With the kind permission of the Mann, Ivanov and Ferber publishing house, one of the chapters of the book by Alexander Levitas is published here. This chapter deals with the issues of working with the price of a product or service - how to set the optimal price, how to test prices, how to justify a high price in the eyes of the buyer, how to create the impression of a low price, how to mask a price increase, how to give and how to not give discounts, and so on. .
To make your business more profitable:
- Attract more new customers.
- Make more deals with them.
- Sell more products to everyone.
- Take more money for each item.
- Make more repeat sales.
- Find more ways to save.
The easiest way to raise income
And now I want to talk about the easiest way to raise income. Have you already guessed what we are talking about? That's right, a price increase.
Indeed, what could be easier than increasing the price of your product or service? I came to the store in the morning, took off the old price tag, hung up a new one (or came to the office and printed a new price list) - and that's it, all the changes ended there. The investment of money is equal to the cost of a piece of paper, the investment of time does not exceed five minutes. And then you start getting more money from each client.
Moreover, even a slight rise in prices can give an explosive growth in profits. Why? Yes, because the product has a cost price, but there is an extra charge. And when you raise the price, you need to look not at how the selling price has risen, but at how the markup has risen.
Take a look at the table. The vertical numbers show what margin you are currently making on your product or service. The horizontal numbers show how many percent the price will rise. And the figure in the table shows by how many percent your profit will increase in this case.
| markup | Price increase | |||||
| 1% | 3% | 5% | 10% | 15% | 20% | |
| 5% | 21% | 63% | 105% | 210% | 315% | 420% |
| 10% | 11% | 33% | 55% | 110% | 165% | 220% |
| 15% | 7,7% | 23% | 38,3% | 76,7% | 115% | 153,3% |
| 20% | 6% | 18% | 30% | 60% | 90% | 120% |
| 30% | 4,3% | 13% | 21,7% | 43,3% | 65% | 86,7% |
| 40% | 3,5% | 10,5% | 17,5% | 35% | 52,5% | 70% |
| 50% | 3% | 9% | 15% | 30% | 45% | 60% |
| 60% | 2,7% | 8% | 13,3% | 26,7% | 40% | 53,3% |
As you can see, sometimes even a price increase of 1-2% - usually completely insensitive to the buyer - allows you to increase your profit by tens of percent.
Room for Maneuver
What limits the space in which you can play with the price of a product? Below what level can you not lower it? Above what level can you raise it?
From below you are severely limited by the cost price. You cannot sell a product at a loss, cheaper than it cost you. Almost the only exception to this rule is the situation when several goods are sold together and the loss from the sale of one of them below the cost price will be more than covered by the profit from the sale of the other.
But with the upper limit of the price, the situation is much more interesting. There are three limiters here - firstly, the price segment you have chosen, secondly, your competitors and, thirdly, the customer's benefit. However, how much do they really limit you?
The biggest limitation is imposed by the price segment. It sets the price order - roughly speaking, the number of zeros in the price. If you open a pancake stand on the street, you will be expected to be at about the price level that corresponds to other fast food establishments, and not restaurants, 50 rubles per serving, but not 200.
However, even within the same price segment, prices can vary by tens of percent. And no one forces you to huddle up to the lower border - you can try to get closer to the upper one, and if you're lucky, even move it. Let the client not pay 200 rubles for a portion - but maybe it will be possible to sell the same pancakes not for 50 rubles, but for 60, 70 or even 80 rubles apiece?
- My American colleague Stephen Oliver, who specializes in creating highly profitable karate and kung fu schools, recommends that when opening a new school, set the price as follows - go around all nearby competitor gyms, find out the prices, and then set your price so that it is 10 -15% higher than the most expensive competitor. And since Stephen himself makes over a million dollars a year from his karate schools, I think he knows what he's talking about.
Further, you seem to be limited by competitors. Together they set the notorious "market price" - the standard of how much this or that product / service should cost. And if everyone sells goods for five rubles, no one will buy it from you for six, right?
Wrong!!!
All goods and services can be conditionally divided into "standard", which are the same for any seller, and "non-standard", the quality of which can be very different for two different sellers. An example of a “standard” product is a bottle of mineral water, a “non-standard” product is apples on the market.
So, even "standard" goods in different places often cost differently. Compare prices for a bottle of mineral water in a supermarket, in a stall on the street, in a cafe and in a station buffet. I would not be surprised if the most expensive option differs from the cheapest by half, or even three times.
The cheaper the “standard” product and the more difficult it is for a potential buyer to turn to a competitor, the higher the seller can raise the price. That is why a can of cola in a stall can cost much more than in a supermarket - it is easier for a buyer to pay an extra few rubles than to look for a cheaper option. And for the same reason, in many large stores, prices for a part of the assortment are significantly higher than those of competitors - the client will not go to another store for this particular product if he buys everything else here?
Well, when it comes to "non-standard" goods and services, competitors' prices have even less influence on you. Selected apples in the market can be sold twice as much as ordinary ones. A good dentist can charge three times the "average market" price for his work - and not lack clients. It is only important that the seller be able to "protect" his price, to convince the buyer that it is justified. But we will talk about this in more detail.
Finally, the third limiter is customer benefit. The buyer wants - and rightly so - that the value of what he gets for his money exceeds the amount paid. And if the price of the goods exceeds the benefit of the client, as he sees it, the transaction will not take place.
However, does the buyer always evaluate his benefit sensibly and fully? Where there is a measurable benefit, it is not uncommon for a savvy salesperson to override a customer's objection to overpricing by pointing out that the valuation was incomplete. For example, the client estimated only momentary benefits and did not take into account the long-term. Or he compared the price of the goods, but did not take into account the cost of transportation.
If we are talking about goods and services, the value of which is subjective, how, for example, to evaluate the benefits of going to the cinema or playing chess? - the ability or inability of the seller to find an excuse for his price often plays a much greater role than all other factors.
Why don't others raise their prices?
Surely you have already thought: “If everything was so simple, why doesn’t everyone do it? I'm going to lose half my clients!" I answer. Why doesn't everyone do this? Most often, this is because your colleagues and competitors think the same way - and do not risk raising prices for fear of scaring off buyers. But often such a policy is completely unjustified.
What objections can there be to raising the price? I only know one thing: "It can scare away buyers, so they go to competitors." When a businessman I advise says this, I always answer: “Have you tried it ?!” And what do you think I hear in response 99 times out of 100?
My American colleague Marcia Yudkin, in her article Charge More and Get It, lists as many as five arguments - or rather, five excuses - that entrepreneurs who are afraid to raise prices usually refer to. And then he smashes these arguments to smithereens. Let me briefly list these arguments and counterarguments.
- "My clients can't pay more". Are you sure? Did you check?
- "I wouldn't pay more myself". But your client is not you.
- "What I do is easy". Easy for you, hard for the client.
- "No one in this business got rich". Check it out and you'll be surprised.
- "I'm just getting started". Who said you have to start from the bottom?
In fact, a high price may not scare away, but attract customers. As an example, I will give you one story from R. Cialdini's book "The Psychology of Influence" (St. Petersburg: Peter, 1999).
- One lady, the owner of a jewelry store, bought somewhere a batch of cheap silver jewelry with turquoise. She put a price on them that should have given her a reasonable profit and put them on display. A few months later, it turned out that there was no demand for these jewelry. The hostess decided that it was better to sell them quickly and cheaply in order to return at least part of the money. She left a note to the saleswoman: “The price of turquoise is doubled” - and left. The next time the lady visited her shop, all the turquoise was sold out. But, to the immeasurable surprise of the hostess, it turned out that the saleswoman misunderstood the note and did not lower, but raised the price by 2 times. Customers looked at the price of jewelry, assumed that they were looking at some exclusive product, and bought and bought.
I, too, have seen more than once or twice how people choose the more expensive of two similar products. For example, just a couple of days ago, my friend bought a headset for a mobile phone - and after some thought, she took the most expensive one from the shelf. And to the question: “Why this particular one?” - answered that since this product is more expensive than others, it must be better than them.
The fact is that the price often serves as one of the indicators of the quality of the goods for the buyer. No wonder the word "cheap" in most languages has a disparaging connotation and means a low-grade, low-quality thing. Well, when a person buys an unfamiliar product and does not know how to choose, a high price plays the role of a “quality mark”.
Psychologically optimal price
Each product has its own “psychologically optimal” price. Moreover, this price has nothing to do with either the cost of goods, or the benefit of the client from the purchase of goods, or the prices of competitors. This is the price that most of your customers consider “right” or “fair” and at which they will be willing to buy your product or service, not considering the price to be either suspiciously low or extortionately high.
Low prices are not necessarily attractive, high prices do not necessarily scare away buyers. Here are some stories that illustrate this principle.
Igor Sidorov, a tradesman and business coach I know, once won a bet with a visiting American sales coach who boasted that he would sell anyone and anything. “Sell me a bottle of vodka for a ruble!” - said Igor. The usual price for the cheapest vodka at that time was about 10-15 rubles. The unfortunate American offered his bottle to the peasants at the stalls for an hour, and they shied away from him like a leper.
The American businessman Howard Ruff experimented a lot in his time with the prices of newspapers for stock market players, for traders, etc. He found that one of his newspapers is better subscribed to when it costs $39 per year than when it costs $19. And when the price rose to $79, the number of subscribers grew even more.
Although the simple American millionaire Ruff is a recognized marketing guru, for a long time I could not believe the veracity of this story. But when I promoted one of their courses for the KURSY.RU training center, I found that this course sells much better for $150 than for $35.
Too low a price raised concerns: “What can such a cheap thing teach? This is not serious!" But the price of $150 already suggested the seriousness of the course.
Yes, and my own distance course once fell into a similar "price trap". In the first months when I tested the course, I asked for $100 for it - and I found myself between two chairs.
For very small businesses with incomes of $300-500 per month (of course, this is mainly PBOYuL), even $100 per course was too expensive. The fact that the course will pay off, and will pay off repeatedly, is not so important for them, somehow, that now there is simply no free money. And for larger businesses, earning at least tens of thousands of dollars a month, the price of $100 for an author's course, which includes a consultation, seemed too low. Suspiciously low - like that bottle of vodka for a ruble.
So when I ran the course, collected feedback from students and raised the price to $300, the course began to sell much better. Now I'm thinking about raising the price to $350-400.
And what is the psychologically optimal price for your goods or services? Does it exist in your business - what do you think it depends on? How did you price your product/service? How did you check that this price is optimal?
