The Car Wash Kid: A Lesson in Pricing Confidence
One summer, about 20 years ago, there was a knock on my door. A young lad, aged around 10 or 11, was standing on my doorstep with a hopeful look on his face.
“Hello, I’m The Car Wash Kid.” He didn’t actually introduce himself that way but I don’t remember his name. “I live at the end of the street and I was wondering if I could wash your car?” he pitched.
“Erm, yeah,” I said, thinking that my car didn’t actually need washing, but I admired his entrepreneurial spirit, “that’s great, saves me the job.”
I sorted out a bucket of hot water, shampoo, sponge and wash leather and left him to it. “Just knock on my door again when you’re finished.”
About 30 minutes later he said he was done so I went to inspect his work. He’d done a decent job so I took out a shiny new pound coin from my pocket and pressed it into his still soapy palm. “There you go The Car Wash Kid, that’s for you.”
He looked at the coin, then up to me, then back to the coin again.
“What’s wrong?” I asked, “were you expecting more than that?”
“Erm, yes. I’m saving up for a mountain bike,” he mumbled.
“Well, you didn’t tell me how much it was going to cost me before you did the job. Do you think your work is worth more than £1?” I asked. I had every intention of paying him more, I was just winding him up a little.
He suggested that his graft was worth a fiver. I didn’t think it was worth a fiver, as I could get a basic wash done at the car wash for £1.99 back then, but then again, the car wash wasn’t saving up for a mountain bike.
I took the pound coin back and replaced it with a five pound note, but I held on to one corner of it.
“Have you learnt anything about business today?”
“Yes,” replied The Car Wash Kid, “always tell them how much I want first.”
“Bingo!” I replied, Larry David style. “And I think the value of that lesson is worth at least a fiver, so I’m keeping this,” removing the note from his upturned hand.
As quick as anything he said, “Yeah, but you didn’t name your price beforehand!” grabbing the note back and sticking it straight in his pocket.
Schooled by a schoolboy!
Hopefully the Car Wash Kid learnt a lesson about pricing that day, and went on to own a chain of car washes!
Getting your pricing right in business can be difficult, as there are so many factors to consider. Manufacturers have to cost up their raw materials and consider the costs in putting their product together. Retailers have to buy stock and re-sell it at a margin big enough to cover all of their operating costs. Service companies have to understand the value of their knowledge and expertise and then determine what their time is worth.
Regardless of what you are selling, having belief in your product and confidence in your pricing is incredibly important. Understanding why you are charging £500 per day for your web design company is useful, so that you can justify the rate if questioned by a prospect.
But, more importantly, putting your price forward with confidence can be the difference from doing the deal or not.
I’ll explain further. There have been a number of occasions when someone has been pitching to me, face-to-face, across a table, giving me their best spiel. Sticking with a theme, let’s call the salesman Slick Steve. So, when I ask Slick Steve how much it’s going to cost me the conversation goes something like this:
“How much will it cost?” (classic delaying technique from Slick Steve). “Well, erm…” (not looking me in the eye). “It’s probably going to be about, um, £5000 which may sound expensive so I can probably give you a 10% discount,” (he’s now Sweaty Slick Steve). “So, is £4500 OK? It’s a great product because it does this, this and this.” Blah, blah, blah…
So how do I interpret that? Slick Steve doesn’t believe in his product? He thinks the cost is too high? Or he doesn’t think I am going to buy it anyway? Probably all of the above but, if I’ve already decided I like the product and it will be of benefit to my business, my thoughts are:
- His £5000 starting point is a piss-take because he’s offered a generous discount before I even asked for one, which means he has a huge margin to work with.
- He has the authority to offer discounts, without needing to get permission from Manager Melissa.
- He’s crumbling already so I can get this product at a much cheaper price than I was happy to pay!
A better approach for Slick Steve would have been to look me straight in the eye and say confidently “The price for this is £5000.” Then no more talking.
He has already sold me the benefits of the product (I don’t need to know all the features again) so all I need is the price. He gives me the cost with confidence so I know he believes that it is a good product, at a fair price. By staying silent he puts the ball in my court. I have to think on my feet, decide what my first response is, and what I am prepared to go to on price.
But instead, like a great white, I sense blood and focus on the fact that he has already offered me a discount. I reckon I can get at least another £500 off if I push hard, maybe even £750.
So let’s say we do the deal at £4000. I’m over the moon as I’ve bought a product that I was happy to pay £5000 for. Slick Steve walks away happy as he’s made a sale, until Manager Melissa realises that he’s sold a product for a tiny profit margin, instead of a healthy one.
Regardless of discounting though, always pitch your price with confidence then say no more. Like Travis Bickle in Taxi Driver, practise in front of the mirror if you need to. Look yourself in the eye and deliver your spiel. Don’t pull a gun on someone though, that’s really not necessary.
The caveat here (yeah, there’s always one) is that pushing suppliers down on price can be good in the short-term, but not always in the long-term. I like to know I’m getting a good deal, so will ask for a discount if I feel it’s the right thing to do. But, if I think someone has presented a fair price, that I can afford, I will just accept that price. The reason being that a supplier will begrudge delivering a service or product at such a low price if you negotiated a large discount.
If you want a healthy long-term relationship with a supplier, particularly a service provider such as an IT support company or a bookkeeper, you need to make sure the relationship is mutually beneficial. If all the supplier can think is ‘that fucker beat me down so hard on price I hardly have any profit on this contract at all,’ do you think they are going to provide excellent customer service?
So, I guess you’re wanting to know if I ever saw the Car Wash Kid again? Yes, I did, sooner than I expected. Only four days after my first car wash there was a familiar knock at my front door.
“Hello, I’m The Car Wash Kid. I live at the end of the street and I was wondering if I could wash your car?”
It turned out he’d only been charging everyone else in the street £3!
Footnote: For some sales inspiration check out these great films:
