These are stories that actually add to the value or attractiveness of the product. They literally make people willing to pay more money for it than they would without the story.
Here’s an example.
Andy Smith is senior vice president of an investment brokerage firm that serves the financial industry. That’s a bunch of fancy words that mean he sells bonds to banks. Listening to a bond broker talking to a banker can sound like a foreign language to an outsider: “Hey, I’ve got an agency bond, it’s got a five-year maturity, 2% coupon, and the price is one-eighth of a percent above par. Are you interested?”
Now, sometimes that’s enough information for the banker to make a decision to buy a bond. But even to a banker, there’s nothing sexy or unusually effective about that kind of a sales pitch. That’s why Andy prefers to sell what he calls “story bonds.” And as the name suggests, these are bonds with stories behind them that make them even more interesting to a banker.
He explains it this way: He says, “We sell a lot of mortgage-backed securities. Those are bonds made up of pools of hundreds or thousands of Fannie Mae or Freddie Mac home loans. Bankers know they’re pretty safe, liquid investments that pay principal and interest every month. I might have one to sell that’s made up of 30-year Fannie Mae 3.75% interest mortgages that pay a 3% coupon, and that’s about all I can say about it.”
But sometimes Andy gets a bond that consists entirely of what are called relocation mortgages. It might also be made up of 30-year Fannie Mae 3.75% mortgages with a 3% coupon. But he’d sell this one by telling the banker a story about his brother. Andy says the conversation typically goes like this:
My brother’s a couple of years older than me. He did a short stint in consulting, went to the Ivy League for his MBA, and then he took a job in corporate finance at a Fortune 50 company. Like a lot of those big global firms, they like their executives to have leadership experiences from all over the company. So they move their top performers to a new location every three years or so. He’s relocated five times already.
And every time they ship him off somewhere else, they hire a realtor to sell his house, move all his stuff, and they buy out his mortgage and pay it off when the house sells. Then three or four years later, they do it all over again. So his mortgages are typically getting paid back early. And even if they stop moving him, he’s getting promoted so quickly and his salary going up so fast that he’ll want to upgrade to a bigger house fairly often. So either way, that mortgage is likely to get paid off early.
So these relocation bonds are the same as all the other mortgage-backed bonds, except all the home loans are to people like my brother who are getting relocated for their job. So you expect them to pay off quicker and more reliably than the others.
And with that story, the appeal of what Andy’s selling has now just gone up significantly. Let’s look at how that worked. I’d argue two separate things are going on here.
One is that the story helped the banker come to the conclusion that these bonds are actually different from the other bonds in the same class. She can be more confident that these bonds won’t default because multibillion-dollar companies and wealthy executives typically don’t default on their mortgages.
Plus, if interest rates go up, she isn’t going to be stuck with this bond as long as she would the others because they generally get paid off sooner.
The other thing going on is this. The story allowed Andy to humanize the collateral that these bonds are based on. The banker can now picture a human being on the other end of that mortgage pool. That banker now has a story to reflect on every time she looks at her reports on that bond. Plus, now that banker now has a story she can tell the bank president, the board members, or her depositors when they ask how she’s investing their money. Having that story to tell other people helps her sleep better at night and feel better about her investment.
And for you, ask yourself, what’s unique or interesting about your product or service. Craft a story that illustrates that for your prospects, and that’s your “value-adding” story.
Alright, in the next lesson, we’ll move into stories to help you resolve objections that inevitably come up during a sales pitch.