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“DON’T BE IN THE MIDDLE” – WHAT DOES THIS MEAN? FIND OUT IN THIS WEEK’S PODCAST!

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PODCAST TRANSCRIPT:

ian Robertson

Hey there ITB crowd. This is another solo podcast with basically more about raising prices, but this time with something to back it up from a different angle. And the reason I’m bringing this up is, interestingly, I was just going through, you know, I think it was Instagram or something, going through a feed, and there was this guy doing a TED Talk, and he had apparently worked with KFC years and years ago in a different country and they had this one product that they were trying to sell and instead of cutting the price like they wanted to do, he was a consultant, he said raise the price. And they said, well, no, we’re going to have too much product and all this stuff. And he said just raise it. See what happens. And according to him, they sold out the very next day by raising the prices.

So that got me thinking. I’m like I wonder if there’s more to this, because I’ve talked about it on the podcast, but I don’t have hard psychology or anything behind it. If you remember, probably a couple of seasons ago I mentioned a friend of mine who I just saw tried to get rid of a bunch of kittens, so he posted them on Craigslist or Facebook Marketplace for free, couldn’t get rid of any of them. A couple of weeks went by, so then he went on and listed them for $5 a piece. That weekend they were all gone. So I said to myself there has to be something behind it.

And I have not read this book so I don’t know if it’s good or it’s not. I don’t know the guy, but I found this book called Influence the Psychology of Persuasion. So basically the principle behind it is it talks about price as a trigger for quality. And what that guy for KFC said, what this guy in the book says, and what just my own empirical data shows, is that being in the middle is where we don’t want to be, because in most purchasing scenarios, whether it be for a service or whether it be for an actual product, being in the middle is where you actually lose sales. The lower end, people search for a bargain, and the higher end, people search for quality. Oftentimes we find ourselves as home inspectors, stuck in the middle. Right? Man, I can’t, I can’t, I’m not the cheapest, but I’m not the most expensive. I figured being in the middle was the best spot, but I’m not getting as much work as I want. What this guy in this book and others have said, since I’ve been following this trail, is that you don’t want to be in the middle, and we’ve said this a lot of times before. You want to work hard to be the most expensive guy in the area.

And here’s why. He gives the example of a jewelry store in Arizona. They sell turquoise there, and they couldn’t sell this particular lot of turquoise to these people that were coming in, a bunch of tourists. So the woman who owns the store went to go buy some turquoise the next day, she had to go travel somewhere, wherever they buy all this turquoise, and she wrote on her note everything in this display, she meant to say half off, but instead she accidentally made it look like it was increased by 50%. So her employees increased it by 50%. By the time she got back, it says here that she was shocked to discover that because the employees had read the half in her note message as two or I forget. Basically, they just increased the price. They doubled it. It looks like actually, the entire allotment had sold at twice the original price. So why did this box of kittens sell at $5 instead of getting that same kitten for free? Why did this turquoise get sold at twice the price rather than half the price. Why did KFC sell out of their product, whatever sandwich or whatever they were selling? Because they increased the price instead of decreasing it.

And it comes down to this. So this is what is said in this book Influence the Psychology of Persuasion. It says the customers, mostly well-to-do vacationers with little knowledge of turquoise, were using a standard principle, a stereotype, to guide their buying. Expensive equals good. Thus the vacationers who wanted “good jewelry”, in quotation marks, saw the turquoise pieces as decidedly more valuable and desirable when nothing about them was enhanced, but the price. Price alone had become a trigger feature for quality, and a dramatic increase in price alone had led to a dramatic increase in sales.

That is so simple and beautiful. It’s a very complex equation, and you could go down the rabbit hole like me, but I’ve said this for years. I didn’t know that there was this much information about it, but big corporations use this all the time. Have we ever bought the more expensive refrigerator? I did because I’m like, oh man, this must be the best refrigerator. And even when somebody said, oh, is that a good refrigerator? I said, well, I paid for it without even thinking, in a clear thought, I gave into that principle. I equated price with value. But there was no value added. In fact, the refrigerator, not even two years later, is breaking. But that’s a side point.

