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Category: Investing

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Growth Investing Leadership Personal Development

The One Question I Didn’t Have An Answer For

Throughout my career, I have recorded hundreds of podcast interviews, but seldom have I had guests ask me a question that I couldn’t answer. Well, that recently happened on my C-Suite Radio show, All Business with Jeffrey Hayzlett. I was talking with Ron Carson, the founder and CEO of Carson Group, a company with a mission to help financial advisors build transparent businesses and better serve their clients.

 

The question Ron asked me, “What’s the difference between a broker and a fiduciary?”

 

I had no clue, and I consider myself to be a reasonably sophisticated investor. It turns out; I’m not alone.

 

“Neither does neither does 99.9% of the investing public,” Ron said. “A fiduciary or an RIA (Registered Investment Advisor) is actually regulated by the SEC (Securities and Exchange Commission). Brokers are regulated by FINRA (Financial Industry Regulatory Authority), which is a self-regulatory organization.”

 

“If I’m a broker, my only duty to a client is suitability,” Ron added. “As a fiduciary, you’re required to put your client’s interests ahead of your own.”

 

With that lesson out of the way, Ron gave out some practical investment advice we can use, including a book recommendation.

 

“The Richest Man in Babylon is a really simple read,” Ron said. “It’s about how you can accumulate real wealth.”

 

Ron says one of the best ways to accomplish that is through real estate. While he’s not the first person on All Business to say that, he may be the first to look at the trends for guidance.

 

“In the next 20 years, we’re not going to have nearly enough affordable housing,” Ron said. “(Rental Property is) something you can put some effort into and it’s going to appreciate, you don’t have to pay the taxes, you get cash flow out of it. If you’re handy at all, go get rental real estate, fix it up, don’t flip it. Hold on to it long term.”

 

Ron said another form of real estate he likes to invest in is farmland. With the turbulence in the ag economy over the last few years, there could be an opportunity for the right investor.

“We’re losing arable farm ground every year by the tune of 20-some million acres through urbanization,” he said. “We have diets improving, moving from rice to protein, that requires more farm ground. We’re only one drought away from having it all turn around, but we could have some real pain in the farm world, which creates some opportunities.”

 

If you’re looking for stock market advice, Ron says technology and biotech companies are hot right now, but warns unless you are really good at evaluating companies look into ETFs (Exchange-Traded Funds) or mutual funds that are tech-heavy.

 

Even if you’re not ready to buy land, rental houses, or play in the stock market, you should keep an eye on your spending or, as Ron calls it, “The Latte Effect.”

 

Besides buying fancy coffee drinks, look at the subscriptions, memberships, and phone apps you pay for but never use. Those all add up quickly.

 

“Pay attention to the pennies, the dimes, and all the stuff that people waste. This is an easy area to make a big improvement in your life,” Ron said.

 

Ron didn’t just offer us all investment advice, we talked a lot about his business — — which helps independent financial advisors better serve their clients. While the company he built in the 1980s continues to move up the Inc. 5000, he has learned a lot about helping people and building a business. However, just don’t call his employees ‘staff.’

 

“We call them internal stakeholders,” Ron said. “Sometimes someone introduces me and says, ‘I work for Ron.’ No one works for me; everybody works with me because words really matter. It’s a cultural mindset. I tell my internal stakeholders every day if you’re not having fun, if you’re not loving what you’re doing most of the time, let’s find (you) another position in the company or let’s help you find a place to go without fear of retribution.”

 

He goes on to add, “Don’t get me wrong, profits are important, but they should be third on the list because we also have a responsibility to stay in business and continue to reinvest back in the business for the benefit of our clients.”

 

Those clients aren’t just relying on Ron for financial advice. They also use his proprietary software and his expertise as well. Over the years, he has evolved into a thought leader, even though that was never on his radar.

 

“Believe me, I was part of the class that made the top 50% possible,” Ron said. “My parents went broke when I was in high school and I’ve been running from scarcity my whole life. That was really my motivating factor.”

Things are a lot different for Ron today.

 

“I have confidence, conviction, and enthusiasm,” Ron said. “I say that I haven’t worked since I was 36 because that’s when I really surrounded myself with good people. I got to do the things I love to do and very little of my day involves anything I have to do, and I’m truly blessed.”