If it seemed to you that I unnecessarily simplify the approach to pricing, do not rush to grumble. We continue talking about the price, and I will also mention a couple of pitfalls. Games with a price - a rich topic for conversation, there are many nuances and tricks.
Entertaining price math
In principle, a rise in prices may scare away some buyers. But is it bad? In my opinion, not always. It's all about math. Here are a couple of problems for commercial thinking.
Task number 1. You bought a product for 70 rubles, sold it for 100 rubles (excluding VAT) and made 1,000 sales per week. You read my book, raised the price to 110 rubles, and sales dropped - now you sell only 850 units per week. What economic damage did my advice bring you?
Let's count. If you bought a product for 70 and sold it for 100 rubles, each sold unit of the product brought 30 rubles of profit. 1000 sales per week x 30 rubles per sale = 30,000 rubles profit.
When you began to sell the goods at the new price, the sold unit of the goods now brings 40 rubles of profit. 850 sales per week x 40 rubles per sale = 34,000 rubles profit. This is 13.3% more than before the price increase.
It turns out that my advice turned out to be successful - although the number of sales fell, the final profit increased.
Task number 2. You bought a certain product for 3,000 rubles and sold it for 4,000. Things were going well, and you were making 20 sales a day. After reading my book, you raised the price to 5,000 rubles. Half of the customers left you, and sales fell to 10 per day. Did you win money or lose?
What, Sidorov? You say you stayed with yours? Does anyone else think so? You? And you too? Thank you. Two to each, you can sit down.
Those who decided that the seller remained with his own - did not win and did not lose - counted only what was clearly indicated in the condition of the problem:
(4000 - 3000 \u003d 1000 rubles of profit) x 20 sales \u003d 20,000 rubles.
(5000 - 3000 \u003d 2000 rubles of profit) x 10 sales \u003d 20,000 rubles.
Right? From the point of view of mathematics for the fifth grade - no doubt. From a business standpoint, definitely not. Because we must not forget about the costs associated with the sale of each unit of goods.
If earlier you made 20 sales, receiving 1,000 rubles of profit from each unit of goods, and now you make 10 sales and receive 2,000 rubles each, the total profit from sales has not changed. But now you have to stock half as much goods, pack half as much goods, ship half as much goods, transport half as much goods, provide technical support to half as many customers, service half as many objects under warranty ... So, the cost of everything it is shrinking. Let not twice, but are reduced. You can now rent a smaller warehouse or office, buy fewer items, and keep fewer employees on payroll. Therefore, although your revenue has remained at the same level, in terms of money and time you were in a fair win.
I think I haven’t said anything new for an experienced businessman, but the owners of the first business in their life are sometimes pretty surprised after doing these calculations. It seems that the revenue did not grow, and there were fewer customers - and the profit at the end of the month increased. This is some fun math.
Story Three: Lighting Store
Vladimir, the owner of a lighting store, turned to me with a question: “I sell lamps made in Poland at retail. To be honest, these lamps of decent quality are often exact copies of Belgian lamps, but with a price 3-4 times lower. A competitor stands nearby and sells Chinese lamps (albeit of a different type, but from the same opera), which are worse in quality than Polish ones, but the price hurts heartily.
So my sales volume is so low that I constantly have to suffer losses. And the neighbor has always sufficient revenue. I read your article on pricing and realized that I might be in the same price trap.
So my question is: maybe really raise the price? Will I lose a buyer at all? Problem... This market is too specific!”
Judging by what Vladimir writes, he is really in a classic “price trap”, when a product is too expensive for buyers of cheap junk, but at the same time too cheap for those who are looking for a good thing. And as a result, neither one nor the other buys.
“Isn’t Levitas too bold to make a diagnosis?” the thoughtful reader may ask. And it’s true, I didn’t really delve into the situation with Vladimir’s store, I live in another city, I myself have never traded in lamps, I have no idea what is going on in this market. Can I be wrong? Oh sure.
“But what about you, Levitas, then you risk giving advice ?!” the reader will ask. The question is fair. I will answer like this.
First, between different types of business there are often more similarities than differences. The same problem can arise for tomato traders, computer traders, and oil traders. And if you can recognize a problem in one area, you are more likely to be able to recognize it in another.
Secondly, I usually try to offer solutions that are safe for business. That is, if I made a mistake in the diagnosis and the problem is not at all in the price, Vladimir will lose some amount - let's say, revenue for half a day or a day - but nothing fatal for the business will happen. Is it worth risking even such a small amount? It seems to me that it is definitely worth it - in a situation where a business brings losses instead of profits, you willy-nilly have to experiment, otherwise bankruptcy will only be a matter of time.
Getting out of the price trap
So, what can I offer Vladimir? In principle, there are three main strategies for getting out of the "price trap".
"Escape Down"- a sharp price reduction based on a large turnover. It is assumed that the drop in profit per unit will be offset by increased sales.
"Escape Up"- a sharp increase in prices based on a more demanding audience. It is likely that the turnover will remain the same or fall, but due to the increase in the price, the profit may be higher even with a smaller turnover.
"Professional care"- maintaining the old price and appealing to the target audience of competent people who are able to compare your product and competitors' products not only by price.
Which of these ways can help Vladimir?
"Flight down" - a strategy rather for the manufacturer. For retail firms, it rarely pays off. They cannot lower the price below cost, and a discount of 5-10% is often not large enough to break away from competitors. So this strategy is not suitable here.
“Leaving to professionals” is possible only where these professionals exist and their number is sufficient to provide the firm with a clientele. Who is a professional in the field of lighting and is able to appreciate the advantages of a Belgian lamp over a Polish one, and a Polish lamp over a Chinese one? Where can you find such professionals? To be honest, nothing comes to mind. Maybe builders-renovators? Don't know. It seems that this method is not particularly promising for Vladimir.
So, there remains a "flight up". The price will need to be raised sharply, immediately by tens of percent. Well, at least 10-20%. Or you can focus on a competitor. He offers lower quality products at a higher price - and they take from him? Excellent! So, it is necessary to put the price 10-15% higher than his. And if they ask why there is such a difference, you can safely answer in the vein that I have “Europe”, and the competitor has Chinese fakes.
By the way, the inner conviction of the seller is still important here. Vladimir should have a session of rational psychotherapy with himself on exactly the same topic. If a product known to be inferior is sold at a price of X rubles, the price of (X + 10%) for a better product is worthy and fair.
We set up an experiment, minimize the risk
In order to reduce the risk for the business and minimize possible losses, it is necessary to approach the price increase how to experiment. Raise prices for a short time, look at the results and then decide what to do next.
It makes sense to choose some ordinary day, change the price tags the night before and start trading at the new price in the morning. If one of the old buyers comes in (or someone who has recently asked the price) and asks why the price increase, you can give him a pre-prepared explanation, and then offer: “I will give you a discount as a loyal buyer” - and name the amount somewhere in the middle between the old and new price.
At the end of the day, it will be necessary to compare the revenue with the amount for the same day last and the week before last, as well as yesterday. If at the new prices you traded for about the same (or slightly less) amount, everything is going well and the experiment can be continued for a few more days. If within a week or two trading at a new price gives a stable result no worse than usual, then you can safely stop at this price, take it as the base one. And a month later, you can raise the price again - it is likely that it will be even more effective.
If the revenue has fallen, you need to check how things are with net profit. It may turn out that fewer fixtures were sold, the amount of revenue is less, but the net profit is the same or more.
For example, if before the store sold 10 lamps for 3,000 rubles, and took them from a supplier for 1,500, the income per day was 3,000 x 10 = 30,000 rubles, and the profit per day was (3,000 - 1,500) x 10 = 15,000 rubles.
If it turns out that during the experiment 6 of the same lamps were sold for 4,000 rubles, the income is (4,000 x 6) = 24,000 rubles, that is, 6,000 rubles or 20% less. But at the same time, the profit is (4000 - 1500) x 6 = 15,000 rubles, that is, it has not changed (I do not take into account VAT in my calculations, but it is not difficult to do it yourself).
So, even if after the introduction of the new price, the revenue fell, but at the same time the profit increased or at least remained at the same level, you can continue trading at the new price.
If the profit fell, but not significantly, you can extend the experiment for another day or two. Or you can not renew - the choice is up to the owner of the store. If tomorrow and the day after tomorrow the profit is lower, it makes sense to lower the price to about the average between the old and the new. And see how buyers behave after that. If the profit turns out to be lower than usual again, there is nothing to do, you will have to return to the old prices.
This will mean that the experiment gave a negative result and the key problem is not the price at all - and for the answer to this question the entrepreneur paid the amount that was missing from the cash desk. You can stop there and start looking for another non-price problem that is preventing the business from making more money.
If on the first day both revenue and profit fell sharply, it's okay. This only means that it is not worth delaying the experiment and the next day you can lower the price to the average between the old and the new. And if tomorrow the trade does not work out sharply, the day after tomorrow it will be necessary to return to the old price.
In doing so, the entrepreneur's risk is comparatively small. What can happen in the worst case scenario? The customers of the lighting store are mostly one-time or episodic - there are no regular customers, which means there is no risk of losing them. In terms of money, a business risks a maximum of revenue in one day.
That is, the worst thing that can happen is that no one buys anything for a whole day. Unpleasant, of course, but not fatal. But you can win a stable increase in income by tens of percent. Is the game worth the candle? It seems to me that yes.
And of course, regardless of price play, you should use different tricks, which I write about in other chapters of the book. Offer related products. Use speeches.
Selective testing
When I discussed this story with colleagues, Ekaterina Malchuk offered her own solution:
“Regarding the discussed case with the lighting store, I would like to offer a slightly different option. The essence, in general, is the same, in raising the price of goods. But if Vladimir is afraid to do it right away, then we can advise you to select a group of fixtures and immediately raise the price on them according to the scheme you described. Leave the other group in the same price category. In this case, buyers can be explained that cheaper samples are out of fashion this season, so the price for them is significantly lower (or come up with another explanation). And the cost of the "new" collection fully corresponds to it (the design and quality of the samples are at the highest level). This will allow, it seems to me, to "smoothly" test the ground in the market and assess the attitude of buyers to its actions.
Indeed, this is another way to test the market with minimal risk to the business. In general, the main ways to reduce risk come down to the fact that you are testing on parts instead of the whole.
For example, you sell a product at a new price only part of the time, as I suggested a little higher. Or you change the price only for a part of the assortment, as Ekaterina suggested. Or, if you have a chain of stores, raise the price only in part of the outlets.
