qualified vs unqualified prospects, and after awhile you can take quantitative not just qualitative evidence back to marketing as feedback. They will appreciate this—if not immediately, after awhile as they too wish to hone in on their message-to-market match.

On Talking About Money Tolerance In Public

One final word of advice: do not use the phrase “money tolerance” in your sales conversations. This is a technical term and useful for us. To the prospect, just as calling them a prospect to their face, it will seem weird. Use it as the tool it is but do not refer directly to it in discussion. Understanding buyer and seller money tolerance and the differences or similarities is a powerful qualifying and selling tool.

You can use it today to filter who should hear about your offer and who should not…and who is likely to be a straightforward buyer who “gets it” without convincing, arm-twisting, or pushing. Of course we do not want to do any of those things, as they often lead to buyers remorse, so understanding money tolerance helps us again by keeping us away from situations where as the seller we might feel like doing so.

>> Jason Kanigan is a business development expert who can dramatically accelerate your sales effectiveness. To book a time with Jason, click here. <<

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Tell Me Your Price: How To Stop People from Asking and Disappearing

Tell me your price! Perhaps the most common question salespeople get from prospects. And why? The answer is simple: the prospect does not know what else to ask.

What often happens in the real world is this: people ask, "So, what's your price?" If you tell them, the conversation is frequently over, isn't it. They disappear. They got what they thought they were looking for, and went away with your information. You never hear from them again.

Afraid to raise prices tell me your price

What were they doing? Every buyer, whether they consciously, deliberately do this or not, is making a spreadsheet. This spreadsheet is to compare the various options and see what the buyer can get for the lowest price.

Sounds okay, doesn't it? Where's the problem?

Tell Me Your Price and the Vanishing Prospect

In this video, I explain what the critical problem is with the all-too-common "Tell me your price" buying method:

 

Especially in RFP (Request for Proposal) situations, where there's zero dialogue between buyer and seller, and the seller has to respond to RFP documents with bid documents of their own, there's a lot of guessing going on.

Early in my career I worked for a firm in the power generation field that made control panels. RFPs would arrive and I, in my sales engineer role, would respond by preparing a bid document. The RFP would say something like, "The panel shall measure voltage." Okay. I can do that in several ways, each with its own plusses and minuses. An analog dial will do the job: it's cheap, but it is not incredibly accurate. A digital readout on a PLC unit (kind of a precursor to the computers we're familiar with today) could also do the job: more expensive, but more accurate. Those are just two of the options, and it's up to me as the salesperson to figure out which is best for that client. And maybe best for my bid! Maybe I want to position us as the lowest cost provider, and to accomplish that I pick all the cheapest ways to meet the feature requirements.

Sounds good, right up to the point where the buyer engineer reads my bid documents and says to themselves, "Aww what a bunch of junk! I don't want analog gauges! I want a high level of accuracy in our readouts."

But that is something I will never hear.

The RFP process is the same thing as a caller asking, "So, what's your price?" and then vanishing.

Without dialogue between buyer and seller you never get a clear idea of what everyone wants out of the transaction. You never hear preferences. You never get the chance to discover how you as the seller could really delight the buyer, with some feature they didn't know you had and you didn't think was important enough to mention.

2021 Update:

Thanks to the global situation over the past year or so, buyers are more willing to invest time and energy getting on a phone or video call to share their requirements. This is your opportunity to learn directly from the customer what their actual needs are...instead of guessing. Take advantage of it.

Go out of your way to make use of this renewed interest in personal contact, and use the opportunity to not only develop trust but also discover what your potential customer really wants and means. Ask them, "Would you like to get on a quick call to discuss, so I can be clear and make sure I'm offering you on the right things?" Respect their time. Keep the discussion to 20-30 minutes maximum—you can always have another call later when they find they enjoy speaking with you.

Don't let these easy opportunities slip by, and don't quote based on guesswork.

>> To book a call with Jason Kanigan and change your sales process to give you the edge in price-sensitive situations, click here. <<

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Why You’re Afraid to Raise Prices

Afraid to raise pricesAfraid to raise prices? You're not alone. Especially if you are a consultant, you will encounter several symptoms indicating you should increase your rates such as:

  • overwork and exhaustion
  • disinterest in current projects
  • concern that the future will simply be more of the present
  • experts at a higher level telling you to raise them
  • desire for more money and dissatisfaction with current revenue.

I have been there. And I have done what I'm about to share with you several times in the past few years--and am about to do it again.

