Selling to The New Elite

Discover the Secret to Winning Over Your Wealthiest Prospects

Stephen KRAUS, Dr. Jim Taylor, Doug HARRISON, Chip BESIO

• Publisher: AMACOM
• Year: 2011
• Print ISBN: 9780814434772
• eBook ISBN: 9780814416549
• Topic: Business
• Subtopic: Business Skills
• Index: Business

In this practical and fascinating follow-up to their behind-the-scenes look at America's most powerful and influential class, authors Jim Taylor, Stephen Kraus, and Doug Harrison reveal insights and indispensable techniques to help salespeople and marketers hone in on wealthy customers, pique their interest, and earn their trust--and repeated business. The New Elite leveraged unprecedented research to reveal what motivates the wealthy class, how they think, where they shop, and how they really spend their money. Now, based on studies of elite companies such as Lexus, Chanel, Neiman Marcus, Four Seasons, Cartier, and Louis Vuitton, Selling to the New Elite explains what the truly rich want from brands, what they expect from the marketplace, and how their changing purchasing patterns could mean big business for you. Including eye-opening stories from mutually satisfying interactions between salespeople and affluent buyers, the book showcases the best practices that have led to hundreds of successful sales and incorporates exercises that allow you to apply the information in your own context. By helping readers win over the wealthiest customers, this one-of-a-kind guide offers the key to becoming rich yourself.

CHAPTER ONE

The Desire to Acquire

“We can do without any article of luxury we have never had;
but when once obtained, it is not in human nature to
surrender it voluntarily.”

—THOMAS CHANDLER HALIBURTON

CHIMPANZEES LIKE PEANUT BUTTER as much as they like frozen juice bars.

That may seem an odd place to begin a book about selling to the affluent. The equivalent preference for two disparate monkey snacks is seemingly far afield from the topic at hand. But in fact, this conclusion about equal primate desires for peanut butter and frozen juice, gleaned from several studies, is actually a useful starting point in understanding a variety of sophisticated human behaviors, including the purchase of luxury products. It turns out that some human behaviors are so deeply ingrained in what we might offhandedly think of as human nature that, in fact, they transcend humanity itself. And so it is with the desire to acquire.

As scientists tend to do, primatologist Dr. Sarah Brosnan at Georgia State University introduced an interesting twist to an otherwise well-understood situation. Instead of letting the chimpanzees choose their own snacks, she gave some chimps peanut butter, and then gave them the opportunity to trade their peanut butter for a frozen juice bar. Given the 50/50 preference mentioned, one might expect that half the chimps would make the trade. That is, some might characteristically prefer one over the other, or maybe it would depend on what they were “in the mood for” at the given moment; regardless, the equivalent preference for the two should be consistent. But it’s not. In fact, 80 percent chose to keep their peanut butter. The same was true for frozen fruit bars, if a little less dramatically. Handed an icy treat, about 60 percent of the chimps preferred to keep it—again, significantly different from the 50/50 split observed, once “ownership” is taken out of the equation.

It’s been called “the endowment effect”—the tendency to value something more when your ownership of it has been established. And as you can see, the phenomenon transcends human behavior; it would appear to be deeply engrained in the DNA of our primate cousins as well. Its impact on human behavior is profound yet subtle. And its effects are observable not just in the scientist’s laboratory, but in everyday behavior as well.

When it comes to rounding up participants for psychological research, college students are an even more popular source than chimpanzees. Besides an enthusiasm for free food, chimpanzees and college students share a tendency to display the endowment effect. In fact, replace tubes of peanut butter with chocolate bars, and replace frozen juice bars with coffee mugs, and the behavior of chimps and college students begins to look surprisingly similar (or, perhaps not that surprisingly, depending on how much time you’ve spent on a college campus). When given a choice of a coffee mug or a chocolate bar, college students express no strong preference for one over the other. But given a chocolate bar, well, good luck if you’re in the business of handing out mugs; the students will stick with their chocolate. The opposite is true as well: Given a coffee mug, they prefer to hold on to it, rather than trade it for a supposedly equally desired chocolate bar.

