Money

Don’t Believe Anyone Who Says “Cash is King”. Here’s Why

Ever heard of the term, “the customer is always right”? Or that “cash is king”? 

It’s a term used by people who may have a tendency to ‘overvalue’ customers or potential customers (especially in retail and sales industries). However, this is a dangerous mentality because there are times when you need to put your foot down firmly and say “no”, or you may end up sacrificing more than you should, especially in terms of profit margins.

The Problem With The “ANY SALE IS GOOD SALES” Mentality

There is a common misconception that you have to do everything in your power to make the sale.1

According to Forbes, “Some Customers Aren’t Worth It”.2 They discussed the unspoken, almost taboo topic that not all customers are equal – and how it’s often politically incorrect to admit this fact. A common trend occurring in customer-facing businesses is the ‘working practice’ of salespeople paying more attention to ‘bigger’ customers and spending less time building up relationships with their older, smaller customers. 

In this case, ‘bigger’ can be subjective. If you’re in the retail industry, this can mean customers with a high net worth… which means that they can spend more on your products, right? In theory, it sounds good. But in reality, they may not be your ideal customers (more on this later).

The key point is, by neglecting certain customers, it can give people the impression that your good service ends when the deal is sealed. While you may be closing more sales right now, you are actually sacrificing your reputation and future sales figures. Your sales might eventually take a plunge, since retaining your customers is a big, stable part of your revenue that you may not be aware of. By losing the stability of this portion of your revenue, you are looking at a potentially massive loss in income. 

The “any sale is good sales” mentality is dangerous especially if you are neglecting ‘smaller’ customers because you are too busy sealing the deal with many other customers, or choosing bigger customers over them. 

When your customers feel they are no longer important after the close, they may look for other alternatives to protect their interests. If a big number of your customers are thinking the same way, that’s when you may lose a huge chunk of your revenue. 

So – what should you do?

Should you focus on everyone, then? 

Most definitely not.

It’s about margin and fit – how much profit margin can you earn, plus how well a prospective customer ‘fits’ with you and your company.

Think Margin, Not Sales

The difference between a good salesperson and an exceptional one is how they think. 

A good or a regular salesperson is all about sales figures. For them, more is always better. However, the exceptional salesperson focuses on profit margin – less can be more. Let’s see how this works.

For example, Salesperson ‘A’ has 5 customers at a 50% margin. Salesperson ‘B’ has 25 customers at a 10% margin. They both make the same amount of money. 

Who is the better salesperson?

‘A’ only needs to focus on 5 customers, while ‘B’ has to work day and night to service 25 customers. For the same profit, the time and effort spent on fulfillment clearly put ‘A’ in the winning position.

‘A’ also has more time to spend on customer service, more ‘downtime’ for rest and recharging, and even has time to spend on closing more customers who can provide a higher margin!

Think of brands like Amazon, Starbucks, Apple. These are the most valuable brands in the world today and their fantastic customer service is a key ingredient to their success.

Take smartphones for example. There may be more people buying android phones but Apple doesn’t need to sell as many phones to earn the same revenue. 

Why is this so? 

It’s because Apple has a high sales margin. The time and effort saved can be used on developing better products or investing in programs that promote brand loyalty. 

So how do we improve on sales margin? It’s time to understand your target audience – so you can find your ideal customers.

Who Are Your Ideal customers?

Understanding your target audience will save you a lot of time and trouble when doing sales. 

Take Apple, for example. Their target audience is customers who are willing to spend more than the average price for electronics and are into the aesthetics and quality rather than cost-effectiveness and functionality.

It’s important to know if that a customer segment is passionate about your products and services. 

How do you identify customers who do not fit well with your work?

We call some customers ‘high maintenance’ because this particular group will be more critical about everything you say and do. They tend to be more sensitive to cost and will usually only spend if necessary

If this is not what you want to deal with, then run far away!

“If you know the enemy and know yourself, you need not fear the result of a hundred battles.” 

– Sun Tsu

To put Sun Tzu’s words into business context, it means to know your offers and what you can do really well. By knowing your product or service well, you’ve already won! 

Each customer will have their own pros and cons. You will have to decide if they are worth the time and effort to maintain, based on your sales margin and the ‘ideal fit’. 

With the right target audience, you can also increase your sales margin, because you have what your target audience wants – it gives you more leverage over what you can negotiate in terms of sales margin.

When Else Should You Say No To Customers?

If you’re already experiencing trouble with some customers who may not a good fit for your business, then maybe it’s time to cut your losses.

Here are two simple pointers that you can use to decide whether a customer should stay or if they should be shown the door.

  • When a request goes against company policy:

Ask yourself two vital questions before accepting any requests:3

  1. Does your company allow it?
  2. Can you give in to the same request for other customers?

It is important to remember that some customers may have the same circle of friends or acquaintances. If you say yes to one of them, can you say the same to all of them when they drop into your store en masse?

  • When the requests aren’t realistic:

When facing with unrealistic requests, sometimes it is vital to know when you should draw the line. 

Multiple refunds or ‘over-the-top’ requests, or going back and forth over an extended period of time can be endured a few times. But what if you continue to have issues with the same customer? 

Sometimes, the requests aren’t realistic, but you do them anyway. In the long run, this teaches the customer that you can meet any request, regardless of feasibility – which will cost you in terms of profit margin, effort, and precious time.

There’s plenty of fish in the sea, as there are customers. Sometimes you need to protect your business first. If you’re worried about your reputation, there are ways to reject them politely without looking bad, because there are ideal customers who need your help, too.

How Do You Say No Without Sounding Rude?

  • Ask for clarification

Communication with your customer is important. Often, ‘abnormal’ requests were made because of miscommunication. Before agreeing too quickly, check if you’ve understood exactly what the customer wants.

  • Provide alternatives

When you provide alternatives, you are showing them you care for them enough to find possible solutions to fix their problems… while protecting your bottom line from unreasonable requests.

  • Provide explanation

Help your customers understand that you have a reason for saying no to them. Make your explanation as neutral as you can.

  • Make them feel heard

Sometimes your customers may feel their opinions are not heard so they fighting just for the sake of being heard. Help them understand that their opinions are heard and you are saying no because there is a valid reason behind it.

  • Meet them halfway

Sometimes you have to meet them halfway to settle the argument. When you’ve tried everything else and your customer still isn’t happy, give in a little if you believe that this customer is worth keeping. 

While it is every salesperson’s dream to bring in the most sales, remember that cash is most definitely not king. There are times when you have to say no to your customers and there are ways to do so politely. 

A big part of successful sales is having a gameplan. If your business is failing, chances are, you’re struggling with cash flow. Something is wrong with your sales process and the way you’re training your team. Get clear on the “5 Steps to Train Your Sales Team in 5 Days”  and you’ll not only end up with some great ideas to run your business but some great ways to execute those ideas.

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