That's interesting, but will you, dear reader, be able to name at least two or three more ways to test the price of parts instead of the whole?
- I advise you to stop, take paper and a pen and come up with a few ideas of your own. Then you can compare them with mine.
In fact, there are many different ways to offer a new price to only a subset of customers. Here are some examples:
- New customers to offer a new price, old - the old.
- Those who speak one language offer one price, those who speak another another.
- Richly dressed buyers offer one price, poorly dressed - another.
- Men offer one price, women another.
- Offer one price to the young, another to the elders.
- In the online store, indicate the price depending on which country the visitor came from.
- In the online store, randomly choose a price from several options. Etc.
Some methods are only suitable for the Internet, some will only work where there are no price tags, but for almost every business there is a solution or two. It is only important not to be lazy and think for a couple of minutes.
Why is the university...
Sometimes I am asked quite a reasonable question: why do universities teach complex mathematical pricing models, but I don’t talk about them at all, but I encourage experiments?
The answer is very simple. Experimenting is good when you have a small assortment and you can afford to think about the price of each product. The ideal case is when you have only two or three products, with the prices of which you can constantly play. But in an average supermarket, there are between 20,000 and 40,000 items on the shelves. Can a supermarket manager waste his or his employees' time playing with the price of each product in order to find the optimal one? Obviously not. So you have to use the mathematical models that are taught in universities to decide how much to mark up on which product.
But the small business owner, whose price list fits entirely on a piece of paper, can afford to experiment with the price to find the best option.
A disguised price increase
Sometimes a price increase disguise. It seems that the price remains the same as a month ago, but in fact it has risen - and more money gets into your cash register. How it's done? Often, the product has some kind of free bonuses - packaging, delivery, assembly, spare parts, batteries, technical support, warranty period, payment in installments, something else like that. The same costs associated with the sale of each unit of goods, which have already been discussed today.
You can remove any of these free bonuses. As a result, the price of the product will remain the same, and it will cost you less. This will be equivalent to increasing the price of the product by the same amount as the value of the bonus for you.
Let's assume that until now you have delivered the goods for free. And each such delivery cost you 80 rubles. You can stop shipping for free. Say, dear customer, please receive your goods - and, by the way, for only 80 rubles (+ VAT) we will deliver it to your home.
So you will save 80 rubles (and if you ask for 100, you will also earn money). And the saved ruble, as you know, is the same as the earned ruble. That is, the financial result for you is the same as if you raised the price of the goods by the same 80 rubles.
Another similar technique for raising prices in disguise is to "sell the whole in parts." If a certain set is perceived by the buyer as a whole and has always been sold together, then after the price increase for the same money it will be possible to get only part of it - and the rest will have to be paid separately.
For example, if earlier an office table with a bedside table was sold for 3,000 rubles, then after a hidden price increase, only a table will be sold for the same 3,000 rubles, and another 700 rubles will have to be paid for a bedside table.
Or, say, in many restaurants they use this technique and exclude the side dish from the cost of the main course. When a visitor orders the main portion, the waiter explains to him that it will be a single piece of meat or a few shrimp on a plate, and advises: “Order more rice (chips, salad), it costs only 100 rubles.”
Continuing the theme of restaurants, we can recall at the same time the “renaming” technique. Together with the price, the name of the product is also changed, so it turns out that it was not the price that went up, but the assortment changed - and the client is offered not the same dish at a higher price, but some completely different, new one. Of course, this method is only suitable for those firms that sell goods or services "of their own production", and not well-known brands.
Another, purely Russian way. The price of goods is often indicated not in rubles and not in dollars, but in some cu. e. - arbitrary units. In this case, you can mask the price increase by leaving the price in y. e. the former - but by raising the cost of one "conventional unit" in rubles.
- However, it is worth considering that buyers can get very angry with this ploy if they decide that the cost is y. e. taken from the ceiling. If the dollar exchange rate is 26 rubles, and at some point you raise the value of your y. That is, from 26 rubles to 27 rubles, which is equivalent to a rise in price by about 3.8% - most likely, customers will take this quite calmly. But if, at the same dollar rate, you declare that the standard unit is 35 rubles, you risk bringing a fair amount of customers to white heat.
And one more technique that is suitable for goods sold not in units, but in packages - in packs, like cigarettes, or by weight, like washing powder. The price remains the same, but a smaller amount of goods is put in the package.
For example, the price of a liter package of milk may remain the same as it was - but inside the package there will be not a liter, but only 900 milliliters of milk (I saw this option myself). Or if there were 60 units in the standard package, then in the new package there will be only 54 units.
The packaging honestly indicates the quantity of goods - but few people read the inscriptions on the packages, and even more so the inscriptions in small print. As a result, most buyers will not notice the price increase.
Justifying the price
If your prices are above the “market average”, quite often a situation arises in the work of the seller when a potential client wants to know why the product is so expensive.
The buyer can afford the product or service, he has the money, the high price in itself does not scare him - but he wants to make sure that he pays a fair, and not overpriced price. Of course, the more expensive and more complex the product, the more often this question is asked: “Why is the price so high?”
In addition, savvy buyers have a habit of testing the price for strength. And regardless of whether the goods are expensive or cheap, they twist their mouths, complain about the high cost and try to knock out a discount.
- “Corporations have special purchasing departments where people get paid for what they buy at the best prices. These people go to conferences where they learn to demand the best prices for themselves. They spend all day in front of a mirror practicing to say “No! Cheaper!”” (Joel Spolsky, “Camels and Sandbox”)
So that the seller in such a situation does not open his mouth like a carp on the counter (and even more so does not rush to give a discount), but stay calm and answer confidently, he must have an excuse for the price ready. Some convincing reason why this product should cost exactly as much as it costs - and convincing just for the client!
What could be such an excuse? A list of parameters in which your product or service outperforms cheaper competitors. Link to a special rarity, uniqueness of the product. Mention of some special components, ingredients, secret formula. An indication of high quality, a prestigious brand. Comparison with expensive analogues - from the same industry or from completely different ("Rolls-Royce" among sofas). Good reputation of your company in the market. Special conditions of the transaction, delivery, guarantee, service, etc.
- Actually, any justification in itself has magical power. American psychologist Ellen Langer conducted an experiment: she turned to people standing in line for a library copier and asked them to skip the line. If she said: “Excuse me, can I use the photocopier without a queue?”, She was let through about 60% of the time. But as soon as she added a rationale that begins with the words “because,” performance jumped one and a half times. And it doesn't matter if Ellen said "...because I'm in a hurry" or "...because I only have five pages" or even the obvious "...because I need to make copies" - she was still missed almost in 95% of cases.
Here, for example, is a dialogue in a restaurant that I overheard during a trip to Kaliningrad:
Why is your tea so expensive? In other Japanese restaurants, a teapot costs 50 rubles, while yours costs 200 rubles. Why?
- You see, in other restaurants there is ordinary tea, but we have a special variety "Old Dragon" with the addition of herbs and ginseng root.
Since the client has heard about the high cost and healing properties of ginseng, this answer suits him. Although if you estimate how much ginseng was actually put in that tea (and the proportion there is probably “one hazel grouse, one horse”), it becomes obvious that the price is shamelessly overpriced. This is even if you don’t think about what kind of ginseng was. But the price justification worked - and the customer places an order.
Do your sellers, dear reader, know how to justify the price of your goods? Is this price justification convincing enough for buyers?
Renaming as justification for the price
One way to sell your product or service at a higher price is to renaming. You give your product a different name, a different definition - positioning this product as something more valuable, more attractive to customers, more "sublime" than competitors' products. And due to this new name, your business moves to a higher price category. There was a dining room - it became a restaurant. It was a vocational school - it became a college.
A typical example of the use of the "rename" technique is the saga of gyms in America. At first they were simply called gyms - gym. Then some re-whitewashed the walls, hired young and strong coaches instead of retired weightlifters, opened fruit juice buffets - and renamed themselves health clubs - health clubs. And health, as you know, is already more expensive. Other times - twice or three times. When there were too many health clubs, a new variety appeared - a body sculpting studio - body curving studio. New name, new positioning - and new price increases.
Often, at the same time as renaming, it is necessary to change something in the business itself so that it matches the new name - for example, if the dining room turns into a restaurant, it would be appropriate to hire at least one waiter so that the visitor does not have to carry the plates to his table. But these changes are usually minor and inexpensive. Sometimes it is enough just to change the sign - as is the case with vocational schools and colleges.
What examples of price increases due to product renaming do you know?
The price must be transparent
And one more question on marketing thinking. I never order tea from tea bags in a restaurant. But I order tea brewed in a teapot quite often. Although tea in a teapot is not cheaper, if not more expensive. Why do you think?
The fact is that I know perfectly well the price of a tea bag. A box of a hundred tea bags costs $4 in our store, that is, one bag costs 4 cents. So when in a restaurant they offer me this very bag thrown into a glass of boiling water for $ 2, I understand that they are asking me 50 times more than its real price. And purely humanly, it is unpleasant for me to overpay 50 times.
And when tea is brewed in a teapot, I don’t know how much tea leaf was put there and what kind of tea it was. Of course, I guess that the restaurant did not offend itself here either. But the real margin is unknown to me, so there is no feeling of “rob in broad daylight”. Therefore, it is much easier to psychologically accept the price.
If the markup you're making is known to the client (or can be easily calculated by them), it will be much harder for you to justify your price. A “private trader” client will feel deceived, a “businessman” client will bring down the price, referring to the fact that you will earn good money even after the discount.
Therefore, if your prices are higher than market prices, it is desirable that they be opaque to the client.
When is a transparent price advantageous?
There is an exception to the previous rule. If your markup is low - and this is what justifies the price - you may be better off making a price transparent for the buyer. Show him what the price consists of: how much the product itself costs, how much it costs to deliver it, how little you put on top ...
But it makes sense to take such measures only as a last resort - when the buyer puts pressure on you, trying to knock out a discount, and there is nowhere to retreat, because the cost price is behind. It's better not to get into this situation.
"You paid... you saved..."
Another way to justify the price is to calculate the customer's benefit. Of course, not in every type of business and not with every product such a calculation is possible. But if you can tell a hesitant customer, "Our machine costs a million, but it will save you a million and a half in the first year," that argument is very effective at removing price objections.
