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Understanding Market Thirds: Different Strokes for Different Folks

April 25, 2024
Understanding Market Thirds: Different Strokes for Different Folks

Today, I want to delve into the concept of “Market Thirds” and how understanding the different types of customers can significantly impact your sales strategy and bottom line.

In any market, there are essentially three distinct segments of customers: the value-based customers, the price-conscious customers, and the undecided ones. Finding success with each segment requires an understanding of their thought process and different approaches for each.

First up, we have the Value-based customers. They prioritize quality over price and are willing to pay a premium for products or services that meet their standards. They appreciate a thorough presentation, listen to your recommendations, and are generally pleasant to work with. Capturing the attention of value-based customers requires demonstrating the superior value and benefits of your offerings rather than focusing solely on price. They usually don’t blink at price and tend to purchase high-end brands because they’ve learned over time that quality costs more. These are the customers we all love dealing with! In the sales world, they are called slam dunks.

On the opposite end of the spectrum, we encounter price-conscious customers. These individuals are solely motivated by securing the cheapest deal possible and are less concerned about quality, reputation, or long-term value or any warranties you offer. Price customers often present challenges during the sales process, as they will constantly seek discounts or bargains without considering the overall value proposition. Price customers don’t care about anything except a cheap price.

All too often, I see service technicians and comfort advisors encountering such customers who are solely fixated on getting the lowest price. They interrupt again and again, demanding the price without allowing for a proper discussion or presentation.

Essentially, it’s important to recognize that these individuals are never going to be happy, no matter what you do. So, it’s not a reflection of your worth or your abilities. It’s crucial to remind ourselves that these customers almost never change, so why bother and risk projecting that experience on other good opportunities?

Despite being vastly different, both the value-based customer and the price-conscious consumer share one common trait—they will often ask for price discounts during presentations.

The value-based consumer, while savvy, may inquire about discounts but remains willing to purchase even without a price reduction. However, the price-conscious consumer, often seeking the cheapest option, is a different story. Granting them a discount (or a price match) only encourages further bargaining. Dropping prices hastily can backfire; while some value-based consumers may merely be exploring options, offering discounts prematurely sacrifices margins unnecessarily.

It’s essential to gauge the situation before conceding discounts, distinguishing between genuine interest and relentless bargain-hunting.

So be careful not to give away your price discounts too soon. Even if you have the ability to discount your price by 5 percent, 10 percent, or whatever it is, don’t be so fast. Wait and see if this is a value-based customer just testing the waters or a cheap customer who only cares about a bargain. Your business will likely struggle much more than it needs to if you are simply the lowest price in town.

So, we’ve covered the first two groups. Now, there’s a third group called the undecideds. And the undecideds are great customers because sometimes they go cheap but sometimes they go quality. They occupy a middle ground between the value-based and price-conscious segments. They are open to learning about the benefits of your products or services and can be influenced by factors such as education, reassurance, and perceived value. Converting undecided customers into value-based clients requires effective communication, tailored solutions, and a compelling value proposition that resonates with their needs and preferences.

So when you’re doing a presentation, when you’re giving them an education on a service call or a sales call, they’re listening because they’re trying to make a decision, whether they should go cheap or should they go for value. It just depends. It’s akin to individuals driving a Mercedes to Walmart; they’re willing to pay more for that little German sports car, but when it comes to tennis shoes or blue jeans, they’re not really worried about it, so they’ll go to Walmart to save a couple of bucks.

Yet, these customers are invaluable—they’re open-minded, receptive to education, and willing to explore the value proposition. And converting these undecided individuals to value-driven solutions becomes seamless once they comprehend the significance of quality in areas like energy and safety. They will listen to you. They will let you educate them. And by the way, it’s pretty easy to get some of those undecided people over to the value equation when they understand we’re talking about electricity and gas and things that explode…

So here’s your objective. Your objective is to identify the third of the people who are value-based customers and to make them happy, and convince half of the undecideds to come over to the value side of the equation. If you get the first third (the value segment) and you get half of the other third (the undecided), that’s half of the pie. You got 50% conversion, and you got the nice, juicy, fat, high-margin part of the apple pie. Not the nasty, no fruit filling all-crust side of the pie. That’s the wrong pie to go after. So, look for your value-based customers. Don’t worry about the cheap customer. You can’t make them happy.

So, as you navigate your sales journey, remember to prioritize value, educate your customer, and always strive to deliver exceptional results. When you do, your sales will follow.