For a while, this element of human (and occasionally nonhuman) behavior seemed poised to upend several tenets of classical economic theory. Built on a “rational actor” model of human behavior, one aspect of economic theory posits that a person’s “willingness to pay” for a good should be equal to his or her “willingness to accept” compensation to be deprived of that same good. Debates in academic journals heated up. A flurry of studies dug into the issue in tremendous detail. Some questioned the robustness of the original findings. Others explored the boundaries of the phenomenon, delineating the precise circumstances under which it occurs. But in counterintuitive ways, even these studies seemed to reinforce how “primal” the endowment effect is. Among chimps, for example, the endowment effect occurs with food, but not with “abstract” objects such as rubber bones and knotted ropes. Primatologists believe this means that the power of ownership evolved to help aid survival itself. As Dr. Brosnan put it, “Giving up something that could help with survival or reproduction may have been so risky that it wasn’t worth doing even if there was the potential for something better.”¹

Other studies picked apart the fine distinctions between the endowment effect and related phenomena. But again, more often than not, in practical circumstances, these behavioral tendencies likely reinforced the power of the endowment effect, not lessened it. “Loss aversion,” for example, is the well-documented tendency to avoid losses more vigorously than seek out gains. That is, losing $5 (or $500,000) is more painful than gaining the same amount is pleasurable. One study reported that when salespeople raise the cost of insurance policies (a painful loss of money from the insured’s point of view), consumers are highly motivated to begin price shopping and look to change insurance providers. But when costs are lowered by the same amount (from the consumer’s point of view, a gain of money), the impact in terms of improved satisfaction or loyalty is much smaller.² Loss aversion may be subtly different from the endowment effect, but in most practical circumstances, the two will work together, making the desire to acquire and the proclivity to accumulate stronger and more prevalent.

Over time, the endowment effect—that curious power of ownership—came to be accepted as one of many “irrationalities” at odds with a perfectly rational representation of human choice (particularly if, as is often done in such discussions, the assumption of rationality is taken to straw-man extremes). The field of behavioral economics emerged as the scientific study of “anomalous” human consumptive behavior; economics broadened in its explanatory power rather than shrank.

While economists struggled to make sense of the seeming irrationality of human behavior, salespeople and marketers embraced it, and they have historically made understanding these quirks a central element of their professions. Consider that staple of infomercial selling—the free trial. Once you own something, you value it more. You get used to it. You embrace its strengths. You begin to look back on your decision to buy (or, more technically, to try with the potential for buying later) with pride in your smarts and resourcefulness. The thought of parting with it is sad and brings to mind all the potential circumstances and consequences of loss. In short, it’s loss avoidance and the endowment effect together, with probably a handful of related concepts thrown in (including the desire to avoid the hassles associated with returning products and the reluctance to break what feels like a binding social contract).

Consider the following business-meets-primatology thought experiment. A community of chimpanzees characterized by the free choice of snacks has two products (juice bars and peanut butter), each with 50 percent market share. Senior management at Chimps Ahoy Peanut Butter arm their sales force with free trial packages and a compelling sales pitch: “Just try our peanut butter, Mr. and Mrs. Chimp; if you want to keep it, you can pay me later. And if you decide you want to trade it for a frozen juice bar, just let me know, and I’d be happy to make that trade for you. But I think you’ll be really happy about your decision to stick with Chimps Ahoy.”

The bottom line is this: People like stuff. They buy stuff. They accumulate stuff. They don’t particularly like to get rid of stuff. It is deep in our DNA. It is so primal as to predate humanity itself.

THE ESSENCE OF SELLING: CHANNELING
VS. CREATING THE DESIRE TO ACQUIRE

There are, in our opinion, many myths about selling and salespeople, such as:

• A great salesperson can sell anything.

• The best salespeople make the best sales managers.

• Anyone can be turned into a great salesperson.

We’ll explore these and other myths in this book, but for now, we tackle one of the biggest: Salespeople get people to buy things they don’t want.

The desire to acquire is fundamental; the salesperson’s role is more about unleashing and channeling that preexisting desire than it is about forcing unwanted items on susceptible prospects. There are, of course, exceptions. Boiler rooms of high-pressure telephone salespeople hocking fraudulent investments do exist. (Speaking of which, anyone reading this book would likely find the movie Boiler Room an interesting look at the seedy hard-sell underbelly of the stock brokerage industry. Admittedly imperfect and dramatically flawed as a film—that is, a bit lame—it’s worth the viewing not only for its recognizable portrayal of a high-pressure sales environment but also for Ben Affleck’s hysterical turn as a low-rent version of Alec Baldwin’s coffee-is-for-closers sales guru from Glengarry Glen Ross.)

Like so many myths, this one has its origins in commonplace reality, as for generations most salespeople had to close the sale immediately. Peddlers and merchants have been around as long as society has existed, traveling from community to community, seeking to maximize their sales from each person and each town before moving on to the next. They were the traveling Wal-Marts of their day, albeit with smaller selections, and they sought one-shot “transactional” sales. They would be moving on soon, and so they were not focused on building long-term relationships. Their visits were anticipated, their goods were highly sought, and they were one of the biggest distribution channels of the time. But high-pressure tactics were not uncommon, satisfaction after the sale was often low, and the peddlers’ reputations suffered as a result. In 1800s America, their numbers boomed, particularly after the Civil War, as former soldiers and waves of new immigrants sought entry-level positions where they could be their own bosses.³ At the same time, the industrial revolution was increasing the supply of goods, and the return of a peacetime economy was spurring demand. For many, traveling merchant seemed the best path to the American Dream of the time, but the image suffered. These peddlers and merchants were often portrayed in popular culture as swindlers. Jokes were told about dishonest and ineffectual traveling salesmen. Given the frequency with which peddlers called upon farmers in the agrarian society of the day, the jokes often involved a traveling salesman and a farmer’s daughter. Admittedly, much of this negative word of mouth was spread by shopkeepers in general stores—direct competitors to the peddlers. Regardless, there seemed to be enough truth in the gossip to perpetuate the image. It’s a black eye that continues to endure today.

