How to sell high-ticket products and services
Date: January 13, 2016
Name: How to sell high-ticket products & services
Presenter: Dan Lok
Many entrepreneurs are struggling to reach their sales; in fact, most entrepreneurs do not realize how to use different price points as advantage to reach their sales goals. Vancouver Entrepreneurs Group invites Dan Lok, the multi-millionaire and serial entrepreneur, to discuss the mindset and strategies to provide excellent values to clients at a premium price. In this presentation, entrepreneurs will understand the theory behind selling high-priced products. Moreover, Dan Lok will help entrepreneurs to build confidence and attract the right clients for their businesses.
Dan Lok, the Founder of Vancouver Entrepreneurs Group, is one of the world’s leading experts in internet marketing. Many entrepreneurs refer him as Million Mentor. Recently, Dan Lok has successfully launched “Shoulders of Titans” podcast to entrepreneurs who are looking for ways to breakthrough their business limitations. Dan Lok also published many bestselling books, such as F.U. Money, to educate young leaders about the true entrepreneurial skills.
7 Reasons to sell high-priced products
Dan Lok believes the psychology behind selling products at different price point is the same. However, many entrepreneurs cannot see the connection behind that theory. Therefore, Lok shares the top 7 reasons why entrepreneurs should only sell high-priced products.
Reason #1: More profit and less hassle
The key to generate high profit comes from profit margins. In the business world, there are only a small percentage of companies that are able to sustain their business using low price positioning strategy. In fact, low price positioning leads to large customer infrastructure. Lok emphasizes competing on price is not sustainable competitive advantage. Competitors will purposely lower the price to grab market share and drive others out of business.
“Business is a game of margin, not volume”
The transaction size does matter in any business. Lok provides a chart that entrepreneurs can achieve same outcome by changing different price points and transaction sizes.
| $25 product x 40,000 customers = $1,000,000 |
| $50 product x 20,000 customers = $1,000,000 |
| $100 product x 10,000 customers = $1,000,000 |
| $1,000 product x 1,000 customers = $1,000,000 |
| $10,000 product x 100 customers = $1,000,000 |
Reason #2: Better customers
Different types of customers have different expectation. Comparing with customers who purchase Audi with customers who purchase Honda Civic, they both have different mindsets and they both focus on different things. Therefore, Lok believes it is important to value the expertise. The more money it costs, less complaints from customers. When entrepreneurs offer higher price, they will receive better customers.
Reason #3: Psychology of price
In business, Lok believes customers get what they pay for. Customers receive higher value when they purchase high price products. Price can be a shortcut to buying decisions and price can open the door for different customers.
In 2012, there was a wine tasting research done by Stanford University to test people their preference without knowing the real price. The research concluded that people preferred wine with higher price; in fact, the true price was significantly lower. Price can fool people’s brain unconscious chemical level.
Lok states customers enjoy paying for the things they value, and it seems more they pay, the more they enjoy. Therefore, entrepreneurs should not interfere they are receiving the simple pleasure of paying premium rate.
“You cannot get rich by looking poor”
Reason #4: Can deliver more value
High priced products contain massive value. Entrepreneurs must have the adding value mindset. When entrepreneurs are selling high priced products, they are creating extraordinary experience for the customers. When customers realize the value, they will appreciate and accept the price.
Reason #5: Some buyers only buy premium products
Different customers have different needs and wants. An example will be Nordstrom buyers and Walmart buyers. Lok believes some people want to immediately jump to the top of the heap. Unless they have something for them, they will never buy.
Reason #6: Create big pay days
When there is a big product launch from successful entrepreneurs, they usually are selling high priced products to a few people. They only need to target small quantity of customers, and they will achieve their goals.
Lok considers this as the customer-funded business model. It is important for entrepreneurs to know that the best people to fund their businesses are selling to their customers.
Reason #7: You own the marketplace
High priced products can help entrepreneurs to gain market share faster. Lok indicates there are three methods to expand marketplace. The first method is affiliate payout, which means to attract top affiliate’s attention. The third method is advertising or marketing spending, which means to spend the most resources to acquire the customers. The last method is hire best people, which means entrepreneurs can pay better to hire more productive and loyal employees.
