Do Your Customers Really Want to Pay Less?
We all want maximum value for minimum effort or cost. But which one is more important? In times of an economic downturn, it is very tempting to offer less for lower prices. But is it really what your customers want? Here’s how to look at it in order to make the right decision for your customers.
A few years ago I changed one of the service providers I was using since I started my company. I actually didn’t want to do it. They served me really well (or at least that’s what I thought) for the first 2 years or so. So what happened there exactly? How did I end up switching?
There was a decision I needed to make that I was contemplating and yet postponing since day one. I kept raising it with my previous service provider (let’s call them A. for simplicity), and A. kept saying I shouldn’t do it, that despite what I might be reading online this direction isn’t relevant for me. They also said they’ll be happy to explain in a meeting why exactly.
With all the everyday hustle of running a business I never got to it, but when I was on maternity leave, I thought it was a good idea to reconsider things. So I set up the appointment and went to hear all about the decision — pros and cons. I left the meeting quite convinced that this is not the right direction for me. A.’s main point was that it is too complicated and not worth the benefits.
But since I was debating this for quite some time, I wanted to hear another opinion. I decided to meet B., who I knew from friends’ stories would advise me otherwise. I went to meet B. willing to prove them wrong because of everything I knew from the meeting with A.
B. showed me something very different from A. They were offering something much more complicated but with a much larger benefit.
At that moment it dawned on me, that despite A. and B. having the exact same profession and providing the exact same services to businesses like mine (they even have a suspiciously similar amount of experience), they saw their jobs very differently. Their end-game and goals were completely different.
A.’s goal (in my hindsight) was to keep things at a minimum level of cost and effort (while still getting the job done). They were optimizing for simplicity.
B.’s goal (and their entire behavior and attitude) was to maximize the benefit I get from their services. They optimized for value.
To be perfectly clear, A. wasn’t lazy. They truly believed that minimum cost and effort were what served me best. The problem was that they didn’t ask me. They made the choice for me without allowing me to choose between all relevant alternatives.
When I started, simplicity and reduced cost were truly what I needed. But after two years in business, I wanted to maximize the benefit, even at a slightly higher price. A. didn’t give me this option (and didn’t even know how to phrase it), while B. made it very clear that they will maximize my benefit. That’s how I ended up switching.
There are times, products, and audiences when optimizing for minimum cost and effort (even with the trade-off on benefit) is the right thing to do. But you want to do it knowingly, after considering the alternatives and reasoning why you are choosing this path. Hint: even in times of an economic downturn lowering your prices blindly is not necessarily the right thing to do. Another example is product-led growth, which combines lower prices with a self-service approach. That, too, might not be the answer, as we explain deeply in our Unboxing PLG course.
These trade-offs between value and price are ones that we all make all the time. That’s part of the job. Still, let me highlight a few dark corners you can put a flashlight on, to see whether you are making subconscious trade-offs that might need to change.
I’ll go from the most obvious and easiest to amend to the least.
Layer 1: Your Customers
We always try to make things simple for our customers, while preserving the value. That’s the magic of a great user experience. Ask yourself if there are places you have gone too far on one side instead of the other. Since there are many articles about making things simpler, I want to put the focus here on making things more valuable.
Are there places where you assumed your customers won’t be willing to make an extra effort (or payment) and you decided to reduce value for them?
Even if you answered yes to this question, it doesn’t mean it was the wrong decision. It might be exactly what your customers needed from you, but you want to make sure this is an informed and deliberate decision you are making.
How can you tell if it was the right decision or not?
For starters, ask yourself what was the real trade-off. What benefit did you prevent from your customers by making that decision? And what was the cost/effort reduction they gained?
After you have it clearly in front of you, use your knowledge of your customers’ needs and preferences and reconsider if this is the trade-off they would make for themselves. A customer persona is a great tool here since it helps you get into their general mindset and not just the specific interaction with your product.
