Customer Surveys · Product Marketing

What would you do if your customers said your product is too expensive?

Yana Podskrebalina QA Test Engineer at Woact Company

May 2nd, 2017

Here’s the problem: We did some pre-launch surveys to find out a good price for our debut product. Then we launched at around that price and sales slumped. So we did some more surveying and customers said the same price was too expensive. We’re at a crossroads here because we cannot make money if we lower the price to the point where many of the customers said would be an acceptable price. Do we keep trying at this price point and do more marketing to convey the value? Or do we pivot the product or even change customer base? Any help appreciated!

Scott Sapire ENTJ

Last updated on May 2nd, 2017

Price points are just a function of value. You should be focused not on the price but on the value. Is the value for your ideal client real and is that value worth what you need them to pay and make a profit? If not, the value proposition is simply wrong.

If your product can save a client X time or Y money, or Z both, then the problem is in the articulation of the value - also known as marketing.

Sales is the exchange of that value for money.

The Challenger Sales model of Volvo trucks is a great example. They had trouble selling their construction equipment because their vehicles were more expensive than the competition. However, they discovered that their clients had a lower turnover rate of drivers, and thus lower driver training and hiring costs, because their vehicles were more comfortable. They could show their customers that, despite the higher cost, there was a greater value.

Tim Boudreau Consulting Product Manager / Software Engineer at Oracle Labs

May 2nd, 2017

There's a saying I've heard attributed to various people: "If half your customers aren't complaining that the price is too high, you're not charging enough."

Your customers are going to tell you a number as close to zero as they think will still be listened to - it's their money. The number you're looking for is what number their behavior changes to buying at - and that number probably has nothing to do with what they're telling you.

If you have enough customers or potential customers to do it, what you probably ought to do is an experiment - divide them into groups and offer different prices to each. See where the real sweet spot is, when you get the behavior you're after - look at which cohorts actually spent money. Fine-tune from there.

If you've collected information from the people who did not buy, start with them as your group to divide into cohorts (if possible, try to make each cohort a representative sample, containing a cross-section of from every industry or demographic group in your list of potential customers - otherwise the resulting numbers will look like they're telling you the "right price" but they're really telling you the right price for a single group). Put together offers at different prices for each cohort, fire it off to them and see what sticks.

You could also take a nickel-and-dime approach, that lowers upfront costs closer (but not to) the numbers you're hearing, but to make the product really useful, require additional incremental purchases that get you back toward the numbers you need to be making. People generally look at upfront costs, but don't do the math in their heads to figure out what the aggregate cost over time is. And if that's spread over a long period of time, a higher aggregate cost may be tolerable as opposed to a one-time hit.

If I'm willing to spend $20k on a car, you can probably talk me into spending $30k, but not $40k. You need to figure out what your $30k number is.

Paul Garcia marketing exec & business advisor

May 4th, 2017

I agree with Scott Sapire that the issue is one of communicating VALUE and not price. Your survey erroneously asked people to guess what they'd be willing to spend. Until the moment when they actually need the object, the answers you might receive to such survey questions would most likely be very misleading. Your survey can only tell you what respondents value. And what you want to describe are the BENEFITS not the FEATURES. There are three elements to persuasion 1) personal benefit, 2) dramatic difference, and 3) reason to believe.

We're seriously talking about PERSONAL benefit, what does the decider in the purchasing arrangement get out of the item kind of stuff. Most selling companies make the mistake of harping on features and not benefits. A dramatic difference isn't usually dramatic enough. It's often where products/services fall down the most. At a 20% difference, the majority of people still don't switch from what they're currently doing. You have to be around 50%+ different to get people to make a decisive change in habit. Reason to believe is usually the easiest one to nail down.

Doing "more" marketing (by which you probably mean advertising) isn't the answer. Improving marketing content is, using the three elements I just described. There's little reason for you to lower prices, but understanding your target and what the experience is like for them in making a purchase decision is essential at this point. Sales didn't slump unless you were already selling, rather they didn't meet projections. The imprecise language used in the description of the problem may be representative of the inability to communicate value, if the advertising is equally as imprecise.

Customers vote with their wallets, not with surveys. Don't trust surveys to ever tell when something is "fair." Survey writing is its own art form. As far as your product, you are in control, you know what things cost to make and to operate. Your strategy must include calculating the cost to your customer (how much do they lose/gain with your product). But customers can't do math. You have to do it for them. Never leave it up to a customer to figure out the financial benefits. Spell them out completely. The customer will almost never do addition, multiplication, or any other math on their own.

It's possible you may need to adjust the product or target in some way, but most likely what you need to change most is the way in which you attempt to persuade customers.

