What We’re Willing to Pay

We are all in business to make money. Even non-profits seek ways of generating revenue in support of their causes. At the same time, we, as consumers, spend our money on stuff we need (food, clothing, shelter) and stuff we want (like that Caribbean vacation or that new iPod).

There are other things, however, that we take as a given and are less willing, if at all, to pay. Our willingness to pay for something is based on our expectations for the product or service and what we think is right or fair. For example, we’ll write that check for the new software, but we expect the support for installing it to be free, even if we have to access the information ourselves.

Determining an appropriate price for an item can be problematic. There are a number of factors involved. Take a country’s culture, for example. In the U.S., patrons are expected to tip their servers. In the UK, servers take a gratuity as an insult. Within a culture, a subculture impacts the process. A software developer will have different price expectations than an end user.

Furthermore, those expectations are likely to change over time (see my earlier post “Message Quest”). And as the organization providing the product or service evolves, so too will the sense of fairness or rightness of the price tag. Competitive pressures will play a role as well as the relative capabilities and skill sets of the competitors (see “Do Enough to Do It Well”).

Consider the products or services you offer. How are they bundled and priced for the initial sale? What additional sales do you offer afterwards? Take a close look at how those subsequent sales match with customer expectations and how they may affect future initial sales.

Your customers will pay a fair price. Just don’t try to gouge them for too much and, at the same time, don’t leave money on the table.

Some additional posts of mine about pricing that will help: “The Pricing Game Part 1”, “The Pricing Game Part 2” and “Penalized for Loyalty”.

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