It’s not really about the price…

Ask a sales person why they won an opportunity, and they’ll typically list all manner of potential reasons, such as

  • Great support – pre and post sales
  • High quality
  • Features
  • Options/flexibility
  • The relationship they have built up with the client

And so on..

But when you ask a sales person why they lost an opportunity, and you almost always hear just one answer…

PRICE!

I offer as ‘evidence for the Prosecution’ Exhibit A — The HP TouchPad.

This is (was!) HP’s response to Apple’s iPad. It had a whole bunch of tech features that were missing from the iPad2. And it was available for the same price as the iPad2.

And yet HP couldn’t sell them.

They were in shops and on the Internet – availability wasn’t a problem.

And yet HP couldn’t sell them, well, not many anyway… (see here…)

But when HP suddenly announced it was pulling out of consumer PC and tablet business and dropped the price of the HP TouchPad to $99, they were sold out.

I can hear it now – the argument for the Defence – they sold out because the price was dropped… and so why not drop the price of other tablets, and sell a load more…?

LIES!!!

They sold out quickly because the RISK involved in buying it, vs the potential value/benefit of having it, had dropped to acceptable levels for a lot of people.

Buyers in every situation fear just one thing – FAILURE!

Making up this failure is some combination of the following:

  1. the fear of paying too much
  2. the fear of being left disappointed
  3. the fear of being laughed at or criticised
  4. the fear of change

There isn’t the same risk in buying a full price iPad as there is in buying a full price tablet from anybody else.

Why?

Well, iPads work, they’re a known quantity, they provide the means to do everything most people want to do, and don’t required a degree in computer science to use, plus they’re cool – few people would give you a hard time for long over buying an iPad. Clearly, given how many millions of iPads have been sold, $499 for a tablet is not too much… and few are left truly disappointed, or get laughed at or criticised for having one – if this was an issue people would not have bought an iPad, sales would have been woeful… just like sales of every other tablet currently available… And there’s little fear of change for many – already familiar with the iOS software in iPhones & iPads, and its ease of use – there’s little perceived change involved.

But some other tablet? A tablet which has more tech stuff, doesn’t look so cool (arguably), costs at least the same, if not more, not noted for ease of use for the typical human being, and no hi-quality app store etc to go with it…? Try selling that to your spouse/family… or yourself… unless you want to ‘hack’ your tablet and/or simply hate Apple and its products…

But at $99 you can make the argument “well, at that price you can’t go wrong, I got a tablet for under $100” – plenty of people would understand.

You get the same ‘experience’ for $99 as you would at the original $499, but if it turn out to be a klutz, well, what do you expect for $99…

People buy a certain level of risk – a balance between the cost of the solution and the implications of not having the solution…

At $99 the HP TouchPad  tipped the balance clearly in to the ‘acceptable risk’ category which was beyond its reach at $499 or even the heavily discounted prices that were floating around just before the fire sale at $99.

So my call to action here is simple: just how are your customers perceiving the balance between cost of solution and implications of not having a solution… and what do you need to do to tip them in favour of buying a solution, ideally from you?

One thought on “It’s not really about the price…

  1. Pingback: It’s the Risk, Stupid! » Martin Schmalenbach

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