Are You Training Your Customers Not to Pay?

Raffa Financial ServicesRaffa Financial Services on 06/25/2018

Remember the old saying, “You get what you pay for?” This line of thinking seems to have disappeared. Today’s consumer motto is more along the lines of “I deserve it, but I shouldn’t have to pay for it.”

And it could be our own darn fault.

What’s going on?

Many customers have decided they are entitled to certain products and services. They are convinced that they shouldn’t have to pay for these things, no matter how much they cost to produce.

Here are a few quick examples:

  • News and information: We value being up to date, but we refuse to pay for publications, subscriptions, and/or access to online articles.
  • Shipping and delivery: We value being able to get things dropped off on our doorsteps, but we’ll do whatever we can to avoid paying for this convenience.
  • Mobility: We value being able to drive our cars everywhere, but we complain incessantly when the price of fuel creeps up a few cents. Even though gas prices in the US are some of the lowest in the world.

And yet, we are more than willing to spend our hard earned cash on other things we value. Cell phone plans. Gym memberships. Anything pet related.

So why are we willing to pay a premium for some things while demanding low or no cost pricing for others?

We’ve been conditioned

Training a dog to wear goggles may be difficult, but training a human not to pay for things is extremely easy. And businesses do it all the time. By offering their services for free.

Facebook. Skype. Gmail. Pandora.

Tons of people use these services regularly. But if you suggest they should upgrade or pay a fee to access them, they will look at you like you just suggested putting dirt in their coffee. Not because they don’t love the aforementioned products, but because they are already getting them for free.

And we humans are so easily trained to expect things for free.

Let’s look at the Pandora example. Many people balk at the idea of upgrading (i.e. paying for) their Pandora account. And yet some of these very same people willingly pay a monthly fee for other music streaming services. And they do it without complaining.

Can you guess why?

Because they were never offered a free option. The expectation that these services have value and are worth paying for was set up from the start.

The discount trap

The same is true for anything else people regularly pay for, including gasoline. Because oil prices fluctuate, so do fuel prices. And once we’ve paid less for something, look out. We do NOT like to go back to paying more. We’ll do it if we have to, but we will also scream about it. And you can forget about brand loyalty. We’ll drive 17 miles to another station just to save 3 cents a gallon. (Please don’t do the math on this.)

It’s the same psychology behind discounts and clearance sales. Everybody loves a good sale! Customers love them because they can get cool stuff at discounted prices. Retailers love them because they make more money and get tons of new customers.

But do they really?

A great sale might inspire people to buy more product. But depending on the discount, businesses may be drastically reducing their profit margins or even losing money on the deal. Think about it. They don’t call it a “steal” for nothing.

And as for all those happy new customers? Well, they’re happy, all right. They know they paid under market value for what they got, and they have no plans to become part of your loyal, paying clientele. Instead, they will reward your efforts by bragging about their conquests and holding out for the next big sale.

By giving your stuff away, you’ve lost out on profit and trained your potential customers to never to pay full price for your offerings.

Is it time to retrain your customers?

If you’re a for-profit business, it’s time to throw FREE out the window. If you believe in what you're offering, set the expectation of value and charge accordingly.

Train potential customers to recognize that your products and services are worth paying for. Then, train yourself to charge what you’re worth. 

 

We help clients identify organizational challenges, create big picture strategies, and put customized solutions in place. From tailored benefit programs to custom retirement plans to risk management services, we’ve got you covered.

 

Photo by damedeeso

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