Let’s look at some of the the issues that lead businesses to try this shady-looking sales tactic, then look at alternate options that might work out better for everyone.
Price vs. Value
If your prices are too high, and your customers see this right away, they could dismiss you out of hand and go with a competitor, as the thought goes. Much better to hide your pricing.
But what does “too high” mean? If you’ve calculated your cost of production or service and factored in a reasonable profit margin, you know you won’t be arbitrarily setting your costs higher than necessary. (And if you skipped that part and just set a price, and no one is buying, your prices might really be too high.) But given that, it’s important to understand that the price tag is only one factor your customers will use to decide whether to buy from you or not.
Another important factor they’ll consider is value. For example, at Click&Inc, with the way that we presented the value of our Deluxe incorporation package, we show in detail that everything included in the $229 price tag makes this a reasonable price for many of our customers—and we offer a bare-bones $99 package for others. Customers see not only our prices, but also exactly what gives that package value that deserves the higher fee.
A reason frequently given is that businesses don’t want their competitors spying on their prices and using those prices to mark theirs just a bit lower.
Don’t insult your competitors’ intelligence. It’s not that they aren’t spying on your prices—they very well might be, and you very well might be doing the same—it’s just that they’re smart enough to go through the order process as a customer until they learn your prices, and then where are you? Hiding your prices from your customers, that’s where—and your relationship with your customers is more important than what your competitors are doing.
We’ve all encountered a website we’ve passed up because it didn’t include prices: a huge warning flag. As customers, we want to make informed decisions. We don’t want to be roped along and given a sales pitch with the prices withheld.
Hiding your prices from your customers, for whatever reason, will make a certain percentage of people (there’s no telling how high) move on to your competitors before inquiring further.
How to deal
If you’re just not able to list prices on your website because your services are so highly customized that you need to calculate them differently per person, it may be a good idea to take a close look at how you’re determining your prices. Do they fluctuate wildly? If the same project or order came along next week, would you price it the same?
First, you need a formula for coming up with your prices. Just think about your expenses and your expected profit margin, and the appropriate price should emerge. (If you don’t have a formula, how will you know if what you’re charging appropriately covers what you’re spending?)
If possible, use that formula to develop price points, perhaps in package form if possible (like the Click&Inc site linked to previously). This allows you to provide an accurate estimation of prices for various types of orders, giving both you and your customers an idea of what to expect.
Or, if packages just aren’t an option, consider using the “Starting at $$” tactic—if nothing else, it’s a place for the customer to start.
How did you develop your pricing models: your competitors, a carefully considered formula, a wild stab in the dark, or something else entirely? Share your story and leave us a comment!