That Kind of Money

You know the expression “that kind of money”?

As in “I would never spend that kind of money on ______!”

Chances are you heard your parents or relatives use this phrase at some point growing up. I did.

Chances are you’ve used that same expression yourself about something. I have.

When this expression is used, be aware that you are making a value judgment about how other people spend their money — very likely through projecting your own money story on others.

When you become aware of this dynamic, you now can see how much this behavior is costing your business.

Here’s a true story from this past weekend that illustrates the point.

It is VERY SUBTLE, so pay attention as it can cost your business A LOT OF MONEY.

My brother celebrated his 40th birthday on Sunday, June 1.

I was out on Saturday, May 31, and stopped at a wine shop to buy him a present. My brother is a very accomplished chef and is a big wine guy. He likes very high-end reds — Cabs and Bordeaux-style blends. I wanted to get him something really special to mark this milestone birthday.

It was Saturday afternoon, so the wine shop was offering wine tastings. As I walked around the store, the woman working at the tasting table says “Would you like to taste some wine?”

“No, thank you. I am looking specifically for a birthday gift for my brother. He’s turning 40. He’s a big wine guy so I want to get him something really nice.”

The woman then asked one question which a good salesperson would ask. “Ok, um, do you have a price point?”

Great question, attempting to qualify what I mean by “really nice” and also establishing a budget.

But it went downhill from there.

My response? “I’m thinking between $100 to $150.”

The look on her face was a bit startled.”So you are probably looking for a red.”

“Sure, my brother likes big Cabs like Plumpjack.”

We walk over to the reds, I’m eyeing the top shelves, and she proceeds to pull a bottle off the middle shelf.

“You may like this one. I LOVE THIS WINE. Plus, you wouldn’t have to spend nearly as much money. It’s only $38.”

Hmmm. “It’s only…”

I look up at the top shelf, and see a bottle of Chateau Montelena, a Napa Cab that is one of the best. She sees me looking at it. “Great wine, but it is $128.”

“But.” Interesting, I observe. What’s the issue here? Right in my range. Why the “but”?

Then I notice a bottle of Shafer One Point Five. I’ve had various Shafer wines before and loved them. I hadn’t heard of this particular wine. So I pick up the bottle and am inspecting it, reading the back label to see what I can learn about it. I also note the price: $88.

I ask her about the Shafer. “I don’t really know about it. But here’s something your may really like. Old Ghost. A Zinfandel from Lodi. It’s great. Also it’s only $42. Plus the name Old Ghost is kind of funny as he’s turning 40.”

Very clever. And, again, “it’s only.”

At this point, I needed to complete the purchase so I could go pick up my daughter from a swimming party. I just wanted to check this birthday gift off my to-do list.

“Ok, I’ll take it.”

She smiles and leads me to the checkout. I pick up a bottle of sparkling wine to add to the purchase. The cashier wraps up my wine and I went on my way.

When you really examine the dynamics of what occurred in that exchange from the perspective of money psychology, it is utterly fascinating.

I entered the store with stated desire to buy a nice gift for my brother. My stated price point was $100 to $150.

A master professional salesperson would have turned that into $300.

A good salesperson could have gotten me to spend $200.

An average, competent salesperson would have simply sold me the Chateau Montelena at $128 or the Shafer at $88.

How? By artfully asking more questions about my brother’s tastes, and, to the point of this article: NOT BRINGING HIS/HER OWN MONEY STORY into the discussion.

Instead, she talked me into a $42 bottle when I had an $88 bottle of Shafer IN MY HANDS!

She talked me down.

All she needed to say was “Great choice. Would you like me to wrap that up for you?”

If you figure the store operates on approximately 50% gross margin, then look at the economics:

At my price point of $150, the store makes $75 in gross profit.

At an upsell of $300, the store makes $150 in gross profit.

Instead, at $42, the store makes about twenty bucks.

The irony here is that the salesperson probably believes that she provided great customer service here. On the surface, that’s true. She was extremely kind and courteous.

I have no idea what she’s thinking, but here are some possibilities. She may be thinking that she found me a better solution and saved me some money. Great job! Also, she may be thinking — heaven forbid that she try to upsell me, lest she be perceived as a greedy salesperson motivated by commissions.

Or maybe she said in her mind “I would never spend that kind of money.” Either on wine itself, or a brother, or a birthday. Who knows?

The point is, by allowing the money story into the conversation, she lost an opportunity for her business. Not just on this deal, but going forward. I won’t avoid this store, but I won’t seek it out either.

Why? Because even though I saved money, I did not get my true desire satisfied — which was the emotional experience of splurging on my brother and buying him something really nice. I WANTED TO SPEND THE MONEY and she talked me out of that experience and into her comfort zone.

Don’t worry, I’ll make it up to him. I already told him this story and we had a good laugh about it. We’re planning to get some big steaks and break out the Old Ghost for the occasion. We’ll amuse ourselves for years on this one.

So, what does this mean for you and your business?

One major problem in setting prices and realizing those prices through a sale is that we project our own value system or money story onto a product or service — we get wrapped up in “that kind of money.”

When we are determining pricing strategy in the CEO role, we sometimes make the mistake of thinking about whether we would personally spend “that kind of money” on the product/service under consideration. But unless we are the buyer, we can’t really assess value.

When we are selling this product/service in the sales role, we sometimes make the mistake of thinking about whether we would personally spend “that kind of money” on the product/service under consideration. But unless we are the buyer, we can’t really assess value.

Just because we don’t spend “that kind of money” on certain items, doesn’t mean that certain buyers won’t.

If you are a CEO, you must be aware that your sales people may potentially project their own money story into the sales process.

If you are a sales person, you must be aware of your own money story and not allow it to damage your sales effectiveness.

When you are an independent business owner like me who plays both roles, you have to be aware of both of these issues simultaneously.

The simple practice for correcting this behavior?

Very simple.

Do not make assumptions and always ask the buyer what they really want.