A rather dramatic claim, I know. But hear me out.
You likely go into your wallet everyday to get your cash or credit card, or you go online to “click to pay” to buy something. Sometimes that “something” is a cup of coffee that you don’t really give much thought to; at other times, it is a big ticket item that’s been on your list for awhile; and then there all those times and price points in between.
And, you usually have a reaction to the price.
- It might be, “Can I afford this, right now?”
- It might be, “What, in my life, will this improve or enhance?”
- It might be, “What achievement does this represent?”
- It might be, “In what way will this help me make an impact?”
How you perceive the price you pay for something (and what that something you’re buying will enable you to do and experience) is often as important as the price itself.
That’s because price sends a message — to you as a consumer and by you if you’re the one setting the price.
Price taps into an emotion – a feeling. This isn’t anecdotal; there is a ton of behavioral research to support this.
As a business owner, I think about pricing (and the feelings they represent) a lot. After all, it is a critical factor in whether my business and I thrive.
If any of your entrepreneurial friends were to speak candidly with you, they will tell you that pricing is a complicated, tangled, exercise. Because pricing isn’t just about making a profit and covering operating expenses (which are important). It’s also about the relationships you have or want to have with your customers and clients; with your business itself; and with your family (yep, you read that correctly!).
So, pricing has an impact on more than your bottom line.
Price Tells a Story
The message you receive is driven by your emotional connection to what you’re buying and the person or company “sending” it. I tend to think of these messages as a multi-layered story about value, boundaries and worth.
My way of making the concept of value seem less abstract is to suggest thinking of it as the solution to a problem you want solved. So when I go to my favorite neighborhood coffee shop (Cafe Regular) to grab a coffee, I get my caffeine fix “solved.” But something else gets addressed, too: My desire for interaction with people face-to-face – from the chats with the baristas who know what I want as soon as I walk in to the neighbors who are also “regulars.” For someone who works mostly from home, this is an important part of my daily routine.
Another thing I love about Cafe Regular is the discount they offer to the Park Slope Food Coop (of which I am a member) and to teachers. In each instance, they are sending the message of ‘we’re a neighborhood small business that supports other local businesses and the people who educate our kids.’
There are other coffee shops in my ‘hood. Yet, I return here everyday I am in town because of how going there taps into my values and solves my obvious and non-obvious “problems.”
And the coffee is darn good, too!
Some boundaries need to be explicitly expressed, others can be safely inferred. For example, I pay $2.33 for a 16oz. coffee. But if I want a dirty chai latte with soy, I can get it…just not at that price. Or, if you are in the market for a car, you can’t expect to purchase a BMW for the price you’d pay for a Honda. Or, if a service provider quotes a price and you ask for a cheaper one, you can’t be offended if they say “no.”
Boundaries shape how you perceive price, which is almost always in the context of something else.
They also help you to manage your expectations around the price you pay for something and what you’re promised in return. Whether you’re measuring the “what you get in return” via the prism of low or high quality; quantity (a commodity or limited), a sense of belonging (exclusive), or the speed with which the product or service solves your problem.
Boundaries set the tone for the type and length of the relationship you plan to have with the product or service, as well as the person or company behind it.
Have you ever made a purchase because the item in question made you feel good? Of course you have! We all have (and do).
Some things you buy to make you feel good about yourself and the circumstances of your life; others you buy because you feel good about it all. No judgment. But, as a consumer it helps to remember there is relationship between price + consumption + self-identity. Not only can the price you pay and what you purchase validate a self-perception, it can tap into your aspirations, as well.
From a business perspective, I don’t like it when people suggest, “charge what you’re worth.” As if your value as a human being can be quantified in such a manner. I prefer to connect worth with the value you’re promising. The bigger the problem being solved, then the higher the price one can expect to be charged.
Value, boundaries and worth, individually and collectively, help to explain how (and why) price alone doesn’t drive sales for a business or dictate what one is willing to pay. Because it’s about more than money.
For consumers, it’s about how and why you react to prices the way you do. For business owners, it’s about how and why you set prices the way you do.
For consumers, price can provide a window into the relationship you have to work, to consumption, to the reality you’re experiencing vs. the reality you wished you were living.
For business owners, price can provide a peek into the relationship he/she has with his/her business, customers, and family. (Hint: We’re going to dive into this more deeply next week.)
Now, as a consumer it’s not your job to be amateur psycho-therapist trying to discern how someone’s pricing is a reflection of the relationship they have with their business or family. However, it IS your job to see how the relationship you have with yourself and your family influences how you react to prices. Because it does.
So would you do me a favor the next time you buy something? Pay attention to your reaction to the price (and to the experience of buying). Then, take a step back and check-in to see what’s the source or trigger of that reaction. Whatever “that” is is evidence that price isn’t just something you pay — it’s something you feel.
“The most startling truth is we don’t even think our way to logical solutions. We feel our way to reason.” ~ Douglas Van Praet
p.s. We have two Comfort Circle™ dinners this month: March 12th; you can RSVP here if interested. The theme is “love & money” and is open for all who wish to join – regardless of marital status or sexual orientation. March 26th; click here to RSVP. The theme: Pricing Strategy For Serviced-Based Entrepreneurs (it’s not just about the numbers). Can’t make it? Please spread the word by sharing the RSVP links (and, thanks!)
The Financial Wheel
The exercise & eCourse that will help you get clearer on how the choices you are making (and need to make) affect your life - today and in the future.