A Business Case for Transparent Pricing

Annoyed-customerOne of my pet peeves is being strung along by sales people or landing on a website that doesn’t reveal pricing. The classic sales technique that involves luring a customer in with a pitch and waiting until the bitter end to show the price drives me crazy. I experienced this recently at a local running store and walked away feeling frustrated. I felt as though the salesman wasted my time. This experience, which I will share shortly, led me to wonder…

What would happen if more businesses shared their prices up-front, rather than making the buying process like a suspense thriller?

In my experience, businesses are better off providing transparency in their pricing for two reasons: First, transparent pricing saves sales teams time and money because they are free to spend time with the right customers. Second, companies who convert customers who feel good about their purchase, are less likely to experience buyer’s remorse and more likely to spread the word. This is a counterintuitive philosophy that may not apply to all businesses, especially with variable pricing, but it’s certainly worth considering.

The Story of the Product I Never Wanted

It all started one day when I walked into the running store looking for a new pair of running shoes while training for my first half-marathon. For years, I have purchased the same pair of Asics 2070 shoes from this store and have always been pleased with the buying experience. Given the upcoming long distance race, I decided to consult an expert this time to make sure that I am wearing the right shoe for my body.

The sales process started when a gentleman came over to help me and suggested he take some measurements. Before I knew it, I was running on a treadmill and stepping on some machine that read pressure points on my foot. Here we were, 30 minutes into the process and I’m thinking, wow, these guys are thorough!

After 40 minutes of evaluation had passed, the sales rep disappeared and came back with some examples of orthotics. Orthotics? I had no idea that this was the goal of the evaluation. Admittedly, I could have asked more questions about the reason for the evaluation process. Instead, I just went along for the ride hoping it would be over soon. So, when he began talking about the orthotics, I asked how much they cost? The price was somewhere around $80 and this did not include the cost of the shoes. I politely said, thank you, but I’m not really interested in orthotics. Instead, I went home and ordered the same Asics pair I had worn for years online. To be fair, I still do like and buy online from this running store. However, the orthotics sales process did not impress me.

What if the salesperson had told me right away what we were doing and shown me the cost?

Yes, I still would have said no and he would have lost the orthotic sale. However, had he understood that I just wanted to find the right shoes; he could have sold me what I wanted in much less time. Additionally, he would have had more time to spend with other, more qualified orthotics prospects.

Common Objections

Two of the most common objectives to transparent pricing I hear are:

  1. We don’t want to scare away the buyer with price before they have a chance to understand what we can do for them.
  2. We don’t want to publicize our pricing for competitive reasons.

These objections are reasonable. However, I encourage you to consider two key questions that address these objections:

  1. Would you rather spend time and resources on qualified customers who want your product or service and understand what they are buying?  It costs money to waste time on unqualified prospects, particularly when you have a more involved sales process.
  2. Do you want customers who prefer you because you are cheaper or because you are better than your competitors? Unless you are Wal-Mart, most marketers know that the always-low-prices approach is difficult to sustain and often harmful to a brand. If your product or services are superior, pricing shouldn’t drive the buying decision. Regarding your competitors, if they really want to know your prices, they will figure them out.

My guess is that in both cases, you want to attract and convert the right customers who love what you have to offer.

Increase Sales Conversion Rates

The 30-40 minutes that the sales guy spent with me could have been avoided had I known upfront what he was trying to sell and how much it would cost. Similarly, if someone visits your website expecting to pay $100 for your product that really costs $1,000, they may enter and go through the sales process for quite a while before getting weeded out. At some point, this unqualified prospect takes attention away from truly qualified buyers. If you have the right lead scoring and marketing automation processes in place, this should not cost the company too much money. However, it will still lower customer conversion rates more than had you made pricing available on the website.

When prospective customers’ expectations are managed properly, your website becomes more efficient and conversion rates increase.

Attract Customers Who Will Be Delighted With Their Purchase

If I had purchased the pair of orthotics from the sales guy, I probably would have felt tremendous buyer’s remorse after the fact. I would have come home with that sinking feeling in my stomach that I bought something I didn’t need and that cost more than I wanted to spend. I would have felt that the sales guy ‘hooked me’ and that the only reason I purchased was out of obligation because he spent so much time helping with me.

Do you want your customers to feel like they ‘bought’ your product or service or they have been ‘sold’ to?

The first approach is indicative of a customer who will walk away feeling great about their purchase. Also, this type of customer is more inclined to tell friends and spread the word, which ultimately refills your sales funnel with more qualified prospects.

The Bottom Line

Whenever applicable, transparency in your pricing, whether on your website, a sales sheet, brochure, pricing board or verbally shared is good for business. This philosophy saves money by wasting less time and resources and generates more customers who are more likely to turn into raving fans.

 

About Erin Carpenter

Erin Carpenter is the co-founder and CEO of Hidden Peak Interactive. She started the company in 2010 with a vision to transform the antiquated and ineffective ways that many businesses market themselves. Erin’s background in multiple disciplines, from Digital Marketing, to Finance, to Operations and Aviation*, enables her to think strategically about how marketing fits into the big picture of driving revenues for businesses.

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