Valuable tips to convince even the most challenging customer that your product or service is worth more than a few euros saved. If you’ve also seen you turn down a deal with a customer because they didn’t think your prices fit, welcome to the club! It has happened to everyone for one reason or another, but it is a fact that for many customers, the price is, in most cases, the determining factor in the closure or failure of an agreement for the supply of goods or services. This is due to the different price sensitivity you may have compared to your customer, who, in turn, may perceive the price differently than other customers.
Suppose the price sensitivity threshold is too high. In that case, the customer will even prefer to neglect the quality of the product service in favor of perceived economic convenience, devaluing not only your work and your professionalism but those of the entire market sector in which you operate. By agreeing to lower your prices too much, you will harm yourself and your entire category. Better to avoid, right?The first step is to identify and analyze the customer’s level of price sensitivity.
Measure The Customer’s Price Sensitivity
Several economic theories can be used as a reference to understand the effects of price on sales and profits, and one of these is price elasticity. In practice, it answers the big question: It is a comprehensive concept, full of financial, commercial, and marketing terms and acronyms. It would be too complicated to address here, plus trying to adapt it to your specific case. However, good old Van Westendorp, a Dutch economist who in 1976 developed the Price Sensitivity Meter (PSM), a technique widely used by those who carry out market research precisely because of the simplicity of his approach, comes to our aid.
In short, it is a series of questions to ask a sample of consumers—an economic system within everyone’s reach that can offer exciting views. The secret, of course, is knowing how to ask the right questions, but Van Westendorp has already done the hard work, and the questions come down to a few standards.
- At what price do you consider the product so expensive that you don’t even consider buying it? (Too expensive)
- At what price do you consider the product so cheap that its quality may not be good enough? (Too cheap)
- At what price do you consider that the cost of the product begins to be excessive, so you do not give up entirely but start to doubt whether to buy it or not? (Expensive / Exclusive)
- At what price do you consider the product purchase an absolute bargain, an opportunity not to be missed? (Economical / Convenient)
By crossing the answers, you can obtain important information, always considering the different types of market segments and customer targets. For example, if you sell luxury products, you will need metrics other than those used for savings-focused products (and customers).
How To Reduce Price Sensitivity
Emphasize Value
When a customer doesn’t even ask, “How much does it cost me?” you did Bingo. You must be able to make the consumer perceive your product’s value, make him understand how much it can help him, overcome the bottleneck given by price sensitivity, and close the deal. Let’s assume that you are a web designer and that a potential customer asks you for a restyling of their site. Starting immediately with a request of € 3000 for one-off work and offering him € 500 / year for routine maintenance could make you close the door in your face after the first contact. Today, many customers would reply that it is possible to buy a WordPress theme for an average cost of € 50 and that many professionals offer lower prices.
So what? And then you have to make the potential customer understand essential things, such as the fact that you have already created dozens of successful business sites, that you are an SEO wizard, and that you will provide them with a site that is already perfectly optimized, that you are expert in user experience and that their customers once arrived on your site will gladly stay there for a long time and with consequent profit. Talk to him about your experiences, your ability to stimulate customers to call to action, and how you can best integrate various elements such as DEM, social media, and website to create the marketing funnel that best suits his needs. These are the values a customer is willing to spend a little more, paying not so much for a series of HTML and CSS codes but for your competence and professionalism.
Focus On Benefits And Not On Features
Nowadays, the competition clashes with features and functionality. If your product has 100, my product must have 101. It’s not a good way to think and can even be counterproductive. People want things that help them do more quickly and easily. To what extent your product/service can satisfy a need and solve a problem is the only metric that matters. You can also go to a team of video game developers and tell them that the testing suite you propose is the digital equivalent of a Swiss knife.
Still, you won’t have their attention until you get down to business and explain that it can help them cut down—200 hours of testing and debugging per month of their work. To do all this, you need to have a picture of the actual costs and benefits in mind to make the customer understand that the expense he is about to face is an investment that pays for itself over time. A good ROI margin is always a great incentive to buy, don’t be shy and flaunt it like there’s no tomorrow.
Build Your Brand
The strength of a brand often justifies its prices, and when your name is associated with the quality of products or services, you won’t have to work hard to get people to spend on the values and benefits you are offering. Do you take care of your customers? Are your products reliable and durable? Are your services efficient and timely? A brand must know how to answer all the customer’s questions before choosing where and how to spend their money. It is a question of shared perception. Nobody goes into an Apple Store to ask how long an iPhone lasts, just as nobody buys a Red Bull, wondering whether or not it’s a good energy drink.
Apple and Red Bull have made sure that everyone takes these values for granted because they immediately recognize them in the brand, selling millions and millions of products. Sure, you don’t build such a brand overnight, but anyone can make a name and reputation for which customers are better willing to open their wallets. In the Internet and social media age, it is much easier to build a brand using creativity and passion.
You can stimulate word of mouth through a blog, provide quality customer service and collect comments and reviews from satisfied customers. By listening to user feedback and adjusting accordingly, you can calibrate your offer daily and obtain more actual results than by covering the city with posters and advertising flyers. Consistency, professionalism, and authority are the foundations on which all the big brands that have managed to break down the barrier of price sensitivity are based.
Do Your Homework And Decline The Offer If You Have To Lower The Price Too!
Conversions are the only thing that matters, and to get them, you need to study at least a little and understand who and how much is interested in your offer. Researching a potential customer is not a particularly arduous task, but it can save you a lot of problems and unprofitable sales. Not only must he be motivated by necessity, but he must also be aware of the convenience of buying from you.
- What is your business?
- What are the issues it has to manage?
- Do your competitors care for their needs, and how do they do it?
When you talk to a prospective client, try to understand how he has managed things so far, the solutions available to date, and his expectations and objectives for the future. Try to figure out his actual budget before you go too far with bargaining. Find out if they will spend a little more to get added value. A prospect who is initially hesitant about accepting a price but is flexible when he realizes that it carries extra weight is a customer worth dealing with. Imagine that you want to sell a car at a price 10% higher than the budget that the customer had in mind.
You can try to convince him by pointing out that the price is justified by the safety offered to the passenger thanks to the side airbags, but if he is not convinced and continues to think that the car is not worth that 10% more, it will be difficult to conclude the deal. In this case, you can lower the price to close the sale, but is it worth it? A customer who does not understand the value of what you are selling will certainly not give you good publicity and may become even more convinced that you meant to cheat him. Some customers do not care about factors such as product quality, ease of use, or reliability in performance: what matters is being able to bring home what they need and spending as little as possible.
Not only do they belittle your product or service, but they are also the least loyal, ready to betray you with the first one who can offer a lower price. If you need to lower the price, reduce the scope of the offer by resizing the quote items that concern features, services, and options. Specifying, in any case, that if he wants to implement them later, they will have a less convenient cost than what you were proposing in your all-inclusive offer. The important thing is that the customer perceives that your price is simply correct, and not so high as to push him to look for a lower offer elsewhere immediately, and not so low as to make the quality of the products or services perceived as poor.
