Since we know that people tend to buy emotionally and justify intellectually, understanding pricing psychology is a key consideration. Here's what you need to know.
Breaking it down
Accountants and bookkeepers aren't psychologists, but a little knowledge can go a long way in connecting with your clients. With that in mind, let's break it down into manageable chunks.
Two big characteristics of price psychology are:
- Price Leverage
- Price Emotion
Price leverage is typically dependent on the client because it’s their willingness and price sensitivity that usually sets the bar.
Price emotion can be broken out into three primary emotions a client will encounter at various times during the purchasing cycle, they are:
- Price Resistance (aka the initial shock of the price tag)
- Price Anxiety (aka buyer’s remorse)
- Payment Resistance (aka unwillingness to cough up the cash)
Price leverage and price emotion are factors that you’ll need to think about carefully, based on the individual characteristics of each client, but keep this in mind...
Clients pay money for services. When they hear the word ‘price’ they’re thinking about the value they’re getting for that price.
The value equation
To put it in accounting terms, value can be defined in the following way:
Value = Perceived service benefit + Perceived emotional association benefit – Price
Let's take an example of the perceived service benefit: If your firm completes the prospect’s tax return, the benefit of this to the client is that:
- Their taxes will be legally minimised
- They won’t be harassed by the authorities for not paying their taxes
- They won’t have to spend time trying to figure out how to prepare and file their own tax return – and then worry that they may have made some mistakes that could come back to haunt them later in the year.
But what about the the perceived emotional benefit? Well, the perceived emotional benefit of this transaction might be that your practice is a very reputable firm. In the eyes of the client, the person they’re dealing with always has time to respond to their needs and is well regarded in the community, and by the authorities.
Most people today accept that clients actually buy ‘value’. So if you want to generate more value for your clients, you need to increase the perceived benefit from the services you offer and/or the perceived emotional association benefit and/or lower the price.
The key is to figure out a way to increase the perceived service benefit and/or the perceived emotional benefit, and not lower the price.
One way to do this is to cut down the time you spend on tasks that don't add a perceived service or emotional benefit, such as chasing clients for documents and data entry. Receipt Bank automates your document collection and data entry so you can focus on adding value for your clients and getting the price you deserve.
Putting pricing Psychology into (your) Practice
Our free guide Pricing Your Cloud Services: Perfecting Value Pricing covers everything you need to know, from discovery to pricing reviews.
You'll find out:
- How to find out what your clients really value
- The secret to structuring pricing tiers
- How to create proposals that win you business