 

Ron exemplifies what hero leadership is all about — people and profits going hand in hand helping people make the world a better place. Thank you for sharing your wisdom and your philosophy of success with our listeners. To listen to the full interview, click here.

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Best Practices Entrepreneurship Human Resources Investing Management Marketing Negotiations Sales Skills Women In Business

“This Is How To Negotiate Better On Social Media” – Negotiation Insight

People have asked me, should you negotiate the same way on social media as over the phone, or in-person? And my answer, like always, is, it depends. Every negotiation has nuances that make it different from those prior. That’s true, even when the same people are involved in a negotiation. Social media is an environment that possesses opportunities to use tools, such as bots, that you may not be familiar with in a negotiation. Take note of the following to discover how you can become more proficient when negotiating on social media.  https://bit.ly/3bcPa3N

Remember, you’re always negotiating!

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Best Practices Entrepreneurship Human Resources Investing Management Negotiations Sales Skills Women In Business

“This Is How To Detect Fraud In Negotiations Easily” – Negotiation Tip of the Week

“You become susceptible to fraud when your greed outpaces your logic.” -Greg Williams, The Master Negotiator & Body Language Expert (Click to Tweet)

 

Click here to get the book!

 

 

People don’t realize; they’re always negotiating.

I’ve heard some negotiators say all is fair in love, war, and negotiations. And some of them will stop just short of fraud to obtain a favorable outcome. Others will outright attempt to defraud you. The latter negotiator types are the ones whose shenanigans you must be alert to – they’re the ones that can leave you financially and emotionally devastated.

They’re signs to observe, in both the spoken and written words, that someone uses, that can serve as a forerunner announcing their pending trickeries. Take note of the following. You’ll see what I mean. You’ll also discover how to detect fraud to protect yourself from those that attempt to defraud you in your negotiations.

Do you ever consider how easy it is for someone to commit #fraud against you in your #negotiations? Fraud occurs in one form or another more than you realize. Learn how to detect fraud before it’s unleashed on you. bit.ly/3gASVRN

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Best Practices Entrepreneurship Investing Personal Development

Your price defines the customers you get

Have you ever thought that the price of your product or service selects what customers you get? Your price will differentiate how the market perceives your company, and by what kind of customers are attracted to your products or services.

In short, you need to consider that your customers will fall into three categories:

  • The price-sensitive customer
  • The neutral customer 
  • The loyal customer

Let us start examining the price-sensitive customer. The main (and possibly only) reason why this type of customer decided to buy your product or service was because it was the cheapest. They care very little, if at all, about the features and functions and benefits of your products or services that makes it different from the competitions’ products or services. They do not value the extra work and resources your company has spent to develop a better product or service. Moreover, because they don’t really care about the product or service, they are also less likely to learn about how to use it (for a product) or understand it (for a service). The result of this is that they will clog your customer service lines with question after question on the most basic functions. They need a lot of “handholding,” and despite all the effort your company puts into meeting their ever-demanding needs, they will still be somewhat dissatisfied with your company, products, or services. So, to be clear, the price-sensitive customer is an expensive customer in two ways: they cost more to support in cash, and they are likely to express their dissatisfaction with your product or service to their friends, family, and anyone else who cares to listen to them. 

Then also, there is the “ticker” to consider – you spent lots of time and effort supporting the price-sensitive customer, and you finally think you’ve got the customer on your side. You think the customer finally understands why your product or service is not only cheap but it is better, too. But wait a minute. As soon as a cheaper alternative to your product or service shows up in the market they will switch as quickly as a flash. The alternative may not be nearly as good as your product or service, but it has one thing going for it – it is more affordable. So, all your hard work and effort to keep your price-sensitive customer happy and loyal will be for nothing – as they will disappear in a flash! You’ve been unceremoniously dumped – for a “cheaper model.” So, you are lucky if you ever made a profit from that price-sensitive customer in the first place. A lot of time and effort for little, if any reward. 

Next, let’s examine the loyal customer. This customer is the polar opposite of your price-sensitive customer. The loyal customer loves your product or service. The loyal customer does not care much about price. That’s a good thing! But they do care genuinely about the value they receive from your product or service. You need to hear that – it’s important! 

They are unlikely to use your customer support. Another good thing. In the rare occasion, the loyal customer will contact the company’s customer support function, it is more than likely to tell them they have figured out something about the company’s product or service the company itself did not know, or that they have figured out ways to use the product or service in ways that were never really intended for in the first place, or in ways to add even more value than its original design or definition had initially intended.