Some firms try to calculate the benefit of the client even where it cannot be calculated. For example, a fire extinguisher salesman might claim that by purchasing a fire extinguisher, you save the value of home furnishings that would be burned in a fire. And one American flower shop gives out playful receipts like this:
Spent: Wife's birthday bouquet - $30
Saved: On broken dishes - $15, on the services of a divorce lawyer - $3000
Total: Net income: $2985
Can you, dear reader, use this method of justifying the price in your business?
Expensive cheap store
For firms with a wide range of products or services, there is a way to give customers the impression of a cheap store or restaurant - even if it is actually expensive.
People don't usually check the entire price list. They judge whether they are cheap or expensive by looking at the prices of only a few products or a few categories of products—usually the most popular ones, the prices of which are well known to buyers.
If you figure out which products (or services) in your range serve as such a touchstone, you can play with pricing to create the impression of being cheap.
How it's done? The goods that a business trades can be roughly divided into three categories:
- "Enticers", that is, goods that are sold cheaply, sometimes even at cost, in order to attract a buyer, give him a reason to choose this particular business, and not a competitor;
- "Basic", that is, products that are the basis of the range. Goods for which, in fact, customers come;
- "Rich", that is, hot goods, on which the maximum margin is wound up and which bring the greatest profit. A unit of such a product will give more profit than 2-3-4 units of a "basic" product sold for the same price.
For example, if we take McDonald's, cheap ice cream is a typical "lure", hamburgers are the "main" product, and cola and Sprite are "rich" products with a markup of hundreds of percent. For the sake of delicious and very cheap ice cream, a person goes to Mac, and not, say, to Burger King. But he comes in for a hamburger, for which Mac makes a reasonable markup. And after eating a hamburger, the client can wash it down with cola - and then the "Mac" will receive super profits.
Another example is grocery stores that proudly write on a 3x5 meter poster: “We have the cheapest cottage cheese, tea and salt. If you find it cheaper, we'll give it away!" As a rule, they do not lie, and they really have the cheapest cottage cheese (“lure” for the surrounding housewives). This gives them a reputation for being a cheap shop. But who buys only cottage cheese? And who will check how much the prices of other goods are higher than in other stores?
Using this technique, you can make those products for which the visitor checks the prices first of all, as a "lure". If these goods are relatively cheap (and especially if you remember to emphasize this fact) - people will find your prices low and the store cheap. And, coming to you for cheap "lure", they will at the same time buy from you expensive "basic" and "rich" goods.
Beware - discounts!
If the easiest way to raise revenues is to increase the price, then the easiest way to lose profits... Yes, of course, these are discounts. Inexperienced businessmen often try to attract a client with discounts, inexperienced sellers often give in to a client who asks to throw off just a few percent. But this is a deadly business mistake.
Perhaps, dear reader, you still have not thought about it, but what is the real price of a 1% discount for your business? Depending on the specific business, a discount of just 1% can often mean a 5-10% reduction in net profit. And sometimes even more.
Here is a table you already know - only now we use it to calculate the real losses that even small discounts lead to.
| markup | Discount | |||||
| 1% | 3% | 5% | 10% | 15% | 20% | |
| 5% | 21% | 63% | 105% | 210% | 315% | 420% |
| 10% | 11% | 33% | 55% | 110% | 165% | 220% |
| 15% | 7,6% | 23% | 38,3% | 76,7% | 115% | 153,3% |
| 20% | 6% | 18% | 30% | 60% | 90% | 120% |
| 30% | 4,3% | 13% | 21,6% | 43,3% | 65% | 86,7% |
| 40% | 3,5% | 10,5% | 17,5% | 35% | 52,5% | 70% |
| 50% | 3% | 9% | 15% | 30% | 45% | 60% |
| 60% | 2,7% | 8% | 13,3% | 26,7% | 40% | 53,3% |
The vertical numbers show how much mark-up you make on your product or service. The numbers on the horizontal - what discount the client will receive. And the figure in the table shows how many percent of the profit you will lose because of this discount. The numbers in the gray field mean that the discount has eaten up all the profits and you are trading at a loss.
Discounts of a few percent poorly motivate the buyer when it comes to inexpensive goods. There is no big difference between 95 rubles and 100 rubles or between 950 rubles and 1000 rubles - the client often does not even notice such a discount. But this discount can cost you 20-30% of the profit from the transaction. Therefore, beware of discounts - ill-conceived discounts can ruin your business without you noticing.
Story four: gardening tools
Sergey from Simferopol, a trader in garden tools, wrote to me:
“My partner Vasily tries to give a discount to almost every buyer in advance, when the client is not even bargaining. He says he wants to attract more buyers by lowering the price and allegedly earn more. This is right?"
I asked Sergey for information in numbers. The alignment, after two minutes of calculations, came out like this.
The purchase price of a unit of goods is $7.2.
The selling price of a unit of goods is $9.
Profit per unit - $ 1.8, or 25% of the purchase price.
Vasya offers customers a 5% discount or $0.45 per item.
Since this money is small, such a discount does not motivate the client. At the same time, $0.45 is exactly 25% of the $1.8 profit.
That is, Vasily willingly, on his own initiative, refuses 25% of the profit for the sake of dubious motivation of clients. And I have no doubt that neither Vasily nor Sergey have yet tested the effectiveness of such motivation.
Moreover, $1.8 per item is only the difference between the purchase price and the sale price. But there are still a lot of other costs associated with doing business: premises, telephone, shipping of goods, advertising ... And these costs are paid from the same $ 1.8 per unit of goods.
That is, the net profit per unit of goods is actually not even $1. Moreover, Vasily throws out $0.45 of this money in the form of a discount - 50% of the net profit goes down the drain!!!
When I sent my calculations to Sergey, I received the following letter in response:
"I am terrified! And so it turns out, we lose 30-40% of the already small profit, or rather, not profit, but simply income. Having subtracted the costs only for communications and transport, while the rent is zero, and giving that very five percent discount, I came to a complete zero. And I'm scratching my head why we are working almost to zero. That's where the dog rummaged.
Thank you very much, I'll go to correct the partner's brains about discounts. Here the wife will be happy, she laughs all the time that we are plowing, and the profit is zero.
Do you, dear reader, offer discounts to your customers? By what percentage do these discounts reduce your profit? Count - and perhaps you will see why your business is stalling, as Sergey saw it.
Another word for discounts
As you can see, a 1% discount is often invisible to the buyer, but at the same time, it can deprive you of a fair share of the net profit. On the other hand, customers often ask for discounts, and if not given, they are offended. Yes, and in advertising, discounts are often used to motivate a client to make a purchase from you.
How should you make discounts so that it does not hit your pocket too hard? Here are a few thoughts on this.
For small retail. Decide in advance on the maximum discount that the seller can provide. Make sure the seller is aware of this. Include this discount in the price of the item. Instruct the seller never to offer a discount on their own initiative for the purchase of just one item - only if the customer asks himself.
For small retail. Use discounts to stimulate sales. Offer customers discounts on multiple purchases, large purchases, or "anniversary" (fifth or tenth) purchases. Such discounts may be offered by the seller on their own initiative or in response to a request for a discount (“Buy another one, it will be discounted”).
For sellers of more expensive goods/services. Only one person in the shop/office should have the right to give discounts. Moreover, this person can be a store manager or a shift manager, but not a salesperson. This person must have a table at hand, according to which he can see how much the company actually loses when he gives a discount of 1, 5 or 10%.
For all. It is better to give not a discount, but a gift. Why? It will be much cheaper for you. For example, if you give a bottle of wine as a gift to a regular visitor of a restaurant, the client knows that he can order such a bottle in your or another restaurant for 1000 rubles, and he feels that he received a gift for 1000 rubles. In reality, this wine cost you 350-500 rubles (and 1000 rubles is the price including VAT, profits and taxes). That is, you made a gift for 350 rubles, and the client believes that he received all 1000, and both are satisfied.
For all. Discounts can be used to encourage immediate purchase. A hesitant customer receives a discount, but this discount is only valid for a short period - from "only today" to several weeks. However, first make sure that this discount is not too big - calculate what percentage of your profits it will eat.
For all. Discounts can be used to incentivize purchases during "dead hours" or "dead days". For example, on weekdays, restaurants receive most of their customers in the evening hours. So that the restaurant does not stand idle during the day, it can only be opened, say, after 17:00 - or you can do otherwise: offer business lunches, set meals at a discount, which are served, say, between 12:00 and 17:00. Barbershops, where most customers go on weekends, may offer discounts for weekday haircuts.
And most importantly, in any case, remember: discounts are given so that you earn more money. If the fact that you give discounts makes you less money, not more, then refuse discounts.
False Discounts
Sometimes you can give the impression of a discount where there really isn't one.
Have you ever seen price tags in stores with inscriptions like “300 rubles Only 250 rubles”? Of course, they saw - the old price is indicated along with the new one at almost any sale.
But after all, such a price tag can be hung out, even if there was no real reduction in price. Instead of actually giving a discount, you can just show that the price was 20% higher before. If the store's primary customers are one-time or occasional shoppers, they cannot know what the price was before. And although they may not accept on faith that the goods used to cost 300 rubles, a certain worm of doubt will still gnaw at them. I want to, you know, buy for 250 something that usually costs 300.
- Sometimes this trick can even mask price increases. If earlier your product cost 200 rubles, you can raise the price to 250, and write on the price tag “300 rubles New Year's sale! Only 250 rubles!” - as if recently there was a decrease, not an increase in prices.
The second type of "false discount" is an imitation of a discount when buying several units of a product. You must have seen discounts like “Chocolate - 50 rubles” many times. Three chocolates - only 135 rubles. Other sellers take advantage of what the people in their minds consider bad and reluctant. And they put up price tags like “Chocolate - 50 rubles. Three chocolates - only 150 rubles. Most buyers are used to the fact that when buying several units of a product you can get a discount, they take three chocolates instead of one, sincerely believing that they have won some kind of discount. Although the price tag clearly shows that there is no benefit in this.
Another variant of the same technique is posters like "A cup of coffee + a bun - for only 100 rubles." Even if the coffee alone is $50 and the bun is $50, many shoppers will assume that they get a better deal by buying the coffee and the bun.
- This technique is widely used by the Amazon online store. Next to the description of many products, you can see a sentence like: "This book costs $11.80 - you can buy it with this book for $19.10" Customers often think that this is a discount for purchasing two books, and based on this about the purchase. However, if you look at the price at which the second book is sold separately, it often turns out that by buying two books together, the client does not save a penny.
