As a small business owner, I’ve always struggled with price sensitivity. When is the porridge too hot or too cold? Can the porridge be just right?
I’ve come to the realization that price sensitivity is a matter of mind psychology. Here are some lessons I learned from the merchant’s mind:
- Even the most aggressive, penny-pinching negotiator will succumb to your price point if you make him see the value in the service. Our own human psychology induces us to submit to desire. What is desire? Desire is a yearning for something to happen or a craving for something we want to obtain. Make the service become an object of his desire and price will not be an issue.
- Be wary of price increases as this might make you appear too greedy or too ambitious in your wealthy desires. Take the example of Netflix who initially offered customers low subscription costs for streaming videos. When Netflix bumped up their prices, many current subscribers were fumed by the increase and canceled the service as a means of protest. Consider this: if you are increasing prices, are you also increasing value? You must justify price increases if you want happy customers. Offer added bonuses if you increase the price to a service.
- I won’t be too hasty in dismissing the possibility of a price increase. Sometimes price increases are a result of market changes. Take for example gasoline prices, such price increase occurred nationwide and not just in one gas station. In this case, customers understand the price increase if competitors are also increasing their prices. The trick is to differentiate yourself from the competition. You might offer slightly higher prices than company X, but the experience or level of service far exceeds that of your competitor. There is value!
- As a marketing service agency, I often hear people say that you should charge customers more money if they seem to be a lucrative business. This is ludicrous! Don’t assume because a customer is a doctor, lawyer, or Wall Street broker that he will have more money to spend. Sure. This would be nice if we make an extra buck on the rich guy, but this can lead distrust between you and the customer. How would you feel if Macy’s overcharged you simply because you make 50K more than the guy behind you? Increase the price only if the scope of work increases — that’s it!