Whenever possible, the loyal customer talks about your company to everybody and anybody they meet. They are your most dedicated evangelist. This is worth remembering, too!

The loyal customer did not buy your product or service because of low prices but instead because it has some unique feature, function, or benefit that is particularly valuable for them. For consumer goods or services, this includes a wish to be associated with the brand’s messages and positioning.

Next, we have the neutral customer. Alternatively, maybe we should call them the “pragmatic customer.” Obviously, in their behavior, the pragmatic customer is somewhere in between the price-sensitive customer and the loyal customer. The pragmatic customer does care about the price, but price alone is not the reason for their purchasing decisions. For the pragmatic customer, it is essential that they receive what they would consider good value for money. Again, this is worth noting. 

So, of these three types of customers, which customer do you prefer, and is your pricing aligned with your preference? 

Let me review some examples:

Consider this cloud-based telco, focusing on customers in the B2B space. They started out very small and grew slowly. They decided to price very low to capture market share from potential customers. So low, that profitability became an issue. Willingness to pay research showed them there was room in the market for a substantial price increase. In fact, the company was able to, over some time, to quadruple its prices. The aforementioned price increases in itself generated to a 25% increase in sales volume which, in itself, is interesting, but even more interesting, is that with these new higher prices the company attracted a whole different set of customers. Customers the CEO described as “professional” and as a consequence, led to a significant decrease in customer support costs that further led to about a ten times increase in profit margin. 

But not all companies are so lucky as this telephone company. Consider this national seller of home-improvement products. Profit margins were slim, and the company wanted to increase prices to boost its profit margin. Their business model was in-homes sales, and they advertised heavily on TV with the central message of deep discounts. Willingness to pay research showed them that the general consumer population was not very price sensitive. With one exception, those customers who had a preference for buying this kind of home-improvement product by in-homes sales were extraordinary price sensitive. This meant that the company’s ongoing low-price marketing only attracted those customers for which price was the most import decision-driver. This led to a “big” problem for the company. They could not increase prices, because that would severally affect the sales volume among those highly price-sensitive customers. They could not change their TV advertising to a value or benefit message, as this would severely impact the number of sales leads the company received – as those customers who want to buy in an in-home sales model are those that are the most price-sensitive. The company had painted itself into a corner from which there was only one way out – start a new brand, which turned out to be an expensive and involved proposition!

So, think about this the next time you are considering your pricing strategy. The last thing you want to do is cater to the least favorable customer at the expense of your most valuable customer. Your sales volume, profit margin, and revenue depend on you getting your pricing strategy right. 

Per Sjöfors
Founder
Sjöfors & Partners
www.sjofors.com

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Best Practices Entrepreneurship Human Resources Investing Management Marketing Negotiations Sales Skills Women In Business

“This Is How To Attack Difficult Choices In Negotiations” – Negotiation Insight

Negotiations can become complicated when presented with difficult choices. But you can attack those difficulties by being cunning, beguiling, and using a little lateral thinking. The following is how you can accomplish that.

Click here to discover how you can make difficult choices easier!

 

Remember, you’re always negotiating!

 

Listen to Greg’s podcast at https://c-suitenetwork.com/radio/shows/greg-williams-the-master-negotiator-and-body-language-expert-podcast/

 

After reading this article, what are you thinking? I’d like to know. Reach me at Greg@TheMasterNegotiator.com

 

To receive Greg’s free “Negotiation Tip of the Week” and the “Negotiation Insight” click here https://themasternegotiator.com/greg-williams/

 

 

 

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Best Practices Entrepreneurship Human Resources Investing Management Marketing Mergers & Acquisition Negotiations Sales Skills Women In Business

“This Is How To Use Leverage To Win Negotiations” – Negotiation Insight

As a #negotiator, #leverage can enhance your #negotiation efforts. But it can become a tool turned against you if you misuse it. Discover how you can use leverage to improve your negotiation outcomes. bit.ly/310PAHc
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Best Practices Entrepreneurship Human Resources Investing Management Marketing Negotiations Sales Skills Women In Business

“This Is How To Use Doubt To Win More Negotiations” – Negotiation Tip of the Week

“Doubt can be a mental strangler that leads some people to become less than who they are.” -Greg Williams, The Master Negotiator & Body Language Expert (Click to Tweet)

Click here to get the book!

