Know-How Exchange : Customer Behavior

Dear Info,

It's not the amount you charge that matters, it's the value your customers receive FOR the amount they're paying. It's what people do with the content, or what it permits them to feel that's the bigger issue. The perceived difference between your two prices is too small to make a significant difference in terms of a continuity program (in US$ the amounts are $26 and $29 and change per month respectively).

Now, imagine the difference between your £15.95 or £17.95 per month site and an established marketer's £49.95 per month site.
Or their £99.99 per month site. Or even their £149.99 per month site.

To a customer, which one would be most appealing based on their needs and on the overall content for the amount being asked for? To offer lots of content for very little money sounds too good to be true. This drives the people who are seeking more value away, and it drives them toward the higher priced service because their senses and feelings of value attribution and value acquisition measures (which are hardwired to their notions of abundance and scarcity) tell them that more is always better. And this is true for ALL of us: you and me included.

Savvy retailers take advantage of this every day: would you like dessert and coffee after your meal in a restaurant? Would your like fries with that? Would you like to supersize your drink for an extra 50p?

Not everyone will take the up sell. But on average, 30 percent will. So what's worth more? The higher percentage of the lower priced goods? Or the lower percentage of the higher priced items?

Most often, it's the latter. Why? Because you have to sell fewer items or units to make the same (or a higher) return. Which drastically impacts your ability to create a net profit. This is huge!

The perception on most prices is that a higher price equals a
better overall end product, service, or quality of goods rendered.

Put another way, it's the difference between shopping in Tesco's and Harrod's, or the difference between driving a clapped out old banger and a brand new Rolls Royce.

To mean more to your customer, and to justify a higher monthly cost, you have to offer more in terms of content, value, and quality—both in the real sense, and in the perceived sense.

And when you add something extra that you DON'T tell people about about (the unadvertised bonus), whoosh!—perception levels increase again and so the brand's value when applied to the problem in the mind of the customer, increases.

This then further increases your customer's perception of your ability to deliver. If on top of this you claim and are appointed expert status, through social proof and by establishing yourself
as the trusted expert, you become that thing in the eyes of your audience: more fulfilling, wiser, more experienced, more trustworthy, more likable. And when THIS happens, your customer's perception of you increases a little bit more.

When we charge a lower fee we leave money on the table, and
we reduce the perceived value of the thing we're offering while also damaging your our credibility as the expert and go to person.

I hope this helps.

Gary Bloomer
Wilmington, DE, USA

P.S. There will always be people willing to pay more to get more. For these people, price resistance is less of a problem. They do not shop based on price alone. They may be only 20 percent of your customer base, but they'll represent 80 percent or more of your net. Do the math.

Test, test, test, compare results using different parameters then test again....then you will know for sure what your clients will spend, where and what your costs might be for different markets and then understand your best return options.

GoodLuck.

A few articles to give you some more insight:
https://www.marketingpsychology.com/price1.htm
https://pricingstrategyassoc.com/
https://www.site-reference.com/articles/General/How-to-Create-Your-Marketin...

My advise is - DON'T GET HUNG UP ON A PRICE POINT THAT YOU BELIEVE IS CORRECT -.

In other words, 14.95 may well be the cirrect price for this service, on the other hand, it may only be worth 3.95 per month or it could be 149.95 per month.

Don't try to figure it out for yourself - let your customers tell you what it is worth to them.

That is where the TESTING comes in.

Launch different versions with totally different price offers.
Market them to small batches of randomly selected users and take a look at conversions and of course ROI.

Don't worry too much about the cost of your actual content - it is digital so therefore there is no manufacturing cost although you may have a royalty cost or acquisition cost but in real terms, digital content covers its initial investment cost very quickly.

Worry only about ROI.

How much does it cost me to acquire 1 customer ? (Currently about $50.00 online)

How much is my earnings per customer (life time value per customer).

What other revenue can I generate from these customers once I get them? (banner advertising - premium up sales of e-commerce products etc. ).

In India, we sell our digital content at US$ 0.60 per unit
In Australia, we sell the same content at US$ 21.00 per unit. in the US we sell it US$9.00 per unit.

One has more volume than the others as you can guess but all are profitable in the end.

It is all about 'What is the market willing to pay and what is their perceived value for the content? ).

Be flexible, play with your pricing and offers until you get the right balance between, volumes - ad costs and ROI.

Good luck,

Matthew