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Do you shop at Costco? Of course you do. According to Statista, Costco has over 136 million members worldwide.1 So does your client. Years ago, I heard Costco has made the upper middle class comfortable with warehouse store shopping. Do you have clients who have difficulty making a decision? Aligning your approach to their Costco (or other shopping experiences) might create that “aha” moment.
My wife and I love fresh figs. They turn up at Costco, the quality is high and the price is good. Here is the catch. They are only available for a short window of time. If we see figs at Costco, we buy them immediately. They might not be there next week! If you are a wine fan and know about Costco’s Kirkland brand, you know some selections are only available for a short time.
What does this mean when talking with a client? Certain products are only available for a short window of time. Municipal bonds sold from your firm’s inventory are a good example. It might be the maturity, coupon and interest rate you want, but it may only be available for a short time. When they are gone, they are gone!
When shopping at Costco and other stores, you know about sale prices too. You get e-mails in advance. You might get a booklet in the mail or handed as you enter the store. The sign above might be highlighted in yellow. The pricing is attractive, but the sale doesn’t go on forever. If you want that product at this price, it needs to go into your shopping cart now.
What’s the financial services parallel? There is an old saying: “Wall Street is the only place where something goes on sale and people don’t buy.” You and your client have certain stocks you like. Your firm’s research is positive about the company. You are planning on holding this position for the long term. The stock market dips. The price is down. Same company, same management, same dividend, but the price is cheaper. If this were Costco and the product is on sale, wouldn’t you be buying now? In both cases, you could decide to wait a month, but the price will likely not be the same. You need to act when you get the opportunity.
We buy things we don’t need immediately. This happens at the grocery store too. Suppose coffee goes on sale. The cans are vacuum sealed. They will last a long time. You buy extra and store it away. One of the reasons you buy is because you respect the brand.
This logic can be used to make the case for total return stocks on dips in the market. Many of them are household names. They are comfortable and you feel they will be around for a long time. Like coffee in cans, they have a long shelf life. They also pay dividends. While you are waiting for something to happen (the stock to go up) you are paid for waiting. The same brand of coffee will be on the selves next week, but the sale will likely be over.
Let’s go back into Costco. If you glance in the fine jewelry showcase, you notice some price tags have an asterisk (*) in the top corner. My understanding is this means the store has only one of those items and it is the one on display If your client is a Costco enthusiast, they know a price ending is .97 ($9.97 for example) means the item is on final markdown. When it’s gone, it’s gone.
This also ties into financial services. Suppose your client likes the current CD rates. Now suppose the TV news announces the Federal Reserve is likely to lower interest rates when they meet next week. It is highly likely next week’s CD rates will be instantly lowered too. The product or the rate the client is seeing now will likely not be available in the near future.
Finally, an analogy for those clients who are collectors, antique hunters, auction attendees or simply like visiting flea markets. “The item you want will be available at the price you are prepared to pay, but only once.” This means if you see something you like and the price is good, you need to act immediately. Your client can likely tell you about the time they saw something, decided to walk away and think about it, then returned and found someone else had bought it.
You can create a sense of urgency if you find a shared experience and show the connection.
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(1) https://www.statista.com/statistics/718406/costco-number-memberships/