Making more money for your business is always a high priority. More money means your business is growing. It allows you to hire more people, pay higher wages, offer better benefits and of course, increase profit margins. The challenge is finding new ways to increase revenue as well as your return on investment.
In today’s world many successful businesses are implementing a strategic sales approach known as “Top Down.”
Top Down Selling
To put this simplistically, in a top down world, a sales person begins at the highest price available and works down until they and the client are able to come to an agreed upon price for the goods or services offered.
Consumers see this approach in several different industries, most notably when purchasing a vehicle from an auto dealer. Auto dealers purchase vehicles at a low price known as wholesale or trade in value. The automobile then goes through a reconditioning process and is put on the lot at a premium price in order to maximize profit. However, the real magic happens during the sales process.
When a buyer goes to the dealership the first thing the sales person does is conduct a needs analysis. The biggest challenge is getting a customer the vehicle they want. This is a critical step in top down selling.
A consumer will always pay more money to get what they want and need, rather than what the dealer wants to sell.
Next, the vehicle selection process begins. The sales person generally starts with the vehicle that has all the bells and whistles included, knowing it is the highest price point. This sets the bar on the rest of the cars and prices the buyer will see. A consumer is more likely to use this price in comparing every other offer placed in front of them.
If the dealer were to go in with the standard make and offer the lowest price available, the consumer will be less likely to want to spend more for added features. Or even worse, they may want the price of the standard with all the extras included.
The final step is the negotiation process. The dealer starts with an elevated price. Typically there is some back and forth and the dealer has leverage based on what the customer said they wanted out of their vehicle. In the end the customer feels like they win because the dealer “discounted” the vehicle from the asking price. The Dealer also wins because they sold the vehicle above cost, usually for a healthy profit.
How can top down selling impact my sales team?
The same tactics can go a long way for a premier sales agency. At Infinity this allows our Account Executives (AEs) to be more strategic throughout the sales process and increase their level of ownership.
When an AE starts at the highest available price they set themselves up to have the room to negotiate should the buyer feel the price is too high. If the client does not object there is obviously now a higher profit margin than if the lowest available price was offered initially.
Having a floor price (the bottom line) allows the AE to know which product will make them the most money. They can use different product and pricing options to negotiate the sale, ensuring they maximize profit. Since AE’s work on commission, this allows them to be responsible for their own income and helps breed an environment of ownership.
Top 5 Tips to Maximizing Your Top Down Selling
There are five key tips to maximize the effectiveness of top down selling.
- Conduct a needs analysis. Customers pay more for want they want. This also allows the sales person to identify “hot buttons” to aid in the negotiation process.
- Always fully demo the product/service being offered. This is where value comes in to play. It’s not just about price. Buyers will pay more if they believe they are getting more value for their dollar.
- Provide the AE with floor pricing. This allows them to be flexible with pricing and negotiate on their terms, which encourages ownership of the deal.
- Go for “No.” Don’t be afraid for the customer to say no to a price. The goal is to get them to pay as much as possible. If they agree to the price right away there is a good chance that money was left on the table.
- Always get a commitment when dropping price. If the customer says they want to pay a certain amount use phrases like “If I can, will you?” This helps make the customer stick to the agreed upon price instead of trying to renegotiate after the fact.
When sales people have the ability to offer customers a higher price and negotiate down, businesses will see increased revenue, higher average order values, and will continually exceed monthly goals which will add extra coin to everyone’s pocket. All this while making customers feel as if they won by getting a better price.
Top down selling is a win for everyone involved.