Reception will be more effective if the prices of goods are not round, in which case it is more difficult for the buyer to notice the catch. Compare for yourself: “Chocolate - 50 rubles. Three chocolates - only 150 rubles" and "Chocolate - 49.5 rubles. Three chocolates - only 148.5 rubles.
If this material interested you and turned out to be useful, you can purchase the book by Alexander Levitas “More money from your business. Guerrilla Marketing in Action". You can find it both in large bookstore chains and on the website of the Ozon bookstore.
And remember the main thing - Your business can bring in more money!
It often happens that a new line of products is launched for sale even before the products of the old one are completely sold. Or maybe it's just that the demand for the product has decreased significantly, or maybe the company is exploring a new market segment. And then the goods are sold at heavily discounted prices. But many accountants are afraid to reduce the sale price below the purchase price, since this is allegedly prohibited by law and is fraught with additional taxes. Let's see if this is actually the case.
Concern 1. Selling below cost is prohibited by law
In the general case, the contracting parties determine the price of the goods themselves. The exception is prices that are regulated by the state, for example, in the field of electricity, gas supply, communications<1>. So for a regular contract, there is no lower price limit on the part of the Civil Code. The main thing is that this price suits both parties.
And the prices are monitored by the Federal Antimonopoly Service in order to prevent the abuse of "big players" in the field of pricing. However, companies that are not able to influence the price situation on the market by their actions alone or with a group of other companies have nothing to fear.<2>.
Note. In 2013, the FAS prepared amendments to the Law on Trading Activities, advocating a ban on sales at a price below cost, but the project did not find support in the government, was sent for revision, and has not even reached the State Duma yet.
Conclusion
If your company does not have a decisive influence on the pricing in the market and does not sell goods, the prices of which are regulated by the state, then the price floor is not limited.
Concern 2. Loss from selling at a price below cost is not taken into account for tax purposes
Let's just say that this is not the case. The income tax base is calculated cumulatively for all transactions<3>. And only if a special procedure for calculating the tax base is established, income and expenses from these operations are considered separately. For example, a special procedure is provided for transactions with securities<4>. In addition, there is a direct prohibition on recognizing in expenses the price difference between the market price and the sale price of the goods to the employee. If you sold a product to an employee at a non-market price, which is even lower than the purchase price, then it is obvious that such a price difference is formed and, in fact, it represents a loss when selling below cost<5>.
But with regard to other transactions of sale and purchase at a loss, there are no special rules. Therefore, schematically, it looks like this: income from all transactions is summed up and all expenses from sales recognized in the reporting period are deducted from the amount received<6>. It is obvious that the loss-making transaction revenue will be recognized in income from sales along with the revenue from other sales, and the expenses on it will be recognized together with the expenses on other transactions. If you are not systematically working in the red, then it is generally unrealistic to detect losing trades. They will simply drown in the total mass, and they will not be visible in the income tax return.<7>.
With a "profitable" simplification, a sale at a loss does not affect the amount of tax in any way: how much money was received for the goods - from that amount they calculated<8>. If the simplification is "income-expenditure", then in this case it is not so easy to track a losing transaction, income and expenses on it can generally fall into different reporting and even tax periods. After all, expenses are recognized as payment for the goods to the supplier and its sale, and income - upon receipt of money from the buyer<9>. When selling goods to employees, the price difference between the retail price and the sale price is also not taken into account in expenses.
Conclusion
Tracking a losing trade is unlikely unless you are working negatively systematically. It is unlikely that the tax authorities will do this, because the loss from sales, if the goods are sold to non-employees, is still taken into account for tax purposes.
Concern 3. If the sale price is lower than the purchase price, the tax authorities charge additional taxes based on the market price
There is some truth in this judgment. It all depends on whether such a transaction is controlled. Let's say you sold apples at a price lower than the purchasing third-party Russian company. Then you can safely look into the eyes of the inspector, since the price of the transaction between parties that are not dependent on each other is initially considered to be the market price<10>. That is, the tax authorities will not check your prices for compliance with their market prices. Simply because this type of verification is provided only for controlled transactions, and transactions between non-interdependent Russian organizations are not classified as controlled<11>.
Note. "But what about Article 40 of the Tax Code?" - you ask. Despite the fact that the notorious Art.40 of the Tax Code on market prices has not yet been canceled, its effect has been significantly narrowed: it applies only to those transactions for which income and expenses are recognized before 01/01/2012. That is, at the moment, the tax authorities can only try to recalculate taxes based on market prices if the "sale" took place in 2011, since 2010 and earlier periods can no longer be covered by the on-site audit scheduled in 2014 G.<12>
But if you sold goods at a non-market price and such a transaction is controlled for you, for example, you sold apples for mere pennies to your subsidiary on OSNO, the amount of income from transactions with which exceeded the uncontrolled threshold (in 2013 - 2 billion rubles, in 2014 - 1 billion rubles)<13>, then in this case you have to<14>:
<или>at the "price" check to prove to the tax authorities that the apples were impossibly sour and the transaction price is well within the range of prices at which such goods are sold by independent persons<16>. If the tax authorities nevertheless consider that the prices were incomparable with the market prices, then after the "price" check they will go to court to recover the arrears and penalties on income tax and VAT<17>. And if the income from the transaction relates to 2014, then the tax authorities can also impose a fine in the amount of 20% of the amount of unpaid taxes<18>.
We tell the manager
If the seller independently calculates and pays taxes at the market price on the income from a controlled transaction, then the buyer will not be able to recalculate the tax base downwards. After all, he will have such a right only if, after checking prices and paying the arrears by the seller, the buyer receives a notification from the tax authority to make symmetrical adjustments<20>.
But sellers' transactions on the simplified taxation system do not fall under price control, since such organizations do not pay either income tax or VAT, for which additional charges are possible during "price" checks<19>.
Conclusion
The statement that taxes will be recalculated based on market prices is only partly true. It all depends on whether the transaction is recognized as controlled. If so, then you will have to prove to the tax authorities that the transaction price is comparable to the market price. If not, then there is no need to worry about additional charges.
Concern 4. The cost of purchasing goods sold at a loss is not economically justified, and therefore they cannot be taken into account when calculating income tax
Every business organization, by definition, seeks to make a profit.<21>. However, one-time losing trades also fit into this concept, because the desire to systematically make a profit is fraught with risk and does not exclude a loss. In addition, by selling today at a low price, the company insures itself against increasing losses in the future, therefore, the management assesses the profitability of the transaction precisely at the current moment.
Note. In which cases transactions between related parties are not considered controlled, you can read in the article "On interdependence and controllability frankly": GK, 2013, N 21, p. 66
The Tax Code does not give tax authorities the right to assess how effectively they manage capital, and therefore the concept of "economic feasibility of expenses" must be considered through the focus of expenses on generating income<22>. And in the example with apples, the expenses for the purchase of goods were economically justified, because, firstly, they were not purchased for a charity event, but were going to be successfully sold at a profit. Another thing is that the circumstances have changed somewhat and now it is much more important to release the working capital frozen in an unsuccessful batch of apples. And secondly, they still received income, because there is some kind of revenue<23>. And no one is immune from losses.<24>.
You can do the following to confirm that your expenses are reasonable. First, the manager must issue an order to mark down the goods. Secondly, the markdown must be justified. For example, you can attach to the order the conclusion of a merchandiser or sales manager, that de apples of last year's harvest, it is impossible to store them for more than 1 month in the conditions of your warehouse, and in case of loss of the presentation, the write-off losses will be much higher, etc. In any case, the justification should indicate for what purpose and why you decided on a losing trade. All this will help you strengthen your position in the event of a dispute with the tax authorities.
Conclusion
Expenses will be economically justified if they were aimed at making a profit. The end result is not decisive.
Concern 5. If the goods are sold at a loss, then VAT cannot be deducted on them
The tax authorities are inclined to see in a loss-making transaction an unreasonable tax benefit, because the deduction on acquisition was greater than the sale of goods. And all because the reasonable economic goal of concluding a reduction in the amount of tax accrued in the case of a racket transaction is not at all obvious to the tax authority. And as we remember, its absence is one of the signs of receiving unreasonable tax benefits.<25>.
Therefore, just as to justify expenses, you need to stock up on arguments in your favor in advance. The same documents will do: the order of the head, the conclusion of commodity experts, financiers, etc.
In litigation, the case is decided in favor of the taxpayer if he provides the court with evidence of a reasonable economic goal that was pursued when concluding a loss-making transaction<26>. But if there was no such goal, and by all indications, the organization is a participant in the tax scheme, then do not expect mercy from the tax authorities. In addition to the non-obvious economic goal, controllers will also identify other signs of obtaining an unjustified tax benefit, for example, the inability to fulfill the contract. For example, an organization purchased a batch of goods, and it is not clear where it was stored for a whole month, since the organization does not own or lease storage facilities, and although the contract for safekeeping was concluded, it was not executed<27>.
Conclusion
A tax benefit in the form of a VAT deduction on goods sold at a loss can be justified if the entity proves that it pursued a reasonable economic goal in entering into a loss-making transaction, such as avoiding even greater losses from a complete write-off of the goods. But if the goods were sold only on paper and there were no real transactions, then the tax authorities will remove such deductions.
* * *
So, of all the fears considered, the most real is the removal of expenses and deductions. To prevent this from happening, prepare a cost justification in advance. And if you, God forbid, are a participant in the tax scheme, then only fake documents without real operations are unlikely to help you.
