5 Tactical Ways to Reveal Every Customer’s True Willingness to Pay
Pricing Pointers, Issue #66
Different people are willing to pay different prices for the same (or nearly the same) thing. The problem is figuring out how price sensitive a particular buyer really is.
One solution is to create offers that are available to all buyers, but not equally attractive to every buyer. You do this by creating different variants of your offers.
Premium buyers will willingly pay a premium to unlock your most exclusive, complete, or convenient options. Meanwhile, price-sensitive buyers will happily make trade-offs (such as opting for simpler versions, sacrificing convenience, or committing to larger purchases) to secure a lower price.
By choosing from the options presented, buyers reveal how price-sensitive they are.
Here are 5 ways you can do this.
1. Charge buyers progressively higher prices for progressively better versions of your product or service.
Create three versions of your product at different levels of quality: good, better, and best. “(Here, “quality” refers to features everyone agrees are better to have, not how well the product or service is made or delivered.) Price-sensitive buyers can save money by purchasing the “good” version, while quality-sensitive buyers will choose the “best” version. When buyers don’t know which version to purchase, the “better” version is a safe choice.
2. Offer a no-frills base product. Then, for an additional charge, offer optional products and services that enhance the base product.
Offer a base product with just the features and functions every buyer wants. This keeps the entry price low and accessible. Then, provide optional enhancements tailored to quality-sensitive buyers. Premium buyers will willingly purchase these add-ons to customize their results and experience. Price-sensitive buyers will happily stick to the base product to save money.
3. Offer the option to purchase product B only to buyers who purchase product A.
Give buyers who purchase product A the option to also purchase product B. This works when product B is more popular than product A, and product A doesn’t require the use of product B. The desire for product B will increase the demand for product A. This allows you to capture more of the true, premium value of Product B without triggering accusations of price-gouging. And since buyers can use product A on its own, price-sensitive buyers can save money by purchasing just product A.
4. Charge a lower price to people who make an effort of some kind to get the reduced price.
Require buyers to do something inconvenient, like spending extra time, to get a discount. Price-sensitive buyers are more willing to trade their time for a lower price. Therefore, they are more likely to make this extra effort, while other buyers will pay full price to avoid the inconvenience.
5. Offer a version of your product or service with a limited amount of usage for a lower price.
Offer a full-featured version that limits how much buyers can use it. The more intensely people use a product, the less price-sensitive they are. High-intensity users will soon pay for the unlimited version, while price-sensitive buyers can save money by purchasing the limited-use version.
Putting self-selection to work
We began with a fundamental challenge: uncovering your customers’ true willingness to pay without driving them away. You now have a toolbox of five tactics you can use as appropriate. By designing offers that require a small trade-off, you let customers reveal their own price sensitivity through their choices, turning pricing guesswork into a self-selecting system.