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October 11, 2015
Throughout my career, I’ve been fortunate enough to work with some really amazing people. I consider myself lucky to have found such an extensive assortment of talent and experience from which to learn. However, many of the skills I hold most dear came from those who didn’t have my best interests at heart. After more than fifteen years as both employee and entrepreneur, I can say with the utmost certainty that the demonstrative sincerity of many new customers is nothing more than a ruse meant to catch you off guard. They are the callous; the opportunists who seek out the energy of newly minted proprietors and con them into surrendering their value. Their deception is simple yet clever and, if you aren’t prepared, may cost you more than you think.
Like most entrepreneurs, new customers are the livelihood of your business. Therefore, it is only reasonable to assume that when promises are made that peak your interests, your beliefs are based on axiomatic considerations of their sincerity. Many times, you will come across true and honest people who are excited to be working with you and will do whatever they can to further your success. However, it’s also important to recognize the artificial candor of those who have no intention of living up so such blatant lies.
New Customer Lie #1: “I have tons of friends that need you product/service”
Scenario: A new customer calls on the phone and asks to speak with the owner. After several minutes of small talk and requirements gathering, where the customer congratulates you on your start-up, they ask you to drop your price because they cannot afford it. While you hesitantly stick to your guns and keep your price firm, the customer senses your indifference and states, “if you give me a better price, I’ll recommend you to all my friends and colleagues”. Focusing on the untold number of new customers this deal may generate, you agree to drop your price to one in which you either make no profit or, in some cases, lose money.
Unfortunately, the customer’s promise was a complete lie. They have no friends; they have no colleagues – none to which you would be recommended anyway. They accomplished the single goal they sought: get the best price possible and move on. It’s a very common lie told to new businesses because they know that new businesses are willing to take a chance.
As an entrepreneur, you’re excited and motivated at the prospect of obtaining new customers. So, when an unscrupulous character claims of delivering a treasure-trove, you’ll likely jump at the chance. Don’t fall for it; stay steadfast in your pricing. Only when the customer is willing to purchase your product in bulk should you consider lowering your price. Here’s an idea: ask them if they’d be willing to put their commitment to your success in writing. I’m guessing the next sound you’ll hear is a “click”.
New Customer Lie #2: “You will get so much exposure”
Scenario: While discussing an order with a new customer, and in continuation of their attempts to lower your price, they explain why working with them is essential to the growth of your business. A grandiose story follows in which you are informed of the thousands of prospects they will have use your product, who will then, in turn, place their own orders. You need only sacrifice your profits this one time and the world can be yours for the taking. Considering only the potential customer proliferation, you agree to a price that even your employees find to be unreasonable.
Before making a decision, ask yourself the following: Why do you deserve such a lucky break? How is it that of all the companies that do what you do, many of which are much larger and have a longer record of success, are you the one who is given this sensational opportunity? Afterwards, you should realize that, in fact, there is no great opportunity; at least not for you. The caller is merely using your desire for success to secure a one-time deal in which you assume all the liability without deriving any of the benefits. He may even be arrogant enough to ask you to hasten delivery at the already reduced price. Remember, this is your business; your lifeline. Your employees rely on your continued profit generation to keep the lights on and the doors open. Do not waiver on pricing, delivery timelines or any other safeguard that keeps your company in the black. Very rarely does a single deal make a business successful – I’m not saying it doesn’t happen, but it’s more akin to hitting the lottery than an everyday occurrence. Instead, realize that your success is likely attained through continued customer satisfaction and recurring orders at prices that create profits. The idea that you’ll catch the get-rich-quick phantom is the real apparition at play.
New Customer Lie #3: “If you give me a good price today, I will keep you busy for years”
Scenario: You’re on the phone with a new customer who continues to haggle for a better price. You seem inflexible but you’re willing to listen and work something out. As the caller feels the opportunity for a discounted purchase slip away – and possibly out of desperation – he declares in no uncertain terms that if you do this deal for him now, he will make up the difference next time and be a loyal customer for years to come. Anxious to build a solid customer base, you agree and close the deal at a reduced price.
This may seem like a good opportunity for your business, but chances are they will never purchase from you again. We are creatures of habit; we like consistency, routine and certainty. When you purchase your morning cup of coffee, you already know – and are already comfortable – with the anticipated cost. In fact, if the price were to suddenly rise, you may feel a bit of apprehension before returning the next day. When you allowed your new customer to purchase your product at a reduced rate, you inevitably created an expectation that you may never be able to match again. Though they expressed assurances to pay your normal rate on their next order, it is more likely that they will expect to get the same discounted rate on all future orders.
Think of it this way: to you, this is an important order and could mean a great deal of future business. However, to them this is likely just another purchase from another vendor. By the time the product is delivered, they already forgot your name, the conversation you had and certainly forgot about the promises made to buy again. The next time they want to order from you, they will look at the receipt you gave them – with the discounted price – and demand the same, or threaten to go elsewhere. Either way, they won’t be doing your business any favors.
New Customer Lie #4: “I’m not making any money off of this”
Scenario: A new customer calls and, after several rounds of negotiations, continues attempts to beat down your price. You are a smart business person and know that your product is your lifeline; to sell it at a reduced cost simply doesn’t make sense. The caller, however, is assertive and refuses to back down. Finally, he rationalizes reducing your price by claiming that your normal rate leaves no room for him to make a profit. Feeling sorry for him, you decided that a small discount now may reciprocate into a long-standing business relationship.
There are two questions you should contemplate in this situation. First, ask yourself what kind of business calls you, demands your product, but then claims they can’t make a profit at the price quoted? Why do they want to buy from you if they can’t make a profit? Their unreasonable expectation would essentially sacrifice your profits for theirs. Anyone can stay in business if they buy low and sell high, but why should it have to be at your expense?
Secondly, think to yourself, “so what”? Why do you care if they can’t make a profit? You’re running your business successfully without relying on charity from vendors; suggest that they start doing the same. If their success is reliant upon the forfeiture of others, then you have no need to do business with them. Two businesses working together are supposed to make each other grow. If they aren’t helping you hire new employees or expand your operations, you have no need for them as your customer.
Remember that your product is the essence of your business. Whether it’s a tangible item or a provided service, your product has a specific value which should never be compromised without absolute guarantees. Do not waiver on your price with unknown prospects. Instead, save the discounts for the repeat customers who have already demonstrated a continued interest in your success.
DISCLAIMER: The information provided in this post should not be construed as legal advice. It is provided for research purposes to give you basic information on the content contained herein. This post does not create an attorney-client relationship nor should it be used as authoritative. If you have questions regarding the conclusions reached in this post, please call our offices or contact your legal counsel.