 

“This Is How To Use Doubt To Win More Negotiations”

 

People don’t realize; they’re always negotiating.

“I’m not sure. If we use that in our negotiations, our real intent might create doubt about our seriousness. That could cause the other negotiators to act unpredictably. You’re right. That’s something we have to consider and plan for, but by having them doubtful about our intent, we’ll keep them off balance. Then, when the time is right, we can be more definitive about our actions.” You’ve just been privy to a conversation that occurred between two negotiators about the use of doubt in their negotiation.

Doubt creates uncertainty. It’s a tactical tool that every smart negotiator uses in negotiations. Thus, good negotiators use it deliberately to motivate the opposing negotiator mentally. Doubt is also the tool that’s used in everyday life to encourage people to adopt one action versus another.

Click here to continue, and you’ll discover how you can become a more persuasive negotiator by injecting doubt into your negotiations.

 

Remember, you’re always negotiating!

 

Listen to Greg’s podcast at https://c-suitenetwork.com/radio/shows/greg-williams-the-master-negotiator-and-body-language-expert-podcast/

 

After reading this article, what are you thinking? I’d like to know. Reach me at Greg@TheMasterNegotiator.com

 

To receive Greg’s free “Negotiation Tip of the Week” and the “Negotiation Insight” click here https://themasternegotiator.com/greg-williams/

 

Categories
Entrepreneurship Human Resources Investing Management Negotiations Sales Skills Women In Business

“Would You Like To Be A More Powerful Negotiator” – Negotiation Tip of the Week

“To be seen as being powerful, you must first see the power within yourself.” -Greg Williams, The Master Negotiator & Body Language Expert (Click to Tweet)

Click here to get the book!

“Would You Like To Be A More Powerful Negotiator”



People don’t realize; they’re always negotiating.

In every aspect of your life, you’re negotiating. The vast majority of people don’t realize that. Thus, to become more successful, you must become a more powerful negotiator! Why? Because the better your negotiation skills become, the more successful you’ll be as a negotiator. And that will allow you to obtain more in your daily activities. So, would you like to be a more powerful negotiator? If the answer is yes, observe the following.

 

Getting Better Answers

Asking questions as a negotiator is a way you gather information during the negotiation. But the questions you ask, and the way you ask them is what’ll determine the quality of information you receive. To get better answers, listen carefully. Be attentive to how people speak and what they say, so you know what questions to ask that’ll get them to give you better answers.

When people speak, they give insight into what’s important. A negotiator does that by the emphasis he places on certain words or phrases, the gestures he emits as he’s talking, and the reflections displayed when he pauses while speaking. That’s what you can observe to determine the questions to ask.

As an example, if a negotiator talks whimsically about a time he obtained a significant achievement, most likely, he’s speaking from a position of pride. Thus, during the negotiation, ask questions that put him back into that mindset. And imply that he can experience that sensation again. That will give you momentary power. And with it, he’ll be more inclined to accept your offer at that time.

 

Control Emotions

How did you feel mentally, the last time you engaged in an activity that required alertness, and you were emotionally distraught? If you’re like most people, you experienced sluggishness in your thinking and responses. You weren’t firing on all cylinders. That’s what occurs when you enter a negotiation, and you’re depressed. You don’t perform at your optimum level, which means you’re less likely to perform at your peak.

As a negotiator, emotions can be daunting to deal with during a negotiation. You have natural highs and lows, depending on what’s occurring as your bargaining. While it can be easy to say control your emotions when you negotiate, in reality, it can become a more challenging task to accomplish.

So, what might you do to control the destruction that taut emotions can bring to a negotiation? You can role-play, before the talks, to get a sense of the feelings you might experience during the proceedings. You could also consider having another negotiator, as a teammate, to deflect and combat negative emotions that might occur. And you can establish walkaway points, marked by a heightened state of emotions, that signals your departure from the hagglings.

The point is, you must control your emotions to negotiate effectively. Thus, the better you manage your feelings, the more significant will be the probability of you having a successful outcome. And since you know the role and value that emotions have on your negotiation, plan how you’ll control them before you engage in your next one.