When you develop any sort of competency at fulfilling a product or service, you need to raise your rates. If you don't, you won't be able to leverage that competency into more money. And you deserve more money!

Afraid To Raise Prices? Here's Why

This is typically the first barrier to increasing your prices. You do not truly believe you're worth it. It's head trash: one or more limiting beliefs you have that are blocking you from growth. These beliefs are hidden. When you bring them out into the sunlight, they vanish; but their power comes from operating in the darkness of your subconscious. So explore these recesses: Why do you feel you're not worth more? Who told you that? Roll it around until you have the answer--and it will melt away.

Having to serve many clients is exhausting. You split your energies among too many projects, and don't accomplish any of them spectacularly. Let me tell you from personal experience: when money is off the table and you are relaxed, your performance is much higher. So if you keep your prices low, the kind of customer you attract will remain one who needs a ton of hand-holding and will split your effort in so many directions you won't do much good for anybody.

By increasing your prices, you reduce the number of customers you need to meet your revenue target. You can laser focus your energy and effort. And that is what gets you and your client transformational results.

But you're afraid to raise prices.

Even though you intellectually see the sense and value of doing so, your mind and gut scream, "NO! Get me out of here!" Even if your belief system allows you to feel you deserve the increase. So what the heck is going on?

It's all about your comfort zone.

Afraid To Raise Prices: How Your Comfort Zone And RAS Combine To Stop You

Bleah. Comfort zone. Probably one of the most poorly understood and least favorite of business and self-help phrases.

This is the problem, though: you have to shift your comfort zone. Right now, as a competent fulfiller of products or services in a certain niche, you are comfortable. You know the people in your marketplace. You know their features. You know the indicators that say, "Yes! I am a candidate for help from you!" You know their jargon. You are familiar with solving problems at their level.

Frustration quickly sets in when you do realize the price increase is necessary, but in your quick glance around for better customers you don't see any.

Of course you don't!

You still have your blinders on.

Yup, blinders. We all have them. Me, too. We unintentionally get caught up in a comfort zone, and our blinders come on so we don't see anything else other than the kind of thing we're looking for. This is our Reticular Activating System (RAS) in action. You can use Google to find out more about the RAS and business. The RAS is constantly filtering zillions of bits of data about the world around us down to a handful we have told it, consciously or more likely unconsciously, are important to us.

This means your brain is filtering out everything that doesn't match the ideal customer profile you've been building up this whole time! You literally do not see anything else.

So OF COURSE you feel fear! You look around for better customers--but your RAS does what it's been trained to do, and filters out 100% of everything that doesn't fit your current client profile--and that pit of doom opens in your stomach because your handy dandy brain feeds you back a platter of Zero Results!

Once in awhile the blinders slip for a moment. You have a conversation with an expert and get a glimpse of something else. Another market. Somewhere else you could use your skills for better results. A book you read gives you an idea. You see another service provider doing what you do--but for a different group of people, and making a lot more money.

That's one way of stepping up.

Another way is to consciously engineer it.

RAS filters millions of bits of information every second down to two thousand. Think you're seeing "everything"?

 

I'll bet your current ideal customer profile was developed in a haphazard, reactive, "take it as it comes" kind of way. You probably fell into the comfort zone you're in, without a whole lot of thought about it. WHO would you work for...WHAT would you do...HOW would you provide value? These questions were answered unconsciously.

What if you went about it consciously?

At this point you've realized you are going to have to find a new kind of customer--and you have no idea where to look.

Your RAS has let you down (but it's not the RAS' fault...you programmed it!).

Don't stop here.

While this realization causes even more fear and panic, this is the signal you have arrived on the leading edge.

You are right on the forefront of development for your business.

Don't stop now.

Yes. You are going to have to find:

  • new people to talk to--a new ideal client profile
  • a new language to speak with them
  • new problems and symptoms to understand.

This is all outside your current comfort zone, and that's why it feels so uncomfortable to contemplate. But it's exactly what you did in the first place as you grew your business.

There's nothing crazy or truly scary here--beyond the giving up of what you already have.

My Own Experience In Being Afraid To Raise Prices

Again from personal experience, what you have now is a pale shadow of what you deserve. If you have any true competency at all, business owners who are flush with money and used to handing over larger sums than you can contemplate at this time are desperate for your help. Just ONE of these customers will reward you more than TEN of your current crowd. Imagine what that would do for your business...your peace of mind...and your results.

