Contributed by Neal Polachek, Founder of ThinkLikeAnApp
We think about friction points as unnecessary hurdles that get in the way of a prospect choosing to say “yes.” Friction points come in all shapes and sizes: a broken website link, incorrect store hours, wrong address, a broken payment process. The list goes on and on.
We think one of the most important friction points is pricing. Let’s examine that from the perspective of large brands.
Pricing Transparency & Consumers
As the importance of pricing has increased for brands, big corporate marketers are expected to have a deep understanding of their customers’ price sensitivity. But what about your own company’s prices?
As you work through how much to charge for your products and services, do you ever ask yourself or your team members, what will my customers think?
While there may be no magic formula for pricing decisions, if you want to grow your top-line revenue, you need to consider how transparent prices will affect your prospects’ and customers’ perception.
So what does transparency mean in the context of pricing? It means that prospects and customers can quickly learn and know what they’re going to be paying for and why.
Here’s what’s not transparency in pricing: When you’re looking to book a hotel room and it says it is $150 per night and then when you’re about to make a reservation and in fine print it says there’s a “resort fee” of $25 per person per night. Who hasn’t run into that totally off putting and massive friction point.
How Transparency Affects Experience
Transparency of price is an important dimension of pricing because it drives consumers to question the value of a product or service. There is plenty of research that suggests more transparent pricing is appreciated by customers.
In fact, 46 percent of customers say that the more transparent a price is, the better. Even more compelling is transparent pricing coupled with outstanding customer experiences. That is a dynamic combination.
As consumers, we’ve come to appreciate pricing transparency, and we’re seeing large companies spending considerable marketing dollars on this. We point to Southwest Airlines.
Before the pandemic, the company spent millions of dollars marketing their version of price transparency with their marketing campaign called “Transfarency.” This is what Southwest says:
It’s really important to think about pricing in today’s highly competitive marketplace. And as you think about your own pricing approach, taking price transparency into account may help you improve your overall value-proposition.
One of the benefits of being highly transparent with your pricing is that sometimes you can better qualify prospects because they will either appreciate your value-proposition or reject it, but at least you won’t spend a whole lot of time on prospects who really don’t value your offer.
Pricing’s Play in the Customer Journey
As you evaluate your pricing strategy, here are three tips to keep in mind when it comes to transparency:
- Think about the entire journey. Make sure that the pricing is transparent, not just at the point of purchase. Transparency in your prices starts with how you communicate them to customers throughout the customer journey.
- Offer options that are easy for customers to understand. Make sure that your products or services are priced clearly and accurately. Avoid using complex sales offer mechanisms. That often is a way of hiding some aspect of your value-proposition that you’re not totally confident in.
- More isn’t always more. It may be a struggle to set the right price, but don’t make it more complicated by bundling too many options and services. Instead of making your prices more complex, simplify them. Again, that is the beauty of Southwest Airlines’ Transfarency approach. In the face of one airline after another burying change fees and baggage fees, Southwest is as transparent as possible.
By following these guidelines, you’ll have greater insight into how transparency in pricing affects prospects and customer’s perception of your products and services. When they are able to easily understand the price, they will be more willing to pay that amount. And they’ll do it without questioning whether there is a better deal out there. And you’ve just eliminated a key friction point in the customer journey.