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Perceived Vs Actual Value

One of our members recently asked us a very interesting question. In her club, she is having a challenge selling into her VIP room because her club recently imposed a new rule making it increasingly difficult for the dancers in her club to sell into. As with most VIP room sales, the typical rates are $100.00 for three songs or a flat rate for a period of time…say $250 for a ½ hour, $500 for an hour, etc. The issue with the club in question is that the club is now riding on the coat tails of the dancer’s success. They are imposing a two-drink minimum order for each $100.00 visit to the VIP room. Each drink in her club is $6.50, but it gets worse.

The club, expecting the customer now has more money to spend as he is willing to go to the more expensive VIP room, is doubling the price of each drink to $13.00 a piece. This brings the grand total of her VIP room sale to a whopping $126.00 for three dances. I’ve been doing sales training for many years and have worked in just about every aspect of product promotion and marketing system imaginable. One of the things that always amazes me is how some gentlemen’s clubs make their decisions. More specifically, how some club management makes their decisions. It is obvious in this scenario that whoever made this policy has never for a day in their life worked in the sales trenches.
There are many reasons why this particular policy is a poor one. For starters, the dollar amount is a very odd one. $126.00 for anything is an odd dollar amount. It’s a very unnatural sounding figure. The main reason this policy is a bad one though is because the total price is set too high. More specifically the value of the service is disproportionate to the price set on it. The first question that will be spinning in a customer’s head is, “Why would I pay over twice as much for lap dances in the VIP room as opposed to having them where I am right now?”

This is a difficult obstacle for a sales-person…(errr…dancer) to overcome. The fact that the customer is having two drinks for this trip to the VIP room ultimately will be forgotten quickly when he hears the price. So how can this be overcome?

The answer is actually quite simple. The key here is to change the actual value into a different perceived value. Perception of how an item fits into your customer’s life is often the key component as to why they want to buy it. Nobody truly needs to own a Rolls Royce instead of a Lexus. Both cars are beautiful cars, both are quite luxurious and drive well, and quite frankly the Lexus costing a fraction of the price of the Rolls is probably built mechanically better. However, the perception of the two cars is substantially different. The perceived value of the Rolls could be extra-added luxury, status of wealth, etc. So the solution to our VIP room puzzle lies in this concept.

The issue here is that the actual value is difficult for a customer to comprehend and agree with that is in his best interest to buy. The price is higher than most VIP room trips in other clubs, the dollar amount is very strange, and he may or may not want to have two drinks. Furthermore, many customers don’t like to have things rammed down their throat, and so the drink issue can be more of a negative than a positive. The actual value of a product will never change. There is a certain set of products or services that are exchanged for a set dollar amount. Again, this never changes. The strategy we need to use is to work with the perceived value.

The perceived value is just like the example with the Rolls Royce. With a Rolls, you aren’t buying a car, you’re buying luxury. A big difference. So, to answer this question, we need to adjust the perceived value of the VIP room sale. The perceived value of this sale has to change into a positive one, and the way to do this is quite simple. Rather than say to your customer, “The VIP room is $100.00 for three songs, but there is a two drink minimum in there and they double the price of each drink to $13 so the total cost is $126.00 to go in there” there is a better way. A simple change in the perceived value of the item needs to change into something more reasonable. The best way to do this is to simply say, “It’s $125.00 to go into the VIP room, AND, you get two free drinks!”

See how the perception of the same item drastically changed? Now, instead of such a complicated sales pitch into a service that has a very poor and expensive price attached to it, we have a product that has a much higher perceived value. By saying the drinks are included in the price, or more specifically, are free, the perception of the whole product changed. Now you are probably asking, “but Adam, the price is actually $126.00″?” to which I say you are correct. When you sell this, sell it at $125.00 and not $126.00. The reason is that $125.00 is a much more manageable figure. As for the price difference, you need to absorb the dollar difference. Most likely your customer will give you the $1 bill anyway as a tip. If your customer made this as a charge to a credit card, simply return with the receipt and claim the club made a mistake and overcharged $1.00. Give him the difference in cash. Again, most likely he’ll just tell you to keep it.
Many clubs across the country have similar policies for their VIP or Champagne Room trips such as a minimum bottle of wine or champagne per visit etc. Use this same technique in those situations also. It’s not “$250 to go into the VIP room for a ½ hour plus a minimum bottle of wine for $50”, rather it’s “$300 for a ½ hour visit to the VIP room which included a free bottle of wine for you to enjoy.” The method of emphasizing a perceived versus actual value is a very powerful one and will, without a doubt increase your selling ability in your club!