How Your Customers Use Price
One of the earliest Pragmatic Pricing blogs was about "Will I? and Which one?" (If you're not familiar with this very important concept, please go read it here.) "Will I?" and "Which one?" are two questions your customers almost always answer before making a purchase, and price plays a different role for each of these questions. The key takeaway - customers aren't very price sensitive when making the "Will I?" decision but are very price sensitive when deciding "Which one?" But those aren't the only two decisions your customers make where price is considered. They are the two most common, but you want to think deeper. Another very common decision is "Where?" Where do they make their purchase? Do they always shop at their favorite store? Do they shop around for the best price? For example, when I'm getting my bicycle worked on, I always go to the same retail outlet. I trust the mechanic and don't want to look for another one. Yet, when I'm buying a new piece of electronics I usually read reviews on the Internet, decide "Which one?" and then find the place where I get the best deal and have it delivered to my house. Notice two different purchases, two different "Where?" decision processes, and most important two different perspectives on price. At the bike shop I'm not looking for a good price. Buying electronics, price influences my decision. There are many decisions like this. Another common one might be "When?" Should I wait? Is it an impulse purchase? Do I need to save? Now the tricky part. Your business is different from everyone else's. YOU have to think through all of the decisions YOUR customers make and then determine how price might influence them. To make it more complicated, your customers are different. Some act one way and some another. Now it's time to segment. Which customers do you really care about? How do they act? What decisions do they make? How does price effect those decisions? Nobody said this was easy. But if you really want to understand pricing for your business, you first need to understand all of the decisions your customers make and how price influences each decision. Yet it's not that hard. Start with one potential customer. Think through their entire process. Talk to them. Ask them how they got to your door? Do this enough and you'll have great visibility into the mind of your customer. Once you understand how your customer thinks, you can best decide how to use price to influence their entire purchase process. Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author Photo by cuellar Sign up for the Pricing Perspective to get a monthly recap of these blogs plus more insights on pricing.
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