I bought a large picture (a panoramic photo, roughly 2 feet by 6 feet) that I want professionally framed so I brought it into my friendly neighborhood framing store.
On the way to store, I thought about what it might cost. I realized that if the price was $500, I would seriously need to rethink my plan because that was more than I wanted to pay for a picture frame. To my great relief, the price ended up coming to $250. Sold! I’m now the happy owner of a picture-framed panoramic photo.
We can learn something from those price points and my potential and actual reactions:
- I had a “shock price”: My shock price would trigger me to step back and rethink my plan if it came in at that amount. In my particular case, my shock price was $500.
- I also had increasing resistance the closer I got to the shock price: The closer the price gets to my shock price, the more it hurts. I might be willing to pay but I feel less and less like I’m receiving value… so that’s a danger zone because I might shop around more aggressively in the future. For example, a price tag of $450 would have stung hard but I would have still paid it… but probably never shopped there again.
- The lower quoted price increased my sense of relief and the value I perceived: Since the price tag was much lower than my shock price, and it wasn’t really in that “danger zone”, I felt relieved and that made me feel that the frame was that much more valuable to me.
I’m not the only one in the world who feels this way about prices. All consumers feel this way about prices. (And investors feel this way about stock prices, incidentally, which is probably why I haven’t bought any shares of Berkshire Hathaway, currently trading above $155,000 per share).
Your customers feel this way about the prices you charge for your products or services. Your job is to know what your ideal customer’s shock price is, what the danger zone is, and then (if possible) charge below the danger zone or at least at the low end of the danger zone.
If you are struggling to make sales, or if customers are getting quotes and going somewhere else, or if you aren’t making repeat sales, then you might be charging at or near your customers’ shock price.
If that’s the case then you need to rethink your prices OR your target market. Yeah, I realize that’s no small task but you’ll sell more by bringing those two things in line — either by reducing your price or by finding a target market that doesn’t find your current price to be their shock price.