Five Ways to Sell in a Bad Economy
Some of my more popular posts over time have been those dealing with selling to two different customer groups: spendthrifts, who spend money freely, and tightwads, who don’t part with their money easily. (See Five Keys to Selling to Spendthrifts, Tightwads, Spendthrifts, and Everyone Else and Five Keys to Selling to Tightwads).
It’s safe to say that for the last few years, it was far more productive for marketers to target spendthrifts. In our overheated consumer economy, spendthrifts were a much more lucrative target than tightwads who had to be convinced to part with their cash. Now, though, we are all thinking like tightwads – even those who are still well-employed may harbor nagging doubts about their financial future. In this environment, it’s worth re-looking at some neuromarketing tips to succeed in selling to tightwads:
Minimize Buying Pain
Tightwads are characterized by an above normal sensitivity to buying pain. Research has characterized the pain of buying as being related to, among other things, the perceived fairness of the price and the immediate cash impact.
1. Make the price a bargain. Tightwads don’t like high prices, or prices that appear to be high for what they are buying. Sale prices may be more potent tools with this group. In a direct selling situation where the offer can be tailored to the individual, a price discount may help seal the deal. In most selling situations, though, discounting may not be a desirable option, or even a possibility. In these cases, it is possible that restating the price in different terms might help. An annual membership costing $120 might be described as “only $10 per month” or “only 33 cents per day.” In every case, you are trying to show the tightwad buyer how fair the price is.
2. Avoid repeated pain points. In Painful Sushi and Other Pricing Blunders, I talked about how per-item pricing (as in a sushi restaurant) creates a more painful buying situation than a one time, all-inclusive price (as in a seafood buffet). Since tightwads are more sensitive to paying pain, avoid drip-drip-drip pricing structures that punish the buyer every time he does something. Obviously, not all selling situations allow this – Wal-Mart can’t adopt “per cart” or “all you can buy” pricing. But many products and services, including internet service, cell phone service plans, health club memberships, physical products with options, etc., are possibilities for including a la carte items in a package price.
3. Create product bundles. This is closely related to the previous point. One effect of package pricing is to disguise individual pain points, as has been noted by neuroeconomics expert George Loewenstein. One example he cites is the bundling of car accessories, like leather seats, power features, and so on into a single “luxury package.” This avoids the multiple pain points of selecting separately priced items, and also disguises the individual prices. If the packaged items were sold individually, the consumer would have to make a specific decision on whether leather seats were worth an extra $1,000, a power moonroof $900 more, and so on. Even though the package may cost as much as, or even more than, the individual components priced separately, there’s less buying pain involved.
One good thing: if you can reduce the buying pain associated with your offer, you’ll almost certainly do better with the vast majority of your potential customers. All but the most extreme spendthrifts do feel some buying pain, and a less painful offer will help with more than tightwad customers.
Other Tightwad Techniques
4. Appeal to important needs. Tightwads are less likely to be seduced by the sex appeal of a product than other types of buyers. One of the experiments conducted by the CMU researchers was to present an offer of a $100 massage couched either in utilitarian terms (relief of back pain) vs. hedonic terms (a pleasurable experience). While tightwads were 26% less likely to buy the hedonic massage than the spendthrifts, they lagged by only 9% for the utilitarian massage. Most products combine a variety of characteristics, and the utilitarian ones may be most important to emphasize when selling to tightwads.
5. Watch Your Language! One rather startling finding in the CMU research was that changing the description of an overnight shipping charge on a free DVD offer from a “$5 fee” to a “small $5 fee” increased the response rate among tightwads by 20%! This is hardly inventive copywriting and didn’t involve any fancy neuromarketing, but the mere reminder that $5 was a small amount of money had an important effect on tightwads.
For those of you in the front line of selling, what other tips do YOU have for selling to newly-frugal customers?
“One rather startling finding in the CMU research …”
What research is that? Who is CMU, Carnegie Mellon University? Don’t get attribution sloppy on us…
We have built an entire sales training program around Cialdinis 6 hot buttons and one of the most powerful is to start at the top and let them downsell themselves to the level they feel comfortable – rather than try and upsell
Attribution is on the linked pages, Jon. Chill out on the pedantry.
Appealing to fear is nothing new. But it’s easier said than done…
Great Post! Thanks for sharing.
In the book Predictably Irrational, the author describes a technique, creating a decoy offer, that has the effect of moving people to the higher priced bundle by demonstrating exceptional value.
The example was from an Economist magazine offer. Buy the online version for $59, the print version for $125, or the online and print version for $125. When all three offers were presented to test subjects, the majority went for the 3rd option because it made the online version look free in comparison. When the second option was left out of the offer, though, a much lower percentage went for the higher priced bundle.
Seems like something to consider when creating your product bundles.
Any thoughts on whether or not it’s better to add that “small $5 fee” or just include it in the product price?
I find that I sometimes fall off the purchasing ladder when I’m hit with an unexpected shipping or handling cost, especially if I perceive it to be unreasonable. (I’m usually willing to handle the book myself, thank you very much…)
Isn’t it amazing that a simple word like ‘small’ as in your “small $5 fee” example, can be so effective as to increase response rate by 20%? Amazing!
Dick: “Any thoughts on whether or not it’s better to add that “small $5 fee” or just include it in the product price?”…
If people are behaving according to prospect theory, loss aversion makes a strong prediction that the additional $5 fee would be more painful than just adding it to the total cost. Of course this is a bit more complex of an issue since there’s some wiggle room in the theory involving reference points and such.
Regarding avoiding repeated pain points, a study showed that people were more likely to renew gym membership when they paid every month precisely because they felt the pinch. Feeling this pain made them use the gym more; when the memberhsip was up for renewal, they thought “hey, I do use this gym quite a bit- I’ll renew it!”. In contrast, those who paid yearly were less likely to renew because their pain of paying declined throughout the year and they weren’t motivated to reduce the pain by using the gym!