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Pricing CRO Style: Matching Price to Audience

Pricing CRO Style: Matching Price to Audience

Pricing has so many roles to play in e-commerce. It has to cover product costs, personnel costs, and marketing costs to keep the business running (and profitable!), and it can act as a marketing tool, differentiating you from higher priced competitors. It’s a fine line to walk if you try to do it all – and most companies think they have to do it all.

But when it comes to conversion rate optimization (CRO), the lowest possible price isn’t always the right price – in fact price doesn’t necessarily depend on what the other guys are doing. The price you can charge for optimal conversions is based on a whole other criterion: Your audience.

Playing The Price is Right

Let’s play a game: True or False

If you lower your prices, your conversions will improve.

Well?

False – it depends on your audience and your unique value proposition (why they’re buying from you, rather than anyone else).

It’s counter-intuitive, but people don’t buy based on lowest price. They buy based on:

  • Trust
  • Brand (which is tied to trust)
  • Ease of purchasing
  • How well you communicate your value proposition
  • Proof your product will deliver the buyer’s desired outcome (also tied to trust)
  • Reduction or removal of risk (read: Trust)
  • Immediate action incentives

Basically, your sale depends on building trust, delivering desired outcomes, and tipping the scales of decision by gently prodding your buyer to act. When you have that combo in place, you’re no longer a price-based decision, you’re a value-based decision.

But – if your value proposition is, in fact, that you guarantee the cheapest price around, and that’s working well for you, then you’re already appealing to your target audience of bargain hunters. You don’t necessarily need to attract those who seek value to run a profitable business. Just look at Wal-Mart. You do still have to understand your audience and gain their trust though, because cheap prices won’t overcome those deficiencies. So read on.

Trust Issues

The biggest conversion killers have to do with trust. We want to know that we’re not going to be victims of a scam or unscrupulous business people, so we look for indications that the businesses we purchase from are on the level.

Your buyers, every one of them, will feel better about buying from you when:

1. Your site looks professional and updated

Both of the stores below are reputable, but which one would you prefer to buy from based on web design alone?

Store Visual Appearance
Store Visual Appearance

Or…

Store Visual Appearance
Store Visual Appearance

The funny thing is – the first web page actually has more trust indicators. They show their physical address and telephone number, they have a brick-and-mortar store, they’ve been in business for over 36 years, and below the fold, they have a quality guarantee AND a video of the store owner dancing the Cha Cha.

But the second website has a more updated design, the modern “Need Help?” chat window, and a top bar that is clean and simple with a search feature, “my account” and cart. I feel more comfortable here, and when I take the time to scroll below the fold, I see that they’re the “world’s largest online dancewear store” (clearly many people shop here – and that’s social proof). The only thing that troubles me is that they have this floating quote with zero attribution.

Social Proof
Social Proof

This site would convert much better if they had real, attributed quotes from happy customers, or even better, user reviews on their product pages.

2. You show user reviews

Even if your user reviews aren’t 100% good, just having them on your site has been proven to boost conversions. Think of bad reviews as a chance to publicly show your excellent customer service skills. And good reviews? Those are golden.

  • Consumer reviews are significantly more trusted (nearly 12 times more) than descriptions that come from manufacturers. – eMarketer
  • 88% of consumers trust online reviews as much as personal recommendations and 72% of consumers say positive reviews make them trust businesses more. – BrightLocal
  • 63% of customers are more likely to make a purchase from a site which has user reviews –  iPerceptions

3. More social proof

For B2B e-commerce businesses especially, a great way to show social proof is to display the logos of companies that buy from you. B2C companies can get in on this action too by showing pictures of people who use their products (bonus points if they’re celebrities).

4. Product images are big, professional and varied

The simple act of making your product images larger has been shown to increase sales by 9%. But it’s not only size that counts, you also need good resolution (no grainy photos!) and alternate views of every product. ConversionXL recommends alternate views, detailed close-up shots, and pictures of people using the product.

5. You state your return policy and privacy policy

Buyers want to know what they can expect from you if the product doesn’t work out – and what they can expect from you when they trust you with their personal information.

6. Trust badges are prominently displayed

Trust badges include security seals, Better Business Bureau badges, McAfee, Norton, SiteLock and Google – but perhaps the most trusted badge is Paypal. ConversionXL research showed that Paypal garners more trust than all of the above. It’s also a handy way to pay.

The bottom line is: People will pay a premium to buy from businesses they trust.

Desired Outcomes

This is where understanding your audience really comes into play, because what buyers want most is the outcome. There’s an old saying that nobody who buys a hammer wants a hammer – they want a hole in the wall. What is the end result your buyers hope to achieve when they have your product in-hand? If you prove you can deliver that, they won’t care about the price. Here are a few ways to do just that.