 

Empathy’s Role

He doesn’t care about me. He’s the negotiator type that only wants the best outcome for himself. Have you ever heard someone say that about a person with whom they’d be negotiating? A lack of empathy can wreak havoc in a negotiation because it has an enormous role per how negotiators perceive one another. I’ve witnessed some negotiators improve the deal for their counterpart because the other negotiator displayed an interest in that person’s wellbeing. That’s the added value that empathy can have.

During a negotiation, when possible, let your counterpart sense the emotional care you have about his plight. Display through your actions that you have a sincere desire to be fair. With a negotiator that’s like-minded, he’ll appreciate your gesture and reward you with an easier going negotiation. You will have exercised a peaceful power that ignited the desire for him to reciprocate.

 

Accept Reality

If you wish to become a more powerful negotiator, you must learn to deal with reality. Some negotiators engage in negotiations too long. That causes them to become more emotionally involved, which pulls them deeper into staying engaged. They do so because psychologically, they want to see the outcome. In some cases, it’s like watching a movie that’s so bad; you can’t tear yourself away from it. Don’t allow this to happen to you!

When you first sense the minimum goals for the negotiation may be too far out of reach, begin to consider how you’ll exit. The sooner you withdraw from a situation that’s not getting better, the faster you can address one that may produce a more significant benefit. And that’s the value of accepting reality.

 

Positioning

Everything mentioned thus far, getting better answers, controlling emotions, the role of empathy, and accepting reality, can be enhanced through your positioning. Positioning is the tool that sets the stage per how others will perceive you. Thus, if you’re situated correctly before engaging in a negotiation, you’ll have a more significant opportunity to impact those activities.

You can position yourself by understanding the mindset of the person with whom you’ll be negotiating. That means you must know that person’s preferences, likes, and dislikes. Once you have those insights, display those characteristics when you’re in her presence. You can have others project your persona that she views as influencers. That will assist your attempts exponentially. It will also be the leverage that allows you to be a more powerful negotiator during your interactions.

 

Reflection

I started by suggesting you heighten the sense that you negotiate in every aspect of your life. And I suggested, to acquire more in life, you must become a better negotiator. By employing the insider-thoughts presented, you can increase your negotiation abilities. That will make you a more powerful negotiator. And everything will be right with the world.

 

Remember, you’re always negotiating!

 

Listen to Greg’s podcast at https://c-suitenetwork.com/radio/shows/greg-williams-the-master-negotiator-and-body-language-expert-podcast/

 

After reading this article, what are you thinking? I’d like to know. Reach me at Greg@TheMasterNegotiator.com

 

To receive Greg’s free “Negotiation Tip of the Week” and the “Negotiation Insight” click here https://www.themasternegotiator.com/greg-williams/

 

 

#Powerful #BodyLanguageSecrets #csuitenetwork #thoughtcouncil #Negotiator #NegotiatingWithABully #Bodylanguage #readingbodylanguage #Negotiation #NegotiationStrategies #NegotiationProcess #NegotiationSkillsTraining #NegotiationExamples #NegotiationTypes #negotiationPsychology #HowToNegotiateBetter #ReadingBodyLanguage #BodyLanguage #Nonverbal #Negotiate #Business #SmallBusiness #Power #Perception #emotionalcontrol #relationships #BodyLanguageExpert #CSuite #TheMasterNegotiator #ControlEmotions #GregWilliams #success #Howtowinmore #self-improvement #howtodealwithdifficultpeople #Self-development #Control #Conversations #Howtocontrolanegotiation #howtobesuccessful #HowToImproveyourself

 

 

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Best Practices Entrepreneurship Investing Marketing Personal Development

Behavioral science puts old price theories to an end

Low prices gets more customers, high prices gets fewer customers. This is an “old” truth that the business economy has lived by for a very long time. In reality, our buying behavior is considerably more complicated than that, and a higher price can on the contrary increase sales volume. 

Traditional knowledge in business economics follows that price and demand have a linear relationship. The management’s marketing strategy in terms of pricing is then simplified to the practice of setting the price so that the total earnings are optimized.

However, modern research complicates this well-known business practice. We humans tend to allow psychology and other non-rational factors influence our behavior and that includes our buying behavior. This strict economic theory does not give the whole picture, though.

When people make decisions in purchasing situations, it is based on an estimate of the product or service value. Of course, that valuation may differ across various situations. For example, an umbrella is much more worthwhile to the buyer when it rains. Still, you see shops that sell umbrellas when it is not raining.