Amit Suri Sales & Marketing Leader -18 years of experience

May 4th, 2017

Few questions you to look at for deciding right Price::

1. You need to identify Pain areas that you solving and thats how you will show Value. Are these critical pain areas?

2. Do you have competition and whats the price they offer?

3. Do you have light house customers? The top 2-3 customers you can give at any price but they become reference customers and should be reputed brands

4 Have you built ROI sheets

5. DO you have different product features for different segments and you can price them accordingly

6.Do you have a strong GTM strategy

7. Do you have customer references, testimonials, etc

Hope it helps

Good Luck,

Best regards,

Amit Suri

Kelly Kuhn-Wallace Tech startup consultant, founder coach.

May 11th, 2017

It's impossible to discern whether there is a pricing problem (asking for more $ than perceived value) or a product-market fit problem (selling a product that might not be solving a problem significant enough for the group you are targeting).

Either way, introducing a product to market at rock-bottom pricing isn't ideal: price is easy to lower but hard to raise. (If you don't have efficiences with scale, stop all the things and regroup.)

Consider completing a "jobs to be done" analysis for the product. Complete it once for each role/industry that might use the product differently. For the task at hand, your goal is to build a gigantic spreadsheet of every possible job the product does. That's column 1. Column 2 is what the result of column 1 is or the impact. Sort and dedupe as you go. Column 3 is what is the value of having that job done.

This is fuzzy but critical math. Imagine two identical organizations. One has access to your product and the other doesn't. What are the differences you would expect to see in their financials at 30/60/90?

Typically Column 3 adds up to a jaw-droppingly high number. Your price is probably not too high. It's probably too low. Positioning, value-statements, and how you sell all impact what premium can be commanded for your product. Alternative business models may be a good option if extensive support is required.

(I recommend using phone calls for win/loss analysis instead of surveys. The data gathered will be much more useful. Particularly for startups and small firms but also in general, using a trained, neutral 3rd party to make these calls is helpful. Your subjects feel more at ease speaking to a third party, and the third party doesn't share in any insider bias.)

Wayne Cerullo Advocate for prospect-centric B2B marketing

May 2nd, 2017

Yana - I'm sorry to say this is not the first time I have seen this happen. In the research experience, context is everything (or at least more than we like to think). We want to believe that survey results are definitive, but we have found that how, where, and when you ask a prospect makes a difference.

In other words, asking a general, hypothetical question will get a more positive response than asking people if they would actually buy at a price... and that's more positive than asking them actually to buy. This is why we conduct two phases of content research -- the first to find out what prospects say they want to hear and then to see how they respond to it.

Your real question is a much larger one that takes much more information and time. I will add this one clarifying point... regardless of your sales process, your prospects must have a problem whose solution is worth multiple times your purchase price to have solved. If not, you will get nowhere. You can reach out to me if you have further questions.

David Feng Co-Founder at Reamaze, Clearalias, and Roninapp.

May 2nd, 2017

It sounds like you have a product <> market fit issue more so than a pricing issue. It would be great to see what your product is but in most cases like this it's because the perceived value of your product does not match what the market is looking for. Simply reducing price might not always work. It could be a deeper seeded issue with features, design, packaging, etc. Since you're already launched it might be best to stick to your current pricing and adjusting other aspects of your business to see if you can turn it around. If not, I recommend a pricing structure change (a change to your revenue model) rather than simply changing numbers. Maybe instead of charging monthly, charge by number of users, or messages, or features. Hope that helps.

Anonymous Cofounder & CEO of Hard Architectural Design and Construction

May 2nd, 2017

Hello Yana,

Hoping you are doing great so first of i want to thank for this approach that i consider it's always important in business and as a businessman i always faced to those situations. So i think we have to do something to see how we could modify some of those price strategies...

Best Regards,

Snold Joseph

Austin Eze Investor

May 3rd, 2017

I would suggest your company rebrands the product(s) either by a little change in packaging, quality(if necessary), then advertise the rebranded product either on the same price or a little higher to cover up expenses.

Andrew Chapman Publishing Entrepreneur and Author

May 3rd, 2017

Perfect example of how surveys or focus groups on price will never reveal as much as actually selling. When you ask people to part with real money, then you get reality!

I'll take a different angle on this than most of the other answers — think about the story that's surrounding your product. Does that story match the story your target audience tells itself about what the product will do for them? If not, then look to changing your story and the price may resolve itself. For example, the story that Volvo owners tell themselves is that they are safety-conscious and responsible. So, naturally, Volvo is successful because its story aligns with this. If Volvo suddenly tried to position its cars as "performance machines," it would lose its market.

That's an extremely short and superficial example, but there are plenty of books on the subject of story-telling as it relates to marketing, branding, and business. Also, look into Seth Godin's work and blog for considerable advice on this.