<1>paragraph 1 of Art. 424 of the Civil Code of the Russian Federation; paragraph 1 of Art. 4, art. 6 of the Law of 17.08.95 N 147-FZ; sub. 4 p. 2, p. 4 art. 8 of the Law of December 28, 2009 N 381-FZ
<2>Part 1 Art. 5, part 1, art. 7, paragraph 1, part 1, art. 10 of the Law of July 26, 2006 N 135-FZ
<3>paragraph 1 of Art. 274 Tax Code of the Russian Federation
<4>paragraph 2 of Art. 274, Art. 280 Tax Code of the Russian Federation
<5>paragraph 27 of Art. 270 Tax Code of the Russian Federation
<6>paragraph 1 of Art. 247, sub. 3 p. 1, p. 3 Art. 268 Tax Code of the Russian Federation
<7>paragraph 2 of Art. 268 of the Tax Code of the Russian Federation; Letter of the Ministry of Finance of September 18, 2009 N 03-03-06 / 1/590
<8>paragraph 1 of Art. 346.15, paragraph 1 of Art. 346.17, paragraph 1 of Art. 346.18 of the Tax Code of the Russian Federation
<9>paragraph 1 of Art. 346.15, sub. 23 paragraph 1 of Art. 346.16, para. 1, sub. 2 p. 2 art. 346.17 of the Tax Code of the Russian Federation; Letter of the Ministry of Finance of October 29, 2010 N 03-11-09 / 95
<10>paragraph 1 of Art. 105.3 of the Tax Code of the Russian Federation
<11>paragraph 1 of Art. 105.17, paragraph 1 of Art. 105.14 of the Tax Code of the Russian Federation
<12>paragraph 4 of Art. 89 Tax Code of the Russian Federation
<13>sub. 1 p. 2 art. 105.14 of the Tax Code of the Russian Federation
<14>paragraph 4 of Art. 105.3 of the Tax Code of the Russian Federation
<15>pp. 3, 6 art. 105.3 of the Tax Code of the Russian Federation
<16>sub. 1 p. 1, p. 3 Art. 105.7, paragraphs. 1, 7 art. 105.9 of the Tax Code of the Russian Federation
<17>paragraph 5 of Art. 105.3, sub. 4 p. 2 art. 45 Tax Code of the Russian Federation
<18>paragraph 1 of Art. 129.3 of the Tax Code of the Russian Federation; paragraph 9 of Art. 4 Law of July 18, 2011 N 227-FZ
<19>sub. 1, 4 p. 4 art. 105.3, paragraph 2 of Art. 346.11 of the Tax Code of the Russian Federation
<20>paragraph 1 of Art. 105.3, para. 1, 2 art. 105.18 of the Tax Code of the Russian Federation
<21>paragraph 1 of Art. 50 of the Civil Code of the Russian Federation
<22>Art. 252 of the Tax Code of the Russian Federation; Definitions of the COP dated 12/16/2008 N 1072-O-O (clause 2 of the motivational part), dated 06/04/2007 N 366-O-P (clause 3 of the motivational part), dated 06/04/2007 N 320-O-P (p .3 motivational part)
The contract of sale is a complex legal document, the parties in the process of its execution it is important to comply with applicable law, with particular care to approach the drafting of the main terms and conditions, dedicated, for example, to the introduction of a property.
How is the price of a contract for the sale of an apartment determined?
In the process of buying and selling a property, the main importance is determination of the cost of housing. The price of the property is essential term of the contract and must be spelled out in it, otherwise, the document will be considered not concluded at all, even if all other conditions of the written agreement are met (Article 555 of the Civil Code of the Russian Federation).
The price of the contract for the sale of an apartment can be defined:
- at the sole discretion of the seller;
- by mutual agreement of the parties;
- based on an independent assessment.
Independent evaluation real estate makes it possible to find out the market value of housing, this procedure should be carried out in a number of cases:
- When selling, if, for example, an apartment has several owners, and they disagree on its value.
- on property disputes.
- When applying for a mortgage, banks need documentary evidence of the price of housing.
- A loan or a loan from banking institutions, if the guarantee of the return of the loan is a real estate object.
When determining the cost of housing on your own or by contacting the services of specialized organizations, it is important that the price of an apartment does not exceed by several times the average market value of real estate of the same type, otherwise the sale will be extremely difficult.
Is the deposit included in the price of the property?
Deposit- this is the amount of money that the buyer transfers to the owner of the property or his representative, on account of settlements under the contract.
Target making a deposit - securing obligations under the transaction, that is, confirmation by the buyer of his intention to draw up a sale and purchase agreement.
The law does not provide for a single model for making a deposit, but there is a number of legal requirements to pass it correctly:
- The deposit agreement must be concluded in writing, regardless of the amount (Article 380 of the Civil Code of the Russian Federation).
- It is important to state that the transferred amount is precisely a deposit, and not, for example, an advance payment or an advance payment.
- The receipt by the seller of the amount of money must be confirmed by a written receipt issued to the buyer.
By making a deposit, the parties can confirm their commitments for the conclusion:
- Purchase and sale agreements.
- of the main contract on the terms provided for (Article 429 of the Civil Code of the Russian Federation).
Transferred amount of the deposit at the conclusion of the main contract for the sale of the property counted in the total cost of the apartment.
The law does not spell out the exact deposit amount, which must be paid when buying a home, usually it determined by agreement of the parties and is approximately 5-10% of the value of the property.
Change in the value of the apartment under the contract of sale
A receipt for the purchase of a dwelling at an underestimated or overpriced price
A receipt is a document that confirms the partial or complete fulfillment of an obligation under transfer of funds. This is a guarantee for the payer, establishing the payment under the contract.
If the parties decide to indicate in the agreement an overestimated or, conversely, an underestimated cost of a dwelling, the question arises of whether how much to write in the receipt. A controversial point arises, since it is unprofitable for the seller to indicate the real amount in the document, and it is important for the buyer to observe personal interests. In such a situation, the parties can go to the trick and issue two receipts:
- In the first real estate price matches with the one specified in the contract.
- The second document states the remaining amount of money, the purpose of which may be, for example, the design of a dwelling.
The receipt must be made in writing, by hand and by the compiler himself, contain the amount of payment for the purchase, the data of the housing itself, the date and place of the document.
It is important that the receipt indicates that the agreed amount transferred in full and the recipient of funds does not have any claims.
Accounting for the cadastral value when selling an apartment in 2017
This is the price of an apartment, which is calculated by independent appraisers, at the initiative of government agencies. The information received is entered into real estate cadastre.
The state conducts a cadastral valuation of housing, since this value taken into account for the following purposes:
- Taking out a loan to buy an apartment, in state banking institutions.
- Payments for transactions related to real estate (donation, purchase, sale).
- Calculation of payments for the inheritance of residential premises.
- Payment of property tax.
- Amounts of money when using an apartment on the terms of social employment.
The cadastral value of housing is calculated based on the following characteristics:
- Living area of the property.
- Location.
- Year of construction, type of housing (brick, panel, monolith).
- Infrastructure development of the region.
- Market value of similar properties.
The cadastral value of real estate is not constant, it is updated and can be changed by the state, for example, due to the general rising property prices.
Income tax and personal income tax deduction when selling an apartment
Based on the new rules for the sale of real estate from January 1, 2016, personal income tax (PIT) is calculated based on at the cadastral, and not the inventory cost of housing, which was previously used.
When calculating tax on income from the sale of real estate, it is necessary to proceed from following conditions:
- The personal income tax rate is 13%, and is calculated as a percentage of the value of the property sold.
- The cost of the apartment, determined in the contract of sale, cannot be less than 70% of the established cadastral value of this housing.
- When calculating the tax, it is possible to use a property deduction - the amount by which a person has the right to reduce the tax payment, but not more than 1 million rubles.
Citizen P purchased an apartment in 2014, in 2016 he decided to sell the property for 3 million 500 thousand rubles, the amount of tax that must be paid to the budget is calculated as:
(3,500,000 - 1,000,000) × 13% = 325 thousand rubles.
A property deduction is provided once in a lifetime, if a person has already used such a right, then personal income tax will be calculated as 3,500,000 × 13% = 455,000 thousand rubles.
After January 1, 2016, in order not to pay personal income tax, a citizen must own an apartment over five years, not three, as previously envisaged.
Sale of housing at a price below or above the cadastral value
The state cadastral valuation is carried out on the basis of the market value of the object and other information about the property (floor, area, location).
Main differences cadastral value from the market value are as follows:
- The cadastral value is required mainly for the calculation of tax payments.
- The cadastral valuation is carried out by a professional appraiser engaged by the state, based on statistical analysis and mathematical methods.
- The market price is usually determined by the owner himself or by an independent appraiser, based on the value of similar properties.
Analyzing market prices, experts set the cadastral value close to market. But due to the likelihood of errors, deviations in the market and cadastral value take place.
If the owner of the apartment does not agree with the cost of housing indicated in the cadastre, he has the right challenge in court this value.
How to find out the cadastral value of an apartment?
Everyone can find out the cadastral value willing. There are several ways to verify this information:
- On the official website of the tax service, when the person knows the cadastral number of the property.
- If the apartment number in the cadastral register is not known, you can clarify the necessary information on the website of the Federal Service for State Registration, Cadastre and Cartography (Rosreestr), where you will need to indicate the address of the apartment.
- Personal appeal to the department of Rosreestr or to the multifunctional center for the provision of state and municipal services (MFC).
A homeowner who already has a cadastral passport should know that its duration is not limited, but the information contained in the document may not be up to date, as the evaluation activity is repeated at least once every five years.
In order to update the information specified in the cadastral passport, a citizen has the right to order certificate(for this you should contact the local offices of Rosreestr or the MFC).
If the owner has carried out a legal redevelopment apartments, then information about the changes should be reported to the territorial body of Rosreestr, and then received new cadastral passport.
Conclusion
The process of buying and selling a home involves a lot of problematic aspects:
- execution of the contract;
- determination of the price of the property;
- making a deposit;
- establishment of the cadastral value of the apartment;
- calculation of tax contributions payable.
It is not uncommon for parties to change the cost of housing for various reasons. Both the owner of the apartment and the future owner underestimate or, on the contrary, wish to overestimate the price of the property. Such actions can be regarded as fraudulent schemes and entail punishment, up to criminal liability. Therefore, when concluding a contract of sale, the parties should approach it with particular care. competent design complying with the requirements of the current legislation.
Question
The consequences of concluding a deal with an underestimation of the cost of housing
I want to buy an apartment, but the seller of the real estate option I like offers to indicate in the contract of sale a price that is less than the amount that I have to pay for the purchase. This is beneficial for the seller, since the amount of tax that he needs to pay after the sale of the property will be significantly lower, and after payment he will issue two receipts to me, one of which will indicate the amount under the contract, and the second will contain the balance of the payment I made for inseparable housing improvements. Can you tell me what are the consequences for me to conclude such a deal?
Answer
The scheme you indicated is illegal, liability for tax evasion is provided for in the criminal legislation of our country, the buyer can be recognized as an accomplice of the seller, and the issued receipts will confirm the tax violation. If, for any reason, the transaction is declared invalid by the court, then you risk not returning the amount indicated in the second receipt.From this article you will learn:
- Why is it profitable to sell expensive goods
- What you need to successfully sell expensive goods
- What are the requirements for the seller in the premium segment?