However, the estimated value correlates not only with the personal and current needs, but also on its relation to other products or services of the same kind. Is this product or service of good quality? Is it worth its price? If the answer is “Yes,” the consumer will purchase the product or service and on the contrary, if the product or service is not considered worth its price, then a purchase is unlikely to occur.

Since the consumer often does not know how good the quality of a particular product or service is, the price itself is a quality indicator. The value thus rises in the consumer’s eyes as the price rises. This is not about status or a desire to show off wealth. Of course, this can have a determining effect, but the principle applies in a general sense and also to products that do not have “status” attached to them.

An everyday example can be a pair of winter shoes. In the shoe store, it is difficult for the consumer who is not able to look at the shoes in-depth, to see if they are of high quality or not. If, on the other hand, the price is high, we assume that the quality and thus the value are higher. Buying low-quality shoes for the winter season, which may start leaking or quickly lose their freshness, is a huge miss, even if they only cost a fraction of the more expensive shoes.

The problem is that you as a consumer do not know this in advance. The cheap shoes can keep the moisture out as well as the expensive ones, but it is uncertain factor, that only time will tell whether your purchase gave you good value or not. However, price is a factor – perhaps the only one – that the consumer has in assessing the (perceived) value of the shoes.

As a company or trader, this becomes an important thing to consider, especially with regard to pricing strategies. A low price means that people also perceive the value as being lower. Therefore, a low price does not, of course, mean higher sales in number. In fact, in some contexts it can be just the opposite. Too low a price can lead to reduced sales as “cheap” signals poor quality and value to the (potential) customer.

Price is therefore important in itself. Companies need to understand that a correctly set price is not about placement on a linear graph, but about finding the point where consumers’ perceived value is the greatest.

The next question then helps to know how this value can be found, where is the optimal price? The answer is perhaps obvious: You ask the consumers. By asking consumers to value different products and indicate what they would be willing to pay, you get results for price indicators for a specific product or service. You can then see the true balance between price and sales volume. This can be refined through a number of variables and it is also possible to work across different markets.

The results are analyzed and processed and at the other end, there is a graph that looks very different from a “standard” graph analysis. Instead of just a linear relationship, it becomes a two-way staircase where different price plateaus and price walls appear in the data.

So, we humans do not act according to the classical and traditional economic theory mentioned earlier. Psychologically, we perceive a low price as lower quality and thus of lower value. The price we as consumers are prepared to pay is about what we perceive as “worth the money.” In this situation, a higher price can be a sales advantage too good an opportunity to pass up on.

An estimated 95% of companies today use a simplified model for pricing their products and services. You guess, use cost-based pricing or predetermined marginal goals. However, if the actual willingness to pay is included in the calculation, the profit margin can often increase by 25–40%. Sometimes even more!

This means that the price of the products can be significantly improved. Businesses and traders, many perhaps pressed under small margins, can, through such an analysis, have a more stable basis for their pricing. Profitability is increased and they have better opportunities to develop their business.

Of course, this is based on the fact that the products or services are genuine. Trying to bluff consumers by setting a high price on a substandard product or service is not going to be a success. This will quickly have a detrimental effect and damage the brand significantly.

The importance of consumers’ perceived value may not be revolutionary. However, it is a new process how this value can be investigated and analyzed. In this, behavioral science and psychology play a greater role than the classical and traditional economic theory. Pricing strategy becomes a whole new ball game, once you know what the consumer is willing to pay for a product or service.

Per Sjöfors
Founder
Sjofors & Partners
www.sjofors.com

Categories
Growth Investing Personal Development

The Sweet Spot of Pricing

Expectation bias is a term used in behavioral economics; the academic field that covers how we as humans make our decisions, and in particular, how we make our purchase decisions. Expectation bias is a human trait and something that is innate within all of us. I have it. You have it, and most importantly, all your customers have it, too. Expectation bias works in a couple of ways; here is how.

