What Role Does Price Play?


This blog has previously discussed the importance of Will I? and Which one?, the two decisions our customers make before almost any purchase. If you want to know more try this post Will I? Which one?.

Recently, while working with a company on their pricing strategy, I asked, “Do your customer purchase just after the Will I? decision or do they consider other alternatives (i.e. Which one?)?” They replied, “85% of our business comes after only deciding Will I?.” Hearing this, I suggested their customers weren’t very price sensitive and they could probably get away with raising prices.

They agreed with me, but then one clever person in the room asked, “But won’t that effect how many each customer buys?” He’s absolutely right! Although Will I? and Which one? are the two most common decisions our customers make, regardless of industry or business, often price effects other decisions our customers make. When we understand all of these decisions, we can then determine or at least consider how price effects each one.

Here are several examples.

How many? It is very likely when we sell more than one of an item to a customer, the higher the price the fewer they will buy.

Where? When we sell through multiple resellers, they compete with each other. Differences in their prices may influence where people buy.

Which channel? If we sell through resellers, direct on the web, and with a direct salesforce, many customers make a conscious decision on which channel they want to buy through.

When? Sometime customers wait for sales or other events.

How frequent? Similar to how many.

Which products to consider? Customers use heuristics and simple rules to make sense of the world and narrow down their decision process.

Your takeaway is to brainstorm about all of the different decisions your customers make. Then ask yourself, or even your customers, “what role does price play in that decision?”


Photo by Vancouver Film School

Mark Stiving

Mark Stiving

Mark Stiving is chief pricing educator with Impact Pricing LLC. Connect with him on LinkedIn

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