The point is big corporations, businesses everywhere, will increase the price of their product to gain perceived value. So where we don’t want to be is in the middle. So if you look at it on a chart, you’d see heavy color and heavy activity on the lower end of the budget price. But that’s not any way to run a business. Then you have to work on volume. We’ve talked about that before, and then you’ll see heavy color and activity on the other end of the spectrum with high priced items. In the middle is where everything tends to go away. As a matter of fact, the closer you get to the exact middle, that’s where we lose work. So we can look at our prices and let’s just stick to prices. We’re not talking about value at the moment.

If we were to do a market survey, and if we’re not doing this, we should, we should be looking at our competitors’ websites. If they display their prices, we should respectfully ask what their prices are. If you’re going to call and waste their time, be respectful of that. Let’s just be respectful of other business owners, how we go about that. But we should be doing a market survey, and if we find that a lot of guys charge 300, or we have a bunch of those 199 guys in the market, but then there’s a guy that charges 700 for an inspection, and we’re at 400. We’re in the no man’s land, and we might be sitting there wondering why. It’s because the bargain shoppers aren’t going to go for us, because we’re too high priced and the high value people that are looking for value in their inspections aren’t going to go for us because they’re like, why are they lower than everybody else? And we can add every service under the sun. We can say we bring a full x-ray machine and we shoot this thing with ultrasonic rays and we’ll bring in 50 inspectors. But if we’re at $400 and this guy’s at 700, the value buyer is going to go yeah, but look, there’s value. Price equals value in the average high-end buyer’s mind.

So the bargain shoppers are usually people that we don’t want, because those are going to be, unfortunately, oftentimes difficult clients, oftentimes difficult inspections, more time, and we have to make it up in volume. So if we’re charging $300, our overhead, whether we like it or not about a buck 25, $150, somewhere in that range, we’re going to work all day, three inspections a day, to make the value of less than one inspection if we had raised our prices. So I seem to be doing a lot of these solo podcasts to bring out this information. But if anybody’s read this book, I’d love to have you on the podcast. Again, it’s called Influence the Psychology of Persuasion. I’ve had Nick Gromicko on the podcast too, and he says, I don’t read books, and I don’t either. I like to grab the information that I need and put it all together. But just that one principle is really incredible. So if we’re in the middle right now or on the lower end, we’re in the wrong spot. We should work hard to be the most expensive guy in the market, because that’s not only going to get us more money. Likely it’s going to give us more work.

An inspector I was just talking to, to end this with, I’ve been saying this to him for years. He raised his prices recently and he messaged me, and he said, Ian, I’m busier than ever and people don’t notice the prices. What I want to tell him, and if you’re listening to the podcast and you know who you are, is people did notice the prices, and that likely is why you have more work, because now you’re on the higher end of that spectrum. So just another podcast talking about why raising our prices is a good thing, and it’s a good business model.

Here’s the thing, give this a try, because we can always lower our prices. Instead of running a special saying half off our inspection or free radon test with our inspection or something, for the next two months, raise our prices, raise it significantly. If we’re at $400, raise it 20%, 25% rather to $500. See where that gets us. See if we actually go down in work, and try it different times a year. We do A/B testing a lot, and one of the worst things we can do is do A/B testing in the bad time of year. So we, let’s say September, when it’s typically slow because that’s the beginning of school season. We’re like, oh, I raised my prices in September, and the work went down. It’s like, don’t do that in September, and compare that September to the September before that, instead of September to August, and August can be a busy month. So just when we’re doing our A/B testing, kind of take that into consideration. I think October is a great time and the first half of November to do an A/B test, because that’s going to be a relatively busy time of year for most of the US and Canada.

So there it is. I’m kicking that same door down again. Raising prices allows us to do a better inspection, better business, just have a better overall life experience and business experience, and according to real hard world data, gets us more work. We’ll have to tell people no because we’re getting so much work, because we’re the most expensive. Give it some thought, and listen in next time. Thank you very much.

Home Inspectors Marketing directly to consumers and not agents
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