09 Sep SALES LESSON FROM A GARAGE DOOR REPAIRMAN
Recently, my electric garage door opener malfunctioned. I called Bob, a repairman I had used before, who diagnosed the problem over the telephone as a bad torsion spring.
When Bob arrived, he checked the door and confirmed that the torsion soil spring needed to be replaced.
Bob asked me how long I planned to live in my current house. Was I planning on selling the home soon? I told him we planned to stay in the house as long as my wife and I could live independently, which I hoped would be a very long time, hopefully, many years. That was a deliberate question that was part of Bob’s upsell plan. And I answered as Bob hoped I would.
Bob then offered me two alternatives:
- a spring that would last for approximately 10,0000 cycles. (Opening or closing the door is a cycle.) That should probably last 5 to 10 years. The cost was $150 plus $300 labor to install it, or $450.
- a spring that would last for 50,000 cycles. That should last more than 20 years. The cost for the spring was $200, only $50 more, plus $350 labor, or $550.
The higher-cost spring, designed to last five times longer, offered a sense of security and confidence in my investment. Who would not choose alternative #2?–only somebody who needed a quick fix before putting their house on the market; otherwise, it was much more prudent to spend the additional $100.
Although dissimilar, Bob’s sales strategy reminds me of the “decoy effect” used in pricing, notably by movie theatres selling popcorn. A puny little box of popcorn may cost $2.50. One can buy the small size for only 50 cents more, or $3.00. For only $3.50 more, a medium size box. But for only $.50 more, a much larger version, a jumbo, family-size tub of popcorn. Very few people buy the medium version, considered a decoy, a container available for a little less than the large.
The decoy effect is a pricing strategy that presents another option that can be chosen. The pricing is designed to encourage the buyer to select the more costly option, which is only a small increment in cost and seems to be a better value, so it is almost always chosen.
The profit margin on popcorn is as much as 1000%, so the theatres want buyers to choose the costliest option, the largest box.
But back to Bob, the garage door repairman. Was this a deliberate sales strategy by Bob, the garage door repairman? Yes, and it can also be applied to other upsell opportunities at your company. We can learn from Bob’s pricing strategy, his questions, and how he presented it. First, he asked how long I planned to live there. Then, he explained that for another $100, I would receive approximately five times the benefit.
How can this be applied to your company’s pricing strategy?
When designing upsell pricing strategies, increase the entry-level price so that the increment between that and the higher-price alternatives is as small as possible. That will often encourage the buyer always to choose the more costly alternative. Also, describing the estimated value or usage as a much higher multiple is wise. For example, for just an additional $100, I could ensure that I would never need to replace the garage door torsion spring in my remaining lifetime. So, I spent another $100 for an upgraded torsion spring. If someone chooses the lowest cost alternative, we can question whether this is a short-term fix and thus have them decide whether that is the wisest decision.