Marketing: When someone else pays . . .

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Architectural  teamWe’re human, after all. If we are spending our own money, we are frugal (generally). When we are spending someone else’s cash, we don’t care about the price. This dichotomy influences pricing and marketing decisions quite dramatically.

If you are selling directly to the paying user, you need to have a compelling argument, a truly good value proposition, and plenty of credibility/references. You may be lucky enough to command “top dollar” if your purchaser has plenty of cash (luxury brands) and/or your reputation is so stellar that clients are happy to pay a premium. It can be done, and if you are able to pull it off, you have achieved the marketing and sales home run.

However, if you aren’t quite in those exalted ranks, then your best chance of making the most money is to find a way for people to pay more with less sales resistance, and the best way to do that, is to transfer the cost of the benefit to the person or organization who can least afford to say “no”.

The most classic examples of these pricing practices occurs within the airline/travel industry. Last minute, full-fare business-class tickets are astronomically expensive. Almost no one, except perhaps the ultra-rich, pay for these tickets with their own money. Their business (or even better) their clients reimburse them under travel policies allowing the extravagance.

Of course, the organizations, businesses and individuals paying the bills try to fight back against over-pricing. The homeowner or business owner with an insurance claim may doesn’t care about the price (as long as the repairs are ┬ácovered) but the insurance company sure does. Here, the power balance can shift, and the bill-payer has negotiating power over the service provider, so the margins aren’t so great.

In our own business, we sell many thousands of dollars each year of advertising to suppliers of featured companies in special editorial profiles. In theory, the company receiving the featured profile benefits far more than the supplier-advertisers who pay the freight. However, If we abuse this pricing power, we ultimately pay through a less-than-wonderful reputation and branding effect. We therefore strive to deliver genuine value to everyone . (This explains why I write this blog, in part.)

Nevertheless, in determining your marketing and pricing strategy, if you can design your affairs so so that payment is dissociated from the direct service, you may find you have far less sales resistance and, in certain situations, can command a much higher price than you would otherwise. Think creatively. Extra margins — and profits — may be right under your nose.

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