Moving the trade-off and the considerations from the subconscious level to the conscious, rational one, helps you validate your decisions and make sure they are serving the purpose you are actually trying to serve.
While I was writing this article, one of my consulting clients called me to talk about this dilemma exactly: as their product is getting more mature and allows more functionality, their UX which was something they were super proud of up until now is getting slightly more complex. The VP of Product was having a hard time letting go despite thinking rationally that this was the right decision. I’m a big believer in gut feelings. When your guts tell you something other than your mind, let them debate. Hence my advice was to put the trade-off even more clearly on the table, letting each side (gut and mind, simplicity vs. flexibility) make their claims. Understand why, while your head tells you that this is the right decision, your gut tells you otherwise. Once that’s done you can make the decision again — one way or the other — and even if it wouldn’t change the decision itself, it will make you feel much more comfortable with it since you will be making it knowingly.
The same principles described here are relevant for the other layers as well, but as we go deeper it might be harder to find the real trade-off and motivation. I’ve included examples to help you out.
Layer 2: Your Organization
The organization puts many constraints — some hidden and some explicit — on what you feel you can and cannot do. From budget and headcount to structure, politics, and even culture.
To test yourself, see where are you making compromises that are based on the assumption of one or more such constraints. Then, ask yourself if these constraints are real and if you put the trade-off clearly in front of a decision-maker would they want this constraint to hold or perhaps they would be willing to change it for a greater benefit.
In one of my early career roles, I was brought into the company as a development team leader with a very specific task they wanted me to lead. As a good product-leader-to-be (although I didn’t know it at the time), I asked them why did they want to do it, and then performed market research to understand the problem better. I realized that the task they wanted me to lead wasn’t going to solve the problem they were trying to solve. With this understanding (and proof) I went to my manager and explained my line of thinking. I also suggested an alternative that would solve the problem but costs about 5X of what they had originally planned. In my case, it worked and I got the budget increase. The project was a success and helped the company many years afterward. But even if I wouldn’t have gotten the budget, at least management would know what to expect.
Making the trade-off explicitly helps in aligning everyone on the right expectations.
The same goes with your customers: do your customers have organizational constraints, preventing them from trying, buying, or using your product to its full extent? You want to understand them, and see if you can work around them, because if they aren’t able to get the value they won’t pay anyway, so you only have what to lose by not trying.
Layer 3: People (Including Yourself)
Sometimes the hidden constraints we put on ourselves have to do with what we believe people need, or our personal preference.
For example, if you need to make a presentation to the board of directors, your tendency might be to show everything in a positive light — you might feel that the CEO needs it to be this way. But do they really need this? Maybe it’s time for an honest reflection? Talk to them before you assume you know what they need.
Another very common example is people’s tendency to avoid conflict. For some people, it is grounded so deeply in who they are, that it unconsciously beats any other argument in the trade-off.
If you are a conflict hater and want to move past that, ask yourself what are you actually giving up on (without even trying!) in order to avoid conflict. Putting it in front of you will help you be more aware. It doesn’t necessarily mean that you always have to walk straight into the conflict, but in order to pick your fights, you have to be willing to fight some of them at least — make it the ones that are worth it.
To sum things up, this post is not about good and bad decisions. Any decision can be the right one, depending on the situation. Today’s situation is definitely challenging and calls for rethinking many things. But remember that even in such a climate, the obvious and easiest solution is not always the right one. Since there are almost no objectively good or bad decisions you can make, you always need to choose how to move forward under (sometimes extreme) conditions of uncertainty. Taking risks is inevitable. But still, the one thing you don’t want to do is assume something about your customers, your organization, or the people around you — without even realizing you are doing so.
Our free e-book “ Speed-Up the Journey to Product-Market Fit” — an executive’s guide to strategic product management is waiting for you at www.infinify.com/ebook
Originally published at https://infinify.com on July 31, 2023.