- What are the ways to sell expensive goods
- How to sell expensive goods to companies
- How to Use the Internet to Sell Expensive Products
Selling expensive products requires a special approach. This category does not apply to everyday goods and has a much lower consumer demand. The purchase of an expensive item is considered in advance by the buyer, he considers various options, weighs its necessity, and analyzes prices. You need to know and apply specific sales techniques so that the consumer chooses an expensive product in your company. This article will help you understand how to sell expensive items and how to convince the buyer to buy them for more than he intended.
Why is it so profitable to sell a small batch of a more expensive product than a large, but cheap one?
Many aspiring entrepreneurs believe that selling cheap things, as opposed to expensive and high-quality ones, can be done without much effort. It’s hard to disagree with this, because the bulk of buyers are attracted by the price tag. It is worth lowering prices a little, as purchasing power increases, and the product sells out quickly enough, regardless of its quality. On the other hand, the same low cost of the product does not allow to increase the profit margin. By entering into many transactions, having a sufficiently large turnover, you can sell many products and get too little profit, making the work difficult and unpromising. It is much more profitable to sell an expensive item.
In addition, the quality of a cheap thing leaves much to be desired. When purchasing it, the client does not think about it, but then claims, returns, dissatisfaction and negativity begin, which complicates the work of a businessman.
It is more promising and safer to sell products of the premium price segment.
To fully understand the whole essence of the issue, it is necessary to determine which products should be classified as expensive and how to sell them.
Establishing contact. How to achieve complete understanding with the client? Find out in the training program.
For the B2C sector, the following types of goods can be classified as expensive:
- executive or sports car;
- house or apartment;
- boat or yacht;
- private jet or helicopter;
- antiques or art;
- jewelry;
- elite clothing.
For the B2B sector, the following are expensive:
- high-tech equipment or machine;
- Production Line;
- car or ship;
- air transport;
- valuable type of raw material;
- real estate objects.
It is extremely difficult to immediately determine which product a potential client considers expensive and which is acceptable. To know how to sell an expensive item, the owner must have a clear understanding of price and quality. What factors should be considered when trading expensive goods or services?
Factors of attractiveness of the premium segment:
- relative independence from economic crises;
- stable sales channels, the presence of a permanent clientele with high loyalty;
- a high level of marginal profit, allowing you to invest in the development of the company.
How to sell expensive goods, given the success factors
The high price of the product makes it a deliberate purchase for most buyers, but there are those who are guided by the alpha motive, which manifested itself spontaneously. The desire for success, rewards and praise, the thirst for superiority, pride in owning a prestigious and status thing - these are the concepts that motivate a person to buy expensive items. Sell them more presentably.
How to find out the hidden needs of the client? Find out in the training program.
In this situation, a person assumes that the acquisition of exclusive things emphasizes his status, increases his success and gives him the opportunity to dominate. For these buyers, the high price is offset by the added emotional value. And store staff need to know how to sell them a higher value item.
The success of selling expensive products directly depends on the following factors:
Appearance: interior design and presentation design
There are no specific recipes for the environment that helps a high-end store to become successful. Each such boutique is focused on its target group, has its own positioning and occupies a certain sector. Its owner finishes it according to his vision, adding creativity and "zest". There are several aspects to consider when choosing a store design.
Modern trade has determined that a high price requires:
- the most comfortable conditions of purchase;
- the greatest interest and involvement of the acquirer;
- the largest number of alpha motif elements in the interior: colors, lacquered surfaces, inclusions of rare materials.
limited edition
One of the most important factors to consider is the uniqueness of the product. To successfully sell expensive products, remember that there should not be many identical models in the hall. According to one of the modern concepts of marketing impact, a large number of models of the same kind presented in the showroom reduces the perceived level of value of the items. If you recall ordinary low-price stores, then some models in their halls are duplicated up to 30 times.
A valuable product cannot be displayed in this way. It makes no difference what kind of item it is and whether it is presented in the premium area of \u200b\u200bthe salon or in a boutique completely focused on expensive things. The high price indicates that the model should be presented in limited quantities. The higher the cost, the fewer display cases. In order to successfully sell unique items, one model is enough, and the rest must be stored in a warehouse and provided to the buyer upon request.
Multisensory
Interest in the proposed product can be maintained not only visually, but also with the right aroma and music. It is better to entrust the choice of these positions to a professional, so that the melody, fragrance, and tactile sensations cause the buyer a clear desire to purchase something. To successfully sell, you should not overdo it, creating a comfortable environment, it is very easy to make a mistake in this matter. It is not necessary to focus only on your taste, it is better to get the advice of a specialist.
Communication
The store consultant must know the range perfectly and be able to talk about its advantages and uniqueness. The buyer must understand what he pays. Only competent actions of the seller can convince the client to purchase a more expensive product. Consumers are not always ready to communicate, sometimes it is easier for them to read the information. The high cost of the product requires a high-quality and detailed presentation. The client may be interested in all the nuances. Try to convey in the text the most complete information about an expensive item, present them in such a way that they interest a potential buyer.
Please note that small print is inconvenient to read and perceive, visitors will pass by it. For a successful sale, place the text in an accessible and pleasant way to read.
Origin
It is easier to sell an expensive product if it belongs to a well-known brand, then its appearance speaks for itself. For example, everyone knows the stationery from montblanc, dishes from Villeroy & Boch or suits from Hugoboss. The seller does not need much effort, as the brand already guarantees the quality and explains its cost.
It's all about the basic principles of selling expensive products. Try to remove the client's fears of being deceived, buying the wrong thing or overpaying. Create a comfortable environment that will only encourage the purchase of your product. Consider the location of the store. When all these conditions are met, then success will not be long in coming.
Which sellers to hire to sell expensive goods
The staff is very important for the successful sale of a product. The first person a buyer encounters is a consultant, then he looks around the interior of the store and only then pays attention to the cost of the product and its quality. Be sure that if all the client's ideas about the highest level of service are observed, there will be no objections to the cost. In a boutique, the price practically does not affect the decision to purchase.
Important, so that the sales assistant corresponds to the price segment of the assortment.
Appearance, features of communication, sociability and personal characteristics form the image of a person. The owner must evaluate and consider these qualities when recruiting, especially for the position of a sales assistant. Quite often, he does not know how to restrain his emotions, seeing a solid purchase of a client, the cost of which is several times higher than his monthly salary. His own feelings prevent him from understanding how to sell a more expensive product. An expression of sincere joy for a person is quite rare in such stores. Select the state, paying attention to these particular characteristics of the candidate. Look for someone who is devoid of envy, rarely compares himself to others, and is motivated only by his own achievements.
Important define the requirements for appearance and monitor their strict observance by all employees who communicate with customers.
The image of employees and their ability to interest the buyer is the visiting card of the salon. The buyer will always give preference to salons and boutiques in which the sales assistants:
- well-groomed face: clean, without acne, scratches, abrasions, etc.;
- well-groomed skin of the hands: neat, fairly short, no more than 5 mm, manicure, no burrs, pastel tone of varnish, no drawings. This is especially important if the seller shows the product on himself, for example, jewelry, watches, perfumes, etc.;
- clean hair and neat hairstyle;
- natural makeup;
- a trail of perfume, barely visible up close. Professional stylists recommend people of such professions to use light floral and citrus compositions;
- no smell from the mouth at any time of work;
- smart stylish shoes.
The store owner must monitor how his employees look and communicate. Negligence in clothing, hair, makeup or communication of a sales assistant can negatively affect the perception of both expensive goods and the boutique as a whole. With such staff, it will be difficult to sell presentable items.
When developing a system of bonuses for specialists there is no need to limit the upper bar of income. It is necessary to give the opportunity to the best sellers to earn more and both to sell expensive products and to purchase them. This will increase sales, because everyone knows the importance of personal experience, including expensive things.
It is also necessary to ensure that the level of the established salary for employees of the premium store and their total income are not lower than the average market. An attempt to save on employee income will result in an increase in the level of employee turnover. The best employees will leave immediately, increasing the competitiveness of rivals.
Reasoning for the price
The consultant should not hesitate to justify the price. It is necessary to communicate with the client in such a way as to interest him as much as possible and convince him to buy the product. If you start considering options with the most expensive product, then the buyer will compare all the following offers with the first one, and they will look more affordable. This will greatly reduce price objections and help the specialist understand how to sell the item for more than the competition.
When naming a price, it is not necessary to give arguments to justify it. A short pause is needed in order for the client to determine his attitude towards both the product and its price. The presentation of the store and the products should speak for themselves.
Communication with boutique clients should be as discreet and correct as possible. The consultant needs to carefully monitor his speech and avoid “wrong” expressions that prevent a quick purchase. Inappropriate tone, incorrect vocabulary, or behavior of a salesperson can cause a visitor to want to leave you and purchase expensive goods in another salon.
Phrases used when communicating with customers:
"Chips" that can be used for successful sale:
- never discount your first purchase. No behavior of a client who first came to you should prevent you from "holding" your price. Expensive items and services presented in the premium store may not be available to all people who enter. Discounts are possible only for regular customers, since any of them reduces your profit;
- use the price reduction system for larger purchases. Define it, for example, as the average of three checks;
- do not round up the value. Modern trading rules have confirmed that the buyer perceives 10500 worse than 10522. Rounded numbers do not inspire confidence. A much more honest price seems to be an even number with an unrounded value;
- salons selling expensive goods do not use price tags ending in 999. Widely advertised sales caused a negative attitude of buyers to such combinations of numbers;
- making a discount on expensive things, write it not as a percentage, but in a real amount;
- voicing the size of the concession in percentage, you should not use the generally accepted values, which are quite easy to calculate - 5%, 20%. Even discount options are considered the most effective way - 6%, 12%, when the buyer will not be able to quickly calculate and will agree to the proposed price.
Argumentation on the quality and properties of the product
It is quite difficult to sell expensive products. A competent consultant always knows how to sell an item more expensive than competitors. He understands that any hitch in the consultation can cause distrust of the client. The seller must be absolutely confident in the product, know all its advantages and be ready to answer all the questions that the buyer may have regarding the assortment presented in the store.