Many entrepreneurs are slow at raising their prices. Entrepreneurs need to understand it is more about confidence self-image than the actual value delivered. Entrepreneurs must know that competitors do not set their price and they do not need to get competitors permission other than themselves. If they raise the price and no one is purchasing, it is the marketing issue because it requires more people in the sales funnel.
There are 4 types of clients. The first type is cheap, and they only buy products based on price. They usually very are demanding. The second type is difficult, and they are hard to work with. They usually ask irrelevant questions. The third type is sophisticate, and they know what they want. They will research in advance and ask many talent questions. The last type is affluent, and they will only buy based on their feelings.
The problem for most entrepreneurs is that they are selling to wrong type of people with wrong type of strategies. Lok believes successful entrepreneurs should target only at sophisticate and affluent, but not cheap and difficult.
The 5 biggest mistakes entrepreneurs make when selling high-priced products
In order for entrepreneurs to maximize the result of selling high-priced products, entrepreneurs need to ensure they are staying away these top 5 mistakes.
The first mistake is selling a premium offer at a low price. Lok mentions people are skeptical, and they usually will think the price is sounds too be true. The second mistake is selling a low-valued offer to a premium crowd. Premium buyers are based on feeling; therefore, they have stronger feeling towards high-priced over low-valued products. The third mistake is making a premium offer in a low-value setting. Environment is important and entrepreneurs should create the perception before the deal breaker.
“Close the deal at a high-end environment”
The forth mistake is making a premium offer to a low-valued crowd. Sometimes entrepreneurs need to know that it is not their problems and it is because the group of clients cannot afford it. The last mistake is making a premium offer with a low-valued mindset. There is a difference between scarcity and abundance. Furthermore, entrepreneurs should not project their values to their clients.
Lok believes when entrepreneurs are afraid to buy, they are afraid to sell. Lok suggests entrepreneurs to practice get comfortable asking in that environment. Body language can give it away, so practice as much as possible.
Entrepreneurs are recommended to read the Robb report. Average millionaires read Robb report. Entrepreneurs can read the Robb report to expand their comfort zone, change their concept of money and know what language they use. Hence, the secret to making a great income from business is to stop selling to poor people.
“Volume does not matter as much as profit margin”
All price resistance is in the mind of the business owner. Lok emphasizes price cutting is a self-inflicted wound. Nobody can lower the price for entrepreneurs themselves. Lok indicates entrepreneurs should not set their price based on market rate. To set price, entrepreneurs can based the price on the values that customers pay for. Price can change due to amount of pain customers feel. Return on Investment is also another factor to set price, and contrast pricing can be good strategy to lead customers to a desire price range.
“If you are charging the market rate, you are letting the customers to set your price”
There are other factors, such as payment terms and guarantees, which can affect pricing. In addition, customers might pay after certain outcome is reached. Therefore, people will afford what they want to afford. Entrepreneurs should stop discounting prices and start adding values.
There are 3 tiers entrepreneurs should be aware of. The first tier is DIY (Do it yourself), the second tier is DWT (Do it with them), and the third tier is DFY (Done for them). Entrepreneurs can charge higher price as they move up the tiers. Entrepreneurs should always aim for the third tier for high-priced products.
7 psychological triggers for high-priced products
Lok shares 7 psychological triggers that can use on business strategies to increase customers to buy high-priced products. Entrepreneurs should use these triggers in good ways; otherwise, they will backfire miserably.
- Scarcity
- Rarity / Collection
- Exclusivity
- Ego appeal
- Part of group
- Experience
- Takeaway selling
People can be motivated by the fear of lose instead of gain. When products are rare, people will value more. When products are market with premium standard, people will treat them premium as well. People are willing to wait when products are expensive. People want to belong to something, so when people are a part of the group, they feel proud. People will pay to be entertained and they will pay for premium experience. Lastly, people will want something if they know someone else has it.
Entrepreneurs should always ask these 3 questions:
- How can I increase the level of perception?
- How can I increase the level of service?
- How can I increase the level of experience?
Lok provides two strategies that can help entrepreneurs to improve their businesses. The first strategy is to figure out what is next. Entrepreneurs can create funnel to allow different choices for their premium clients. The second is the tier pricing strategy. By providing 3 different tiers, clients will pick the most optimal or appealing option.
“The quality of your business is directly related to the quality of your clients”
“Low prices attract disloyal, unfaithful clients, and those clients cannot build a business on it”