If the price the buyer is presented with, at the point of purchase, is (substantially) higher than the buyer initially expected, then no purchase will occur. Conversely, if the price is (much) lower than the buyer initially expected, then the buyer will have doubts as to whether the product or service will provide sufficient benefit to justify the (low) price. This means that setting the right price for your product(s) or service(s) is a balancing act; not too high and not too low, but just right. It is important to hit the “sweet spot” with your pricing strategy. These price points where the price is deemed to be too high or too low is based on every individual buyers’ circumstances; everything from access to sufficient funds to prior experience with the brand (as a purchaser and user), to how badly the buyer desires your product(s) or service(s). However, since many of today’s buyers have shared experiences, have similar circumstances, and are influenced by the same type of sources of influence, then there will be a price point where most buyers will congregate around—that is the “sweet spot” that you are aiming for. This is the price where the maximum number of potential buyers say that the price itself becomes a message of adequate quality and/or benefit to the buyer, and the minimum number of buyers say that the price is too high. This is the price that will generate the highest sales volume for you. 

The price we pay for a product or service will also affect the benefit we expect to receive from the product or service; if the price is low, then we do not expect such a high-quality product or service and we will view the product or service has having little potential benefit; if the price is high, we automatically expect a very high-quality product or service as well as numerous benefits attached to that product or service. Although, the benefit we expect is often firmly established in our heads, but does not always match the reality of the product or service in question. A common experiment within behavioral economics is to have consumers that are in some kind of pain purchase pain medication. The effectiveness of the pain medication they purchase is then directly correlated to the price that these people pay. Or to summarize this type of behavioral experiment: a 5-cent aspirin is not nearly as effective as a 50-cent aspirin, as the 5-cent aspirin would be seen as having inferior quality and effectiveness compared to the 50-cent aspirin. Similar experiments have been done with wine; researchers put individuals in an MRI machine and examined how the brain’s pleasure center lights up, or not, based on what the subjects were told about the price of each bottle of wine that they sampled. They were served two different kinds of wine. One was a $6-bottle of wine and the other a $60-bottle of wine. When the subjects drank the $6-bottle of wine and were then told that it was a $6-bottle of wine, the brain’s pleasure centers did not light up. On the other hand, when they were told the wine they had just drunk was a $60-bottle of wine, the brain’s pleasure center lit up consistently! Conversely, when subjects drank from a $60-bottle of wine and were then told that it was a $6-bottle of wine, no pleasure was registered. Overall, the conclusions taken from these experiments is that the benefits we receive from a product or a service are directly correlated to the price that we paid for it. 

Companies who sell a product or service where the resulting benefit cannot, with 100% certainty, be measured, can then leverage expectation bias to gain much higher sales, often at higher prices at the same time as their customers’ satisfaction level is increased. (If you think about it, there are many products or services where the benefit the buyer gets cannot be directly measured.) In order to achieve this multipronged goal, it becomes paramount for you to be able to fully understand the willingness to pay among your buyers in a specific market. This can be done through price-specific, online market research that specifically measures the monetary value customers associate with your company’s product(s) or service(s). In such market research, respondents during an online survey will be asked a series of questions that, when the answers are subjected to statistical analysis, will accurately provide you with important and highly relevant information pertaining to what your buyers are willing to pay for your product or service, within a specified market that your business is engaged in. 

This, however, is just the first step. A very important step none the less. 

To further understand how it is possible to increase your sales at higher prices, the willingness to pay measurement must in turn be segmented. In great detail. What this means is that the willingness to pay data from respondents with the same preferences for your product or service features, benefits, or even marketing message preferences are grouped together and then willingness to pay for each (segmented) group is analyzed and contrasted with the other groups from the survey. The results taken from this in-depth analysis will mean that your business will be further enlightened and will better understand what features, functions, and benefits that generates a higher willingness to pay compared to other features, functions and benefits that your business offers. Also, you will see what specific marketing messages and sales channels will drive a higher willingness to pay for your product or service. These results will also show you what kind of buyer and what circumstance around them will affect their willingness to pay, which they take into consideration before potentially purchasing your product or service. As a further example, think about how a different circumstance may affect willingness to pay, consider a commodity like gas, for instance. If your gas tank is nearly empty and you are on the way to the hospital with your sick child, your willingness to pay to fill up with gas is likely higher than if you were visiting your in-laws, with a fully-healthy family!

So, in closing, in-depth understanding of a market’s willingness to pay and being segmented both by-product or service features and also taking into account the unique variables attached to each buyers’ profiles will enables your business to target potential buyers better, to optimize your market strategy better and to get your pricing strategy better, so that you hit the “sweet spot” for yourself and your customers. Having done all this, it will all lead to your ability to increase sales at higher prices for your products and services. 

Per Sjöfors
Founder
Sjofors & Partners
www.sjofors.com