Thoughts on Why You Aren't as Price Conscious as You Say You Are

Everyday I seem to talk to at least one person who runs a business who tells me that “it’s all about the price.”  Sometimes they are struggling, sometimes not, but in 99% of cases I would suggest that their judgment is being clouded.   Perhaps they are so jaded from being in their business for so long, or they are too close to the issues at hand, or they just don’t have the experiences to show them otherwise.  

Let me share why pricing issues are the most over-used expression in business today.  Here are some reasons that people are not as price conscious as they think they are.

• People are not educated.   I’m not suggesting that they are dumb, just ignorant when it comes to the details of your product.   I once had a client who said to me that there’s no patents – it’s all just chemicals, and all the vendors are all the same.   Let’s say that scientifically, the statement is true.   First of all, most of the customers don’t know that, and probably never will.   One iota of naivete or fear will send customers scurrying to what they think is the most trustworthy brand.  And, in whose best interest is it to teach the na?ve customer?   Surely, this self doubt has probably worked on you.   Have you still bought the name brand version of Tylenol when the “same active ingredients as Tylenol” sits right next to it on the shelf?  
• They appreciate the value of their time.   If you really are price conscious, you’d run home to your Brita filter in the refrigerator and drink water from that every day.  Or maybe buy a water bottle and fill up your water bottle in the morning?    But if you’re like most people, you buy things as you need them.   The convenience store industry is $300B+ a year (not including fuel) so everything sold in them is stuff you could have bought cheaper for somewhere else if you didn’t value your time so much.

1. It’s not social acceptable to not care about price.   In the US at least, much ado has been made about “rich” people and the “1 percenters.”   So much so that if you even ask a rich person “are you rich?” they will say no.   Likewise, I have never heard anyone declare “I am NOT price conscious” but I guarantee you that there’s at good size segment of the population that isn’t zeroing in on your price, because they really just don’t care.

•  They are lazy?    Somewhere between appreciating their time, and not being socially acceptable to declare, people just don’t have the time.   I know someone, for example, who refuses to return something to Walmart – no matter what they buy.  He says that waiting in line takes too long.   He is currently unemployed, so I’m not sure what his time value is.  
• They are overwhelmed.   Above, we talked about people who make a choice on how they value their time – either they’re lazy or they have legitimate other ways to spend their time.  However, there’s a lot of other people who don’t give this issue much thought.  Take, for instance a working parent, who just gets overwhelmed with the pressures of work and children who just simply run out of time, even if they’re not aware it’s happening.  The overwhelmed will make impulse decisions which lessens the price sensitivity of a decision.   

Lastly, there is one special type of price consciousness that isn’t being done for the sake of price-consciousness.  Instead, they actually seek out price consciousness as a sport, not driven by “saving money.”  This one is interesting, because you have to play to their needs for a sport, but also need to recognize them for what they are, and react accordingly.  An example?   Look at the growth of retail stores like Kohl’s vs. JCPenney’s in 2012-2013.   Kohl’s is the kind of discounts, where you take %’s off after taking a % off (serious math!).    JCPenney’s tried a different approach.  Ron Johnson, the heralded executive who had just launched the successful Apple Stores was hired to be JCPenney’s CEO back in 2012.   He eliminated all sales, coupons and specials, and arguably gave people the price they wanted without doing any work!  A price conscious person’s dream, right?  Well, immediately revenue declined, and the customers went away in droves.   He killed the sport of shopping at JCPenney’s, and the new CEO didn’t even make it to his 18 month anniversary.

The 2 key takeaways here are that price is one of many levers, and that people overstate vs. their actions.  They don’t do what they say they will do.    Instead, recognize that your product or your company is more than just a price tag and act accordingly.  For nearly every industry, your product (or service) is everything from an event to an experience, and can’t simply be subjected to one number.  From the minute the customer has awareness about you, everything is in play.  Price is just one component of it, and only give it the amount of attention it is due.

This is another in a series of Linkedin articles that delves into the mystical and magical world of product and pricing and their impact on profits. I welcome your comments and feedback. Let's get a dialog going -- do you have a good story to share? Please do so!

I work as a consultant helping companies maximize profits through better marketing, selling and pricing. If your sales and profits are out of whack – or you don’t know where to begin - we should talk! I've worked with some of the biggest corporations and smallest individual businesses out there. I’m also a small business owner myself. Contact me.  You can read more about my work at my LinkedIn profile or at my website: https://www.dukeofprofit.comP