Insights & Tips

Already a subscriber? Login

Become a subscriber and unlock an information arsenal focused on making your pricing efforts more effective.

What If Your Customer Isn’t Trying to Save Money?

The writer Anaïs Nin once said, “We don’t see things as they are, we see them as we are.” Those words highlight a common trap that plagues the pricing discipline.

As pricing professionals, we spend nearly all of our time thinking about price. It’s only natural then for us to assume that our customers are also spending a lot of time thinking about price. In fact, we tend to believe that the price of the product is the single most important factor in determining whether or not someone will buy something.

But that just isn’t true.

Price is one of many things that customer take into account during the purchase decision-making process. They might also be thinking about product quality, customer service, reliability, flexibility, speed of delivery, reputation, or dozens of other considerations. In fact, they might not be that worried about price at all.

But pricing practitioners—and salespeople—tend to give outsize importance to price. This sort of “tunnel vision” is actually a known psychological phenomenon called the focusing effect. In the most well-known study to show the focusing effect, researchers asked whether people living in California or the Midwest were happier. Most people said Californians must be happier because the weather is so much better there. But when the psychologists asked Californians and Midwesterners how happy they were, both groups actually reported the same levels of happiness. You see, most people in the survey group were focusing on one factor—in this case, the sunshine. They didn’t take into account all the other circumstances that affect people’s happiness, including crime, earthquake danger, cost of living, etc.

In the same way, the focusing effect can cause us to place too much importance on price. We simply aren’t taking into account all the other variables. And as a result, we might be offering discounts when we do not need to and leaving money on the table. Strange as it seems, in some cases, a price that seems too low can even turn away potential buyers.

In a negotiation situation, we urge B2B firms to analyze what type of buyer they are dealing with. Only 20 to 30 percent of the buyers in any given market actually buy purely on price. The others are looking for value or a long-term relationship with a supplier.

To help you identify the different types of buyers, we have a diagnostic called Three Types of Buyers That Don’t Buy on Price. It goes into detail about the different types of buyers and explains the tell-tale signs that help you spot them.

In addition, you also might want to check out the webinar Pricing Psychology in B2B. It helps you understand the human factors that play into B2B buying decisions and provides insight into how to use psychological principles to your benefit.

Get Immediate Access To Everything In The PricingBrew Journal

Related Resources

  • Building a Pricing Center of Excellence

    Pricing Center of Excellence Nar Splash

    Experts have long argued that centralized pricing is the ideal model for driving performance improvement. But these days, companies are finding success taking a different approach---the Pricing Center of Excellence.

    View This Webinar
  • Considerations for Pricing Through Channels

    Peter Maniscalco Splash

    How do you get your arms around the various players in the channel and manage the links in the distribution chain? In this interview, we discuss channel pricing with Peter Maniscalco, a Senior Manager of Pricing at a major IT Products and Services company.

    View This Interview
  • Powerhouse Pricing Teams

    Powerhouse Pricing Teams Nar Splash

    In B2B, dedicated pricing teams are still a relatively new development. And as such, there are no long-standing rules for how everything should work. In this on-demand webinar, explore the common traits, characteristics, and behaviors of successful pricing teams that have been around longer than most.

    View This Webinar
  • Proving the Value of the Pricing Function

    Proving the Value of Pricing NarSplash

    Executives understand the value of functions like sales, marketing, and finance---but pricing often has to justify their very existence, over and over again. In this recorded training seminar, learn how to demonstrate the results and metrics that can earn you a seat at the big table.

    View This Webinar