I developed competency in a discount marketplace. I got good at playing that game. This was stupid! I was earning half of what I made at a corporate salary. That game topped out at a few thousand dollars a month for me, but I knew how to produce money from it and it worked for me. Even though after awhile I experienced all of those symptoms listed at the top of this post, I grimly held on. I could get that money. And I couldn't see other kinds of customers. Every time I tried to look around--every few months or so--I'd see a big open sea of nothing. Scary! Yes! Scary! And so I was angry, but I held on to what I had.

This was a huge mistake. I could be a year ahead of where I am now, if I had known and done what I know and do now in 2013. Instead, I spent that year shuffling back and forth between struggling in the discount marketplace and vainly looking for a better class of customer. I asked people for help. If there was any provided, my RAS filtered it out.

Finally, I made what felt like a brutal choice.

I stopped talking to my original marketplace.

I quit communicating with those people. I used my realizations about Pricing to come up with a four-figure minimum acceptable as a revenue target. And then I went looking full time for that new marketplace.

It was like grinding gears. I was tempted to run back to the old marketplace, because I understood it. Fear stalked me every step of the way for weeks.

But then the blinders started to slip. Since I was consciously trying to reprogram my RAS, it began feeding me new data. Things I hadn't seen before. Opportunities that had been out there the whole time...but because of my RAS and my limiting beliefs to that point, I had filtered out and literally not seen.

I got a few clients at my new number--and each one took the place of FIVE past customers.

Over the space of four months, I went from being reliant upon a desperate, low money marketplace to a much more relaxed, moderately cash rich client profile whose needs and situation I began to understand.

I learned that language.

I learned those problems and symptoms.

I learned what to look for to spot the profile of someone who was in this better position to make use of my services.

And it really didn't take very long.

Suddenly I was offered the chance--on the back of a smaller initial project--to run a launch. From that one client I made more than I would have from FIFTY customers in my original marketplace. And I got transformational results.

Since that time, I have raised my minimum price again and again. The second jump was not as dramatic as the first, but was prompted by this thought: "Hmm...this number doesn't excite me anymore. ...What number does excite me?" And the most recent increase, a doubling of the previous number well into the mid-four figures, is starting to feel like "Not enough" now.

And each time I have gone and found that new customer profile.

I'm about to go do it again. And this time, the market is completely different from any I've been working with in the past five years.

The good news: it's easier to do than your fear is telling you right now.

That first jump is the hardest.

After that, the process gets faster and easier...because you have a process! And most importantly, you believe you can accomplish it.

Your Plan To Overcome Being Afraid To Raise Prices

So here's the plan.

Note that you are in a comfort zone, likely unconsciously and haphazardly arrived at, concerning your current marketplace.

You have your RAS blinders on. You literally cannot see better opportunities yet. But you can consciously reprogram your brain to see them.

You must stop talking to your current market to make room--this is just like throwing the clothes out from your closet you never wear so there's room for new garments. You do not have to cut them off utterly like I did...a phased reduction would work. But you must deliberately pursue identifying this new ideal customer: a considerable percentage of your time must be invested in doing so.

Remember the payoff for learning this new marketplace and commanding these higher prices is a huge one.

Constantly keep in mind that it gets easier as you go. You cannot unlearn what you learn. Once you figure out what these new people look like, where they are at, and how you can work with them, you can never lose that knowledge.

The sense of power, relaxation and ability built through this process destroys timidity and makes you realize you are far more effective than you thought back in the old market.

The new projects will be a heck of a lot more exciting, I promise you.

Do you get the point here? BE DELIBERATE.

Once you begin down this path, the only direction is Up. Be brave for just a little while, and join me on it.

2021 Update

This article has helped so many people with their mindst and pricing issues over the years since the first iteration in 2015. Don't discount the impact of "What is 'a lot' of money to me?" It's one of the most powerful questions you can ask yourself—and keep asking yourself. In fact, you can chart your upper limit money tolerance over time, every day, week or month, and follow how it changes. Guaranteed certain people and events impact how you feel about money, and therefore what you believe you can charge at any given moment.

If you'd like to learn more about money tolerance, I've discussed the subject in general in this article, and the importance of the lower money tolerance goalpost here.

>> Jason Kanigan is a business development expert with two decades of experience helping leaders at organizations from startups through the Inc. Top 1000. If you want help with Pricing, book a call with Jason here. Was this information helpful? Please Like or Share so others can benefit from it! And if you have a question, kindly Comment below. <<