1. Don’t pick desired outcomes out of thin air – do your research

It’s an all-too-common mistake for business owners to think they know what their customers want, without actually having asked them! Just like there’s “no crying in baseball,” there’s no guessing in business. Ground your assumptions in actual, qualitative and quantitative research (ie. words and numbers both).

2. Don’t settle for the easy answers

What people really want most isn’t faster shipping or lower prices, it’s to feel a certain way. As Talia Wolf wrote in Emotional Targeting 101:

When we buy something, we don’t purchase a ‘product’, a special price or features; we purchase an experience and a better version of ourselves.

When analyzing buyer responses to your qualitative data surveys, be on the lookout for hints of what their aspirations are, as well as the practical considerations they appreciate most.

3. Clearly state your value proposition

Your target audience’s desired outcome is closely tied with your value proposition – in fact, your value proposition had better include your audience’s desired outcome, or you haven’t achieved product-market fit.

Joanna Wiebe, Conversion Copywriter and Founder of Copy Hackers defines value propositions like this:

A value prop expresses what your prospect strongly desires 1) that only you offer or 2) that you offer best / most interestingly / most beautifully / most affordably / etc. A quick formula for your value prop is this:

Our customers are loyal to us because they want {highly desired X}, and we offer them that {in Y way}.

4. Show that you’re delivering on your promises with user-generated content

Yes, this trust exercise is also important for proving you can deliver on your audience’s desired outcomes. User-generated content can include product reviews, testimonials, links to third party review sites, and best of all – user photos. Check out Modcloth of outfit photos.

5. Price based on perceived value

“Perceived value” is what consumers think the product is worth to them, rather than a monetary value based on material quality and cost. In the 2010 book Money Makers by David Snider and Dr. Chris Howard assert that “When the benefits outweigh perceived costs, your prospect will take action.” Once you’ve changed your content to sell the desired outcome, the benefits of buying your product will become more apparent, and have a better chance of outweighing the perceived costs in the buyer’s mind.

Essentially, when your customer believes they can get exactly what they want from your product, you can justify charging more for it.

Action Incentives

Even when you’ve targeted the correct desired outcome for your audience and made your website as trustworthy as possible, you can raise your conversion rate even further by providing a little extra incentive. Something that spurs them on to “Buy Now!”

Usually that means putting something on sale, but not always.

1. Show your stock numbers

When stock numbers are low on a certain item, or on certain sizes, show it. Anyone who is on the fence of purchasing or not will move, because of Loss Aversion.

Loss Aversion
Loss Aversion

Loss Aversion is the idea that humans will do more to avoid a negative consequence than to make a positive outcome happen (because negative consequences hurt worse than positive results reward). It’s closely related as Scarcity, one of Cialdini’s 6 Principles of Influence.

Basically, it hurts (and hurts bad!) to lose something you want, even if you don’t want it very much. In fact, when you face the prospect of losing something, you want it even more. It’s why “Now for a Limited Time Only!” and “Only 5 left!” work so well to boost conversions, even when the product is full price.

And, of course, this tactic works really well for limited time sales.

2. Buy Now for [Incentive]!

“Buy Now for free shipping,” or buy more for free shipping – basically, act now to get a lower price or faster delivery, or even a free extra item, like a mystery gift bag. Having an order minimum for Free Shipping is one of the best ways e-commerce stores can increase sales they wouldn’t otherwise get.

In a study conducted by eConsultancy, Free shipping was the most popular motivation for 82% of UK and 80% of US consumers.

What’s easy for you to offer that has value to your customer? Make that your incentive and watch conversions rise! (But your incentive had better be good, because otherwise you’re undermining their trust in you, which will cost you in the long run).

3. Limit options

Sometimes, the sheer number of options you have on your site undermine your conversion rates – people can’t decide. In The Paradox of Choice, author Barry Schwartz says the more choice customers are given, the easier it is for them to choose nothing. If you have lots of products, invest in really good search and filter features so people can narrow down their options based on – yep! – their desired outcomes.

What’s Your Price?

The right price for any item depends more on how well you prove it will deliver the buyer’s desired outcome than any other factor. Your buyer wants to feel secure in their purchase, which is why trust is of paramount importance; your buyer wants to feel good about the purchase (all decisions are emotional); and your buyer might need an additional incentive to make his or her move.

You don’t need to have the lowest price to convert. You just have to give your customers the best set of reasons to convert with you.

Published by

SaaS Consultant & Customer Success Evangelist. Founder at Authentic Curation. Moderator at @ProductHunt & @GrowthHackers. Previously: Growth at @Inboundorg. INFJ.