Edmonton Lean Startup Circle

Offer payment plans When I used to sell the Quick Sprout Traffic System, some people felt it was a bit too expensive. They didn’t like the fact that I was charging $197 for an eBook, and video/audio training. Instead of reducing the price I tested out a few payment plan options: 3 payments of $97. 4 payments of $67. Although both pricing plans in total were more expensive than the original price of $197, the 3 payments plan option converted at 34% more than the original offering and the 4 payment plan option converted at 52% better than the original. With the 3 payment plan option I still got complaints about my prices being too high, but with the 4 payment plan option, I got almost no complaints. Plus I was able to charge more than the original price of $197.

Explain what you don’t charge for Just like any good business, you want to go above and beyond for your customers. Which is why you probably provide a few little extra things for your customers at no charge. When people start to complain about your price points, you should explain how you go the extra mile for your customers and all of the little things you do for free. You can even express this on your website by bundling all of that extra stuff you provide into a “free bonus” for anyone that purchases your product or service.

Explain why your price points are high If people understand why your prices are what they are, they’ll be more likely to pay them. Tell them your fix costs, explain what their money is being spent on, and even tell them your profit margins. People know you are in business to make money, but no one wants to feel like they are being screwed over. If your margins are reasonable and you explain your costs to potential customers, they shouldn’t have an issue. For example, Single Grain had an issue in which potential customers felt their prices were too expensive. Instead of reducing their prices they explained to the companies why they charge so much, then they broke down their costs and even shared their margins. By doing this they were able to sign on 33% more new customers.

Offer lower price points for less and then upsell Now this won’t work for all businesses, but you could lower your price by offering a limited version of your product or service. Plus if people are happy and looking for more, it creates upsell opportunities. I actually had this happen to me when I tried hiring a copywriter by the name of Michael Williams. I didn’t want to pay his fee of $12,000 so he sold me on a smaller package that only cost me $3000. Funny enough, after 2 months, I went back to him and paid an additional $9000 to receive the rest of his services as I had a huge ROI on my initial investment. At KISSmetrics, upsells make up almost 10% of our new monthly revenue. We’ve found that a lot of companies at first don’t want to pay for our higher plans, but within 3 months of using our product, they’ll upgrade to a higher end plan after seeing a positive ROI.

Focus on how you are better than the competition If people didn’t see the value in cars like BMW or Mercedes Benz, they would just buy something affordable like a KIA. The fact is a car like a BMW or Mercedes Benz not only has more features than a KIA, but also is better built. Consider creating a comparison chart that shows how you differ from the competition. This is done on the homepage of Crazy Egg. It provided a single digit increase in conversions, so not a huge boost but better than nothing at all. It also reduced support questions by almost half in regards to our prices versus our competitors’ prices.

Stress the drawbacks of a lower price point In many cases, lower prices will come with a drawback. If you can explain the drawbacks of the lower price you can persuade people to pay your premium prices. A good example of this is RackSpace. They are one of the largest hosting companies and possibly one of the most expensive. They charge a lot, but their uptime rate is phenomenal. If you ever speak with one of their sales representatives they’ll quickly explain they are expensive, but they rarely if ever go down. They’ll also explain that their competitors may be cheaper but tend to go down more often. Then finally they’ll close hard at the end by asking what it would cost you every minute your website is down. For this reason they have done extremely well with their high price points. The company is worth almost 9 billion dollars as of today.

Leverage perceptual price points There are a lot of little tricks you can do to make your price points seem like they are lower than they actually are. Walmart has actually mastered this. Instead of charging you $50 for something, they’ll charge you $49.97. That way you emotionally feel like you are getting a good deal. If you want to learn more about physiological pricing, you should check out this blog post on KISSmetrics. It has some great tactics with examples you can use and learn from. Even the smallest thing can have a huge impact on your sales. Such as removing the “$” sign from your price points, which can cause a boost in sales and reduce price objections.

The converse of this law is that if you are first-to-market, or just as well, first-to-marketing-channel, you can get strong clickthrough and conversion rates because of novelty and lack of competition.

"To this day," Bjork says, "most people think about forgetting as decay, that memories are like footprints in the sand that gradually fade away. But that has been disproved by a lot of research. The memory appears to be gone because you can't recall it, but we can prove that it's still there. For instance, you can still recognize a 'forgotten' item in a group. Yes, without continued use, things become inaccessible. But they are not gone."

Or take the neighborhood UPS Store in NJ that routinely ships custom fresh sandwiches across the country in time for lunch, with fees approaching $80 (for shipping alone; sandwiches are billed separately). Who ships a sandwich from a different time-zone? How are the sandwiches? While we never quite got to the bottom of that first question, we did (1) confirm that the sandwiches are excellent, and (2) get to observe the complex web of mutual accommodation — including custom packaging, billing, systems integration, and tracking — that had developed like a vast and ornate coral reef between the sandwich shop and the shipping store, giving new meaning to the word Logistics.

Or the exploration of evolving consumer attitudes toward all things Green that we filmed recently. Alongside the well-documented gap between people's green values and their actual behavior, we began to see a shadow-gap along gender lines — an apparent discomfort among men, even those who, by temperament, age, or social context, were best positioned to embrace green. And then it hit us, as we watched a young man in SF rifle diffidently through his cloth shopping bags: the iconic symbol of green — the canvas tote — is essentially a purse. How many men will want to advertise greenness if it means carrying a purse? In this respect, Green is in danger of becoming the new pink, and we owe it to the planet and to green brands everywhere to give the movement an equal opportunity badge.

I share these stories for two reasons. First, because you can't make this stuff up, thus demonstrating how much more fun it is to discover truths (sincerely) than to invent them (however cunningly). And second, because the trumpeting of all that's new and shiny in our business mustn't drown out the fundamentals guiding the best work in any medium: what we might call experience-near insights, gathered by market researchers in earnest pursuit of the truth about what people are feeling, experiencing, and creating out in the world today.

If we get that right, we've got the best — maybe the only — shot at developing communications that will actually matter to client brands and the people who love them.