Columnists

Squirrel Spotting: The Art and Science of Customer Budgets

ColumnistsMay 04, 2021

Squirrel Spotting: The Art and Science of Customer Budgets

Peter Smith says customer budgets are rarely a true indicator of what they are willing to, or likely will, spend.

Peter Smith is president of Memoire and Hearts On Fire. He is author of two books, “Hiring Squirrels,” and “Sell Something.” Connect with Smith on LinkedIn or at dublinsmith@yahoo.com.
In recent weeks, my colleague Krista and I conducted a series of 35 interviews with some of the best salespeople in top-performing jewelry stores. We were trying to understand the bridal landscape and whether the pandemic had wrought any noticeable changes. 

One of the questions we asked related to customers’ budgets. Specifically, we wanted to know how budgets came up in conversation and how often they were adhered to. 

In short, we learned budgets are usually arrived at organically—as opposed to a customer being asked specifically—and once established, were rarely, if ever, adhered to. 

As one salesperson said, “Once you get them emotionally engaged, price doesn’t matter.” 

When I asked another top salesperson how often she exceeded the customer’s budget, she replied, “Every single time.” 

If I didn’t already know these salespeople as top performers, I might have suspected a little self-congratulatory hyperbole afoot. 

However, there was no doubting their pedigrees, and even if they engaged in some subtle rounding of the sharp edges (I mean, surpassing the budget every single time!), the pattern of exceeding budget was consistent across virtually all interviewees. 

Naysayers might argue those salespeople are engaging in predatory practices, that they are cajoling and coercing their customers into spending more than they want to. Alas, the science suggests otherwise. 

 Related stories will be right here … 
Research shows customers not only want to spend more, but feel better when doing so, and, as if to put a cherry on top, perceive the quality to be better when they do spend more.

Whether it is offered or uncovered during the sales process, the budget is a function of a cognitive process; cool, calculated, and sober.

It lacks context beyond the most basic measures, and it is rarely indictive of what the customer is willing to spend, or likely will spend, unless they are underserved by a salesperson.

To a great extent, a customer’s budget expands commensurate with the level of their emotional engagement with the salesperson. It’s as if the customer is saying, “Here’s my budget, but feel free to inspire me.”

In “Handbook on the Psychology of Pricing,” Dr. Markus Husemann-Kopetzky wrote, “Higher prices induce consumers to perceive product quality as better during actual consumption.”

There have been numerous studies over the years, across myriad product categories, to support Husemann-Kopetzky’s hypothesis.

As one of the bridal interviewees suggested, “Customers want to be guided.”

The salesperson who uttered that beautifully uncomplicated, yet profound, opinion might have said, “Customers want to be guided by a competent salesperson, interested in delighting her customers, and inspiring them to higher ambition, and who recognizes the budget for what it is, arbitrary and devoid of context.”

Even the most jaded observers might concede the best salespeople have a way of working their way into the emotional fabric of their customer’s stories and, as such, succeed in influencing their buying behavior.

A Gallup study some years back concluded that emotionally engaged customers deliver a 23 percent premium over average customers. We see that reality play out consistently, thanks to top salespeople. 

In “Brainfluence: 100 Ways to Persuade and Convince Consumers With Neuromarketing,” Roger Dooley wrote: “On one hand, we know that the pain of paying kicks in when people perceive that a product is overpriced and makes people less likely to make a purchase.

“But now we have multiple studies showing that people enjoy a product more when they pay more for it.” 

The hypothesis naturally assumes that the product is, in fact, better quality, and that customers are not being asked to overpay for mediocre or subpar jewelry. 

A wonderful vehicle to help increase sales is utilizing a combination of two principles: the paradox of choice and the contrast or anchoring principle. 
The paradox of choice suggests we offer three options when it comes to presenting products. 

Anchoring works by having three distinct price points within those three options. 

One option should be at the stated budget, a second option should be twice the budget, and a third should be right between those two anchors. 

Customers select the second option more than 60 percent of the time. In its most simplistic form, that is a 50 percent premium over the budget. 

Accepting the customer’s budget as fact underserves the business and places unnecessary limitations on the customer’s ability and willingness to reach when they are moved to do so.

It also misses the underlying psychology of the joy customers experience when making an important purchase, the regret avoidance (not having to second guess the purchase) that comes with doing the right thing, and the added pleasure and enjoyment customers derive from buying exceptional quality. 

When the perfumer Ernest Beaux warned Coco Chanel the amount of jasmine he was including in what became Chanel No. 5 would make the fragrance fabulously expensive, the soon-to-be fragrance and fashion icon responded, “In that case, add even more.” 

I wonder how that worked out!

Peter Smithis president of Memoire and Hearts On Fire, and author of two books, “Hiring Squirrels,” and “Sell Something.”

The Latest

CrimeMay 18, 2021
Police Searching for 2 Suspects in Armed Robbery of GA Jewelry Store

A third suspect, who was shot during the robbery, has been arrested and charged.

CollectionsMay 18, 2021
New York Isn’t Over, According to the Yurmans

David Yurman’s latest collection is a tribute to a New York City landmark.

Events & AwardsMay 18, 2021
Registration Is Open for JA National Convention

The third annual Jewelers of America National Convention will be held virtually July 19-20.

Brought to you by
How to Engage and Sell to Millennials

Millennials were once feared in the diamond industry, but now this younger generation has become today’s largest diamond buying demographic.

IndependentsMay 17, 2021
Take a Peek Inside the New Zadok Jewelers Store

The Houston jeweler recently opened a 28,000-square-foot, two-level store.

Weekly QuizMay 14, 2021
This Week's Quiz
Test your knowledge of jewelry news from the week of May 10-14, 2021.
Take the Quiz
IndependentsMay 17, 2021
Bill Boyajian Has a New Book Coming Out

“Family Business Succession Planning” covers the dynamics of working in a multigenerational business and prepping for the next generation.

MajorsMay 17, 2021
Pandora’s Head of North America Steps Down

Sid Keswani has left the jewelry company to become president of lifestyle company Centric Brands.

Brought to you by
A New Golden Age

Gold has had its share of ups and downs over the last 5 decades. Here’s why the metal is having another big comeback.

TechnologyMay 17, 2021
JCK Launches Online B2B Jewelry Marketplace

“Jewelers Source by JCK” will help qualified buyers find new clients and conduct virtual meetings all year round.

×