Key tips for staff, which will help you understand how to make sales more successful and achieve excellence in your work:
- determine how the buyer approaches the choice - rationally or emotionally;
- pay attention to his reaction: whether his interest increases, whether fears decrease, etc.;
- do not forget to ask a clarifying question, for example: “Do you agree with me?”, “Are you ready to pick up the product of interest?” etc.;
- use the "loss effect". Its meaning lies in the fact that the more time the client devoted to the item, held it in his hands, tried it on, tried it on, etc., the more difficult it is for him to refuse to buy;
- you should not mention other boutiques with a similar assortment in a conversation. To such a request of the buyer, it is enough to simply answer that you know the products of this store well, since you have been selling them for several years;
- no need to fuss in front of the client. Expensive products should be offered by a calm, confident and correct seller;
- do not fawn in front of the visitor. Turning to you, he should see a professional who can help in choosing. You should also not get close to the client and give recommendations on the purchase of a particular item. Get by with a common phrase like: "Most often they buy from us ...". This will relieve you of responsibility for the choice made by the customer;
- various persuasion tactics work well with customer objections;
- when talking, do not use degrees of comparison or evaluation. Do not use words such as “more expensive”, “cheaper”, etc. Replace them with more acceptable expressions for the buyer, “reasonable”, “optimal”, “realistic”, “today's price”, etc. This will convince him of the need to purchase expensive goods in your store.
To understand how to successfully sell expensive items, remember that when communicating with a potential buyer, Three simple persuasion strategies bring the best results:
- "Past Stories"– we apply if the client expresses distrust in the seller or product, doubting the high quality and the corresponding price. It is necessary to convince the buyer, arguing that if he once purchased a low-quality item, this does not indicate a complete further refusal, but the need to be more careful about the choice.
Example:
Customer: "Recently, I bought expensive boots that didn't last even one season, so I don't see the point in spending so much money on shoes because it doesn't guarantee quality."
Sales assistant: “Now I understand the reason for your doubts. However, do you still need good quality shoes?
Customer: "Yes, of course."
Sales assistant: “You need to pay more attention to the choice of shoes and trust stores with a good reputation. I want to offer you this option, try leather dressing”;
- "Future Stories"- apply if the buyer needs motivation for an expensive purchase. You have to be very convincing with the client.
Example:
Purchaser: “I don’t need to buy this TV model for 50,000 rubles if there are many similar and cheaper models!”.
Sales consultant: “Based on my experience in this store for five years, I am sure that this model is the best option. The number of functions and available features will keep it in leadership positions for a long time. And what at the moment looks like savings, will later turn out to be a loss. You will already be able to take advantage of many applications that offer entertainment. This brand is able to give you joy and comfort for many years.”
- The use of "winged" phrases and sayings reduces the resistance level of the client. To successfully sell expensive things, well-known sayings are well suited.
For example: “We are not so rich as to buy cheap things”, “Expensive and cute, cheap and rotten”, “What is a lot is cheap, and what is not enough is expensive”, etc.
The owner needs to ensure strict adherence to these sales technologies. This will make the boutique successful and help you understand how to sell a more expensive product.
10 Tips on How to Sell Expensive and Very Expensive Items
- Show the client the contrast.
To do this, compare your offer with the options of competing stores. Choose only those parameters where your product is guaranteed to look better. For example, focus on the quality of the product - yours will last a long time, a cheaper analogue is unlikely.
Emphasize that rivals in a similar category do not have such a valuable item.
- Provide really good service.
Such service implies a correct, competent and professional attitude towards customers. Demand from the staff a mandatory answer to the phone call after the first dial tone, preparation of information on any issue within 15 minutes, and if the solution of the problem takes time, then its exact indication. Train specialists to inform buyers about expensive products that may interest them and be useful in business.
Don't make promises if you're not sure you can keep them. Try to make fewer commitments, but fulfill them with more dedication. This is better than promising a lot and doing nothing.
You can offer the client a weekly control of the equipment by phone. Most likely, no one will use this service, but everyone will be pleased with your interest.
- Learn to call the price twice the price that was just in your head.
Try to work with full dedication with each acquirer. Even if it is immediately clear that you will not sell expensive goods to him, but at least consolidate your skills. Try to offer a product that costs twice as much as the one you originally wanted to show. Having decided that the option with a price of 300 thousand will be optimal, offer a model for 500 thousand. It doesn't really matter what the customer says. The most important thing is that you can make such an offer, even if it is meaningless.
Having worked out the technology of naming the price, you can easily further ensure that the buyer agrees to any price you name.
- Include personal relationships.
No one talks about friendship in the full sense of the word or about something more. Just by talking to a customer, a salesperson for a high-value store should appear as open as possible. Don't forget that you are working with people. Try to show your emotional involvement, interest in the client, listen to his questions, answer them and maintain a dialogue. That is what is worth it.
- Elimination of psychological barriers.
It happens that the customer seems to be already set up for an expensive purchase, but something prevents him from simply answering: “Yes, I take this thing.” The emergence of a certain psychological barrier prevents him from making a decision. What to do in such a situation?
The consultant will help the client overcome the barrier with just a few strong arguments.
A good argument would be the proposed possibility:
- acquire a new status;
- obtaining a profitable component;
- opening up new perspectives.
These are just sketches, there are many more options. Think and be sure to find your version of the solution.
- Maintaining courtesy.
You should not persistently persuade the client to purchase an expensive product. People who make expensive purchases know how to count their money. And no intrusive advertising, imploring request, impudent exhortation will have any result. A special approach is important here, the main criteria of which are restraint, professionalism, politeness, delicacy and correctness. And no extremes.
- Selling to multiple people.
Selling an expensive item to one client is difficult. But it is doubly difficult to offer a product to a group of people. For example, family, lovers, friends, etc.
Everything in our life is interconnected. The creation of a young family entails the purchase of an apartment, the appearance of children - a change of car. Meeting friends requires renting an apartment. And in such a situation, the sales assistant should interest and sell a valuable product immediately to a group of people. This requires certain skills. For example, the family decided to buy a yacht. What to talk about with a man? Of course, about the unique "working" indicators and speed. And with a woman? Undoubtedly, about comfort, about external and internal decoration, about space for children.
It is important that the consultant knows how to find his right approach to each person who plays a role in making a common decision.
- Marketing expertise.
The staff of a store that sells expensive goods can be represented in two ways. This may be just a person trading on a price list, or it may be a consultant helping a client solve his problems. The first option is cheap. The second is much more expensive. You should not offer the client only those expensive items that are beneficial to the salon. Try to help him solve his questions and at the same time offer products that are suitable for you. Mix expensive and working, European and reliable, and you will be able to achieve both your goal and the buyer.
- Be really helpful and helpful.
This combination does not imply the usual benefit of an expensive product leading to uninterrupted production or cost savings. We are talking about the need for our recommendations, advice and suggestions. A visitor can do without your store by purchasing a product in another salon or ordering a different service. The current competitiveness of the company directly depends on the ability of the staff to offer the client exactly what he would like to purchase.
- Communicate with direct beneficiaries.
Often in the companies you offer your products to, the decision is made by more than one person. The positive outcome of the sale depends on the head of the marketing department, and on the supplier, and on the commercial director of the company, and on the general director, and even on the accountant. Choose the most interested person who has the maximum emotional benefit from an expensive purchase.
Talk to someone who benefits from your offer, who, perhaps, it will save from dismissal. This person will be interested in helping you make the sale.
How to sell more?
I'm sure you've asked yourself this question. Perhaps not even once.
Often an entrepreneur loses a client because a competitor is cheaper. On the way to profitable cooperation there is a price. People don't like to pay more. Of course, you can save on some of the components of your product or service, but you will not be able to become a market leader if your product is of poor quality. If your offer differs slightly from that of a competitor, and the price is much higher, you will lose customers. It's unavoidable.
But if your price reflects the main differences of your offering, you can win big. Here are 5 tips to help you sell at a price that is higher than your competitors:
1. Ask the right questions about competitors
This is especially important if you are selling premium products. You need to know which of your competitors are considering your .
But questions like "What do you think of the store across the street?" won't get you the results you want. Instead ask:
- “Whose offer is as profitable as ours?”
This will force the client to think about "gains" and "losses". And you will understand what is important for a person. Regardless of the price. Remember, a potential customer won't buy from you if they "like" your competitor more. If the victory is on your side, the price fades into the background. If you win, you can set any price.
- “At what stage is your deal with Company X?”
It is important for you to understand that you are in the same conditions as a competitor. You can take a chance and change the client's decision at the last moment.
2. Find competitor weaknesses
Imagine that you have only 2 competitors. The first has low price and quality. Therefore, clients rarely go to him. The second one is very common. You want to help a potential client eliminate one of the options. Which?
Most will answer: "Second". Because more people go to him than to the first. But this is wrong. After all, the second competitor will help you show the quality of your offer.
If you help a customer get rid of a low-quality product or service in the first step, you won't have to go out of your way to lower your prices. Use the weaknesses of competitors to show your advantage.
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3. Get a purchase guarantee
In the process of discussing a purchase, a potential customer may ask for a discount. But you can justify the high in many ways: show the benefits, production costs, etc.
Therefore, before you give a discount, you must understand that you have won the fight in the head of a potential client. After you see that a person wants to buy from you, you can move on to discussing the price.
You may hear something like: "Your offer is very good, but the competitor's price is 25% lower." After such a phrase, most entrepreneurs are in a hurry to make a discount. But this is wrong. Ask how the person knows that the price of a competitor is this. After his answer, say: "Our offer cannot be cheaper, because this price really reflects its quality."
Make sure that the client understands that your offer is different in quality, so the price is different.
4. Remind people how an inexpensive offer created a negative experience for people.
If your client makes a decision based only on the price, you can definitely say that the choice will not be the best. Usually inexpensive goods and services are of poor quality.
Tell your customers how a decision based solely on a decision was a bad experience. Then, when the person asks for a discount, remind them that saving money ends up costing more.
5. Use a “trial” close
Customers often say they want a discount even before they are ready to buy something. As soon as a person tries to lower the price, try to close the deal. For example, a client says to you: "I like your offers, but I would like to talk about discounts." Your reaction: “We can negotiate a price. As soon as we come up with one that suits both of us, I will be happy to send your order. Most likely, the client will say that he is not ready to buy right now. You, in turn, will say that you will be ready to negotiate the price when the person wants to make the final choice. This is 100% guaranteed to you.
You can NOT sell expensive mediocre product. The reputation will quickly go down and you will simply lose customers. Your offer must be the best on the market. Oles Timofeev will tell you how to do it. Watch and implement:
Conclusion
By using these 5 tactics, you can help your customer justify higher purchase costs. In turn, your buyer will receive a high quality offer. You will stop losing customers, justifying it with the fact that your product is simply too expensive.
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