13 July 2016
What effect could refining your pricing structure have on your bottom line profits?
Provide pricing options and you give potential buyers a reference point. This makes it easier for them to make a decision in your favour – you also put them in control. You win twice. So why does giving buyers a choice work?
In the 17th Century, Thomas Hobson rented horses to Cambridge University students. The students were offered just one horse – take it or leave it. And so was coined the phrase ‘Hobson’s Choice’.
In general we naturally resist ‘Hobsons‘ Choice’ because of a in-built psychological need we have to feel a sense of control. ‘Hobson’s Choice’ removes our sense of control. When you think about this, why would you then want to offer a buyer just one price? Providing your buyers with well-thought-out pricing options puts you in successful company: for example TripAdvisor, Apple and EasyJet
Like most business owners you probably want to achieve three things:
- Happy customers who come back for more and recommend others
- Healthy business profits
- Capital value growth for your business
The way you price your products and services has a massive impact on all three.
A couple of studies by McKinsey & Co and A.T. Kearny (both global consulting firms) – advocate that pricing has a greater influence over your profits than reducing costs or increasing sales. So you’d be passing up on three big business gains if you let these pricing insights slip away
Offering price options makes sense because different people pay different prices. Improve your odds of success by offering options. In a nutshell pricing is too important to ignore or treat lightly.
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