* * *

Salespeople have a decades-long history of being ranked at the bottom of “Whom do you trust?” survey questions, along with politicians and advertising executives. And as the peddler profession faded away, other sales professionals came to bear the brunt of the antisales sentiment. Perhaps auto dealers have had it worst, and again, there was some kernel of truth that perpetuated the negative stereotypes. After World War II, cars were in short supply; auto factories had been converted to munitions factories and other sources of support for the war effort. At the same time, demand for cars skyrocketed. Soldiers returned home and wartime rationing ended, encouraging consumption of all types. The American Dream evolved with a car soon becoming a central part of it. The emergence of suburbia necessitated the widespread adoption of cars. Soon a luxury was becoming a necessity, but one that retained its position as an emotion-laden aspirational purchase as well.

All of these factors combined in the emergence of a transaction-focused environment. High-pressure sales techniques came along as a result. The simplicity of sticker prices was replaced with complex negotiation; experience and knowledge ensured that the salesperson would have the upper hand. The auto industry developed a bad reputation that remains today, even after the emergence of fixed-price dealerships and an Internet world that has largely corrected the power and information imbalance that once characterized the salesperson-prospect relationship.

But at some level, even boiler rooms and the most nefarious stereotypical car salespersons aren’t creating the impulse to purchase; they are simply channeling the desire in their selfish direction via unethical ways. Boiler rooms are selling financial gain, competing against other investments; auto salespeople are trying to win a sale that might otherwise go to the dealership down the street. Particularly when we are talking about affluent individuals and luxury markets, it’s less about motivating the desire to purchase and more about winning market share by channeling consumption in the direction of you and your brand.

Again, there are exceptions, particularly when the Great Recession caused consumers both rich and poor to cut back significantly. For example, in 2009, a luxury auto dealership asked us to train its sales associates in dealing with a new phenomenon: prospects deciding to not purchase a car at all. As one salesperson explained it, “I’m losing fewer deals to other dealerships; instead, people are just buttoning their wallet and waiting.” But even under extreme circumstances, such as the average affluent person’s losing 30 to 40 percent of his or her portfolio at the deepest point of the recession, the decision to not purchase was less common than were value-seeking behaviors. Some put their loyalty to the dealership aside in their quest for a better deal. (Again, to quote one of the sales associates, “Customers who never shopped me before are shopping me now.”) Others opened their minds to trading down in quality. (“Nonluxury cars are entering my prospects’ consideration set in ways I haven’t seen before.”)

Even the decision to not purchase was, in actuality, a decision to not purchase right now. Before the recession, half of the affluent stated that they “tried to buy a new car every two to three years,” but as the recession wore on, that figure dropped to one-third of the affluent. Still, for most, that simply meant a four-year replacement cycle, not a decision to keep their current cars till they pass 100,000 miles.

THE DESIRE TO ACQUIRE . . .
SOMETHING NICE

The urge for acquisition is innate and fundamental. So is the urge to acquire something nice. Archeologists often point to the emergence of cave art and symbolic representation as the hallmarks of “fully modern” humans, but much of the earliest art and craftsmanship was in the form of more personal objects—objects that, we can only assume, held deep personal meaning for those who made them: small statues, talis-mans, jewelry, weaponry crafted with elegance and symbolism that transcended utilitarian need. The list goes on. Today, we might call it luxury, although that word is rife with connotations that may not apply. Acquisition of “luxury” is less about conspicuous consumption and more about owning something of beauty and meaning, of refinement and sophistication. As we shall see, acquisition of luxury means owning or experiencing something exceptional, something created with a true sense of passion and artistry, something that can provide a t...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Figures
• List of Tables
• Acknowledgments
• Introduction
• Chapter One: The Desire to Acquire
• Chapter Two: The Passion of the Salesperson
• Chapter Three: The Passion of the Prospect
• Chapter Four: The Passion of the Product
• Chapter Five: Theory Into Practice: Thirteen Expressions of Passion In Selling
• Chapter Six: From Passion to Execution
• Appendix: Our Methodologies for Studying the Affluent and Wealthy
• Notes
• Index
• About the Authors