How to Win Budget Buyers (Without Leaving Big Spender Money on the Table)
Pricing Pointers, Issue #59
To truly maximize sales and profits, you need to tailor your pricing strategy to the diverse needs and budgets of different buyers. One way you can do this is by selling a “no-frills” product or service with optional add-ons to hit every price point.
Think of add-ons as optional, supplementary products or services that enhance the results or experience of the primary purchase.
If you’ve ever bought a snack to enjoy at the cinema, you’ve purchased an add-on. If your business purchased an extended maintenance agreement to go with your new forklifts, you purchased an add-on.
Now, think about how you can flip that script and offer those same types of choices to your own customers.
Win Budget Buyers with a “No-Frills” Offer
A powerful way to increase sales to price-sensitive buyers without undermining overall profitability is to offer a “no-frills” product or service.
Lowering the price across the board to attract price-sensitive buyers can hurt your profits from buyers who were willing to pay more. The worst-case scenario is that your overall profit falls even as you sell more units.
Instead, your business can offer a basic product or service with just enough features and functionality to appeal to these price-sensitive customers. In other words, you include just the features and functionality every buyer expects — the absolute bare minimum.
This approach allows you to win new sales from buyers who prioritize price over performance. At the same time, you protect your profits from those willing to spend more for a better result or experience.
You can then enhance this “no-frills” product or service with supplementary products or services.
Use Add-ons to Customize and Boost Sales
You can significantly boost customer satisfaction, sales, and profit by offering optional products or services that will enhance your customers’ results or experience with your base product.
This transforms a “one-size-fits-all” commodity into a distinctive, customized product tailored to each buyer’s needs and budget.
Customers find the opportunity to enhance their purchase very tempting, especially if the prices of these add-ons are relatively low compared to their initial purchase.
You can apply this strategy across any sector — whether you sell products or services, and whether you sell to consumers or businesses — by giving your customers options that improve the results they get from their purchase.
Price Your Base Low and Extras High
For a no-frills product with optional add-ons strategy to be profitable, you should follow a few specific pricing guidelines.
First, your no-frills product should be priced low relative to its unit cost (rather than in absolute dollar terms). The more this entry price encourages additional purchases, the closer to your cost you can afford to set it.
Second, price your optional extras relatively high compared to their unit cost. This is where you recover the profits you sacrificed on your aggressively priced no-frills product.
Third, it’s a good idea to keep the prices of your optional extras relatively low compared to the price of the no-frills product.
While buyers are generally less price-sensitive to options than to the initial purchase, the total cost of optional purchases can become an issue if it adds up too much.
This balanced approach ensures you capture sales from every buyer segment while maintaining your overall profit margins.
From Take-it-or-Leave-it to Mix-and-Match
After reading this, I hope you’ll stop thinking you have to choose between a high price that scares away budget buyers, or a low price that leaves money on the table.
Instead, use a basic offer to get people through the door. Then, let them buy high-value extras to customize their results or experience.
Take a close look at one of your current offerings. What are the “nice-to-have” extras you’ve already packaged into your core offer? Could you peel those extras off and turn them into optional add-ons?
By lowering the price of your basic offer, you make it easy for budget buyers to say yes. And by charging separately for extras, you give big spenders a way to buy more.