The 3 Types of Customers (Part 1 – The Value-Based Customer)March 30, 2023
In the sales world, we see all kinds of customers. There are ones who are “Just browsing,” those who just want to know the price before they even give their name, and dozens of other types. But in my experience, they usually fall into 3 types. The value-based customer is normally the favorite type to deal with, for ease of experience and the highest profit.
A couple of years ago, I was down in the southern part of Colorado with my friend Doug. We were riding back up from one of the prisons where I had spoken. I knew we needed to get back home soon because a winter storm was scheduled to blow in. As Doug and I were talking about the storm, my cell phone rang. It was my son.
He was scheduled to leave the next day for his first semester in college, away from home. He said, “Dad, we got this storm moving in, I need some snow tires on my car. “I replied, “Awesome, go to the tire store and call me when you get there.”
When he arrived at the tire store, he called me and then put me on the phone with the tire technician at the front counter. The guy said, “Sir, your son’s here, he needs some snow tires.” And I said, “Yep. First thing I want to know is very simple: Can you do it tonight? I don’t want him leaving your store, driving in a snowstorm without the tires.”
He said, “Sir, we’ve got 30 cars deep, but we’re going to be here until midnight if we have to, so everybody is serviced and out the door.” I said, “Great, that’s what I want to hear. So what are my tire options?” He said, “Well, we got your basic choices of good, better, best. We’ve got your cheap snow tires, we’ve got your mid-range snow tires, and we’ve got your high-end snow tires.
Now, at this point in my life I found myself being able to afford nicer things. But because I didn’t have many material possessions in my life during my first 40 years, although I worked very hard, I will now go out of my way to treat myself and my family to better things. So when I buy stuff now, I tend to buy higher quality, more expensive items, because they usually last longer and it feels like a good fit for who I am now. It’s true for cars, shoes, or whatever; I will buy quality. This mindset falls into the category of buyers called value-based buyers. We find that the higher quality product brings the most value overall at the end of the day.
So with my son’s safety in mind, I obviously go right to the high-end tire choice. I said, “Well, I want to get the high-end brand, how much are those?” He said, “They’re about $1,000 for the set.”
So while I’m driving the car, holding the phone to my ear, I reach back for my wallet, and I pull out my credit card. And just before I read the credit card numbers to the technician, my friend Doug who’s sitting next to me, motions for me to mute the phone. He then stares at me point-blank and said this: “Ask the guy for a discount.”
I said, “Man, I’m not worried about a discount right now. I’m trying to get some snow tires for my kid, you know?” He repeated, “Just ask him for a discount and see what he says.”
So I unmuted the phone, and instead of reading my credit card number, I think about Doug’s request. Without missing a beat, I said, “Dude, that sounds a little steep.”
That’s all I said. And then I just waited.
Without saying a word back to me, I hear the guy’s calculator going. He came back to the phone a moment later, and said, “How does $750 sound?”
He dropped the price $250 because I said, dude, that sounds a little steep.
Now, think about this for a second.
I figure on a set of snow tires, the tire store probably has about 500 bucks of margin. This guy gives me half of the gross margin on a set of snow tires in a snowstorm in the middle of winter, knowing he’s got the father of this kid on the phone. And fathers usually have more money than kids. The father doesn’t want the kid leaving without the tires, and this guy drops the price. It’s insane because all I said was, dude, that sounds a little steep.
If you are in too big a hurry to drop the price, you will lose out on so much business on all 3 types of customers, but especially the value-based customer.
What do you suppose would have happened if the tech said to me, “Well, sir, I can’t lower the price. It may sound expensive, but these are our best snow tires, and after all, a blizzard will be here in a few hours. I mean, if you want to come back next summer and talk to me about some snow tires, maybe we can work something out, but right now, tonight, I just can’t do it.”
What do you think I would have said to those words? That’s easy. I would’ve started reading my credit card number to him because he had me in a pinch and chose to hold his price right where it should be. He had all the leverage and bartering shouldn’t have been on his mind.
My point is this. I had the credit card in my hand. I was ready to pay full price. But his response saved me $250 and lost $250 for his business, when he didn’t need to.
You have to be very aware that customers who are in the value-based category will still buy from you even if you don’t drop the price. Why? Because the higher-end product is usually the best quality, and in the long run, we feel we will save the most money and hassle.
You may have already guessed the next type of customer — the cheap customer. We will talk soon about how it’s possible to hold price, even with the most frequent type of customer out there.