Have you ever named the price of your product or service and had a prospect shut down the sale immediately? According to Lestraundra Alfred, writing for HubSpot, this could be because of price sensitivity.
Alfred says that, “Price sensitivity measures how much demand fluctuates when the price of a product or service changes. Essentially, price sensitivity determines how easily your customers are swayed from buying your product if you increase your prices.” But it’s not just when your prices increase. Sensitivity depends on what the prospect sees as the norm when it comes to the price of what you’re selling, as well as a few other factors.
Chances are, you’re in a highly competitive industry. You go toe-to-toe with your competitors on a regular basis. Your competitors may also have a lower asking price than you. If your competition has already approached your prospect, they may be focusing on your competition’s price. “When a product can be directly substituted for another brand without impacting quality or ease of use, customers may be willing to go with the cheapest product because they know they are likely to achieve the same result,” says Alfred.
There are ways to overcome this price sensitivity obstacle. You need to clearly be able to differentiate both your product/service and yourself from your competition. If you can prove that you provide more value to the customer than your competition, the prospect will likely choose to do business with you, regardless of cost.
How dire is the prospect’s need for the solution you can provide? What about timing? How long do they feel that they have to fix their problem without negatively affecting their income or operations? Identifying your prospect’s problems, pain points, and deadlines is the beginning of establishing your product’s value. To further combat potential price sensitivity, you need to make sure that the prospect understands the value of your product. If you have tailored your sales presentation to the prospect and include evidence and examples of how a business relationship with you can benefit them, the perceived value of your product will be so high that the price won’t matter as much.
The Cost of Switching to Your Offering
Sometimes it isn’t your asking price that causes a prospect’s price sensitivity. Switching from one product or service provider to another can be a costly endeavor for your prospects. “For example,” says Alfred, “when purchasing from a SaaS company, B2B buyers need to factor financial onboarding costs associated with using a new piece of software into their budget during the decision-making process. They also need to consider the time and resources they need to spend preparing their team to use a new piece of software and how that can impact their productivity and bottom line.”
If the cost of switching to another product or service is significant enough, prospects will be more resistant to change. Unless you can provide them with evidence of a significantly positive shift in ROI, you may have trouble overcoming this particular case of price sensitivity.