‘Pricing Too High’ – Sean D’Souza’s Article

As you can imagine, there’s not a lot you can do unless you plan to
hand out $200 bills to everyone. Apple chose to give a $100
voucher–not cash. This meant you had to buy more product from a
company whose behaviour had just cost you intense frustration.

You’ve run into the classic ice-cream cone situation
If you give an ice-cream cone to a child and then take it away,
you’ve got two options:

Option 1: Give the cone back.
Option 2: Let the child bawl.

In Apple’s case they let the child bawl
There were hundreds, maybe thousands of angry emails. Blogs flared
up with angry comments. But once the moment passed, most customers
forgot the incident just as a child forgets about the ice-cream
cone.

And it wouldn’t matter much if Apple had waited. As a customer
you’ve felt the intense frustration of buying a product at one
price, only to find that it’s available much cheaper elsewhere.
Psychologically this affects you and makes you feel like a fool–but
you soon get over it.

And that’s what most of your customers will do
It’s almost impossible to replace cash with something else. Almost
impossible, but not impossible. The way around the
situation–especially for a smaller company, is to give a
replacement bonus that far exceeds the original difference.

So if we were to take the Apple case-study, for instance, the
grouse was that the $100 voucher was not enough to reduce the
irritation factor. If on the other hand, they were given a $400
voucher, then every single future customer would fervently pray
that Apple reduces their prices, just so they can get an
‘unexpected’ windfall.

With Apple, such a move would set a crappy precedent
For the average small business, this is no precedent at all. You’re
just saying: “Hey, I made a mistake. And here’s how I’m making an
attempt to fix the mistake.” And you give the bonus.

The bonus would have to be at least equal to, or greater than
(better to be greater than) the original difference (e.g. If your
price is now reduced by $200, then the bonus should be $200 or
more–preferably more!)

But how do you get these bonuses?
The obvious option is to think of dipping into your pocket and
paying for the bonus yourself. This is a first option. However
there are several ways in which you can ask other companies for
bonuses.

Of course this depends on your number of sales, and if your sales
are smaller, then you can get some pretty nice bonuses in the form
of software, hardware etc (Hint: You’ll need to contact the PR
dept. and let them know why you’re a good candidate for these
freebies). However information is also highly prized. A secret
entry to a website, a special report etc., will help to soothe the
pain.

However you can’t stop the bawling
There will be those who complain, and rightfully so. And like a
parent, you may have to step aside. No one likes price
changes–whether the prices are going up or down. And while it may
seem that the customer is always right, the fact is that things
change. The computer I run today would have probably cost $20,000
about 15 years ago.

Things have changed, and hence prices change. It’s something that
the customer has come to accept. And if your business ended up
pricing something too high and now wants to reduce the price,
that’s just how things are. It sounds rude. It sounds
anti-customer, but a deal is a deal at the point of the deal. If
things change, the deal changes. We may not like it, but we all
know that to be true.

Ideally, however, your pricing should move up, not down
You already know that, and it’s probably too late, but moving up is
better both for you and the customer. Moving up gives you the feel
of the market and as you raise your prices, you can see the direct
impact on sales. If you use a systematic procedure like the Yes-Yes
Factor, you’re almost guaranteed to get consistently higher prices
without ticking anyone off.

If you reduce prices you’re going to tick off someone. But it also
depends on the loyalty of that customer. In Apple’s case, the brand
loyalty was enough to quell the angry temper. Over time, your best
weapon is to have such an amazing product or service, that
customers will forgive you for it and keep coming back.

So do a great job–and next time around start at the bottom and work
your way up!

Did you make a mistake in your business? What did you do to fix it? Share your experience here.