BoS Editor: This blog post is written by our friend Leon at IDR Solutions. IDR Solutions are regular attendees at BoS Events – in fact Leon wrote this as a response to our recent Scaling SaaS Marketing Hangout. Join the conversation on Twitter – Leon tweets at @AthertonLeon.
On the recent hangout with Andrus Purde, one of the questions from the Q&A was about pushing users towards the sales team for a demo before letting them try the product.
Mark Littlewood recalled recently receiving emails from a company trying to sell their services where everything about pricing on their website pushed you towards filling in a form to speak to their sales team. Mark was most unimpressed by this.
From a B2C point of view I agree with Mark’s sentiment entirely, but in the B2B world I don’t think it’s so clear cut. At IDRsolutions we recently experimented with removing the prices from our website for one of our products and were surprised at how effective it was at increasing the number of leads & sales. We still let users download a free trial of the software, but to find out how much it will cost to buy you will need to contact us.
To give some context, the product in question is a tool that allows PDF files and Office documents to be displayed natively within the web browser. It’s targeted at companies with online platforms that handle documents. Rather than users downloading and opening the documents with a third party application in order to view them (a poor user experience!), our product allows those documents be displayed within the online platform itself (a good user experience!).
The main problem that we were trying to solve was an issue of price anchoring. The entry level figure on the website aimed at small businesses was unintentionally acting as an anchoring point when we were in discussions with larger enterprise companies who wanted dedicated support people, unlimited hand-holding, use of the IDRsolutions executive jet, etc. It meant that the conversation started on price with preset expectations rather than the problem they were trying to solve. By removing the price, the conversation instead focuses on the problem they are trying to solve and the value that we can provide.
On the lower end, we have found that getting our prospects to contact us has allowed us to better qualify them, answer their questions, help with their evaluation and ultimately convince them to purchase. Actually getting to speak to your customers is rarely a bad thing! We do not have a large sales team so to keep things simple we have retained a fixed pricing strategy at the lower end and are very open with these prospects about how much it costs.
My opinion is that whether removing prices from your website would be worth trying depends on a number of factors:
1) Who your target market is
What are your customers used to doing? In North America and Europe, as consumers we are very used to buying goods sold with a fixed pricing strategy, but in Asia consumers have a lot more experience with needing to bargain for goods. If a retail store in the UK decided to remove all their price tags and moved to bargaining with customers, they might find that their customers start to go elsewhere.
Similarly, you may find there are some industries that expect things to be done a certain way. We tend to find government departments to be notorious for wanting 100 different forms to be completed just so that they can buy from us.
Consumers, SMBs, and Enterprise companies all require handling in their own way. Large enterprise companies generally expect to have to talk to someone and may even rule out your product as being not suitable for their requirements if your pricing tiers are built around the low end of the market.
2) Where your product sits in the market
What is your price point? For low value products it would be difficult to cover the salaries of a large dedicated sales team if they had to manually handle every sale. As the value increases there is more scope for handling each customer individually and making them feel good about buying from you. Even in the business world we generally prefer to speak to someone when handing over a large amount of money.
Are you competing on price or value? If your main competitive advantage is that you are cheaper than your competitors then it would be a good idea to make that clear on your website by making the prices clearly visible, whereas if your product is focused on the other end of the market your customers will be more willing to engage with you as part of the buying process.
How competitive is the market? Competitive markets become commoditized and ultimately end up competing on price.
If your direct competitors are putting prices on their websites then it’s a good sign that you should consider doing the same.
3) What the product is
Some products or services have inherent qualities that make them better suited to being sold a certain way.
Does it have high support costs? For a product where the cost of support is high, the bottom end of the market does not make sense as the customers who pay you the least are always the ones who are the most demanding. We like to send that type of customer to our competitors instead. I used to make money selling pet products on eBay and you would be surprised how much more demanding the customers who were buying a £2 bird feeder were compared to the ones buying a £40 giant rope chew toy for their dog when it came to problems like slow delivery. Even in software we have found this to be the same.
How mature is the product? If your product is fresh to the market then you want to gather as much information from your customers as possible in order to improve the product whereas a hands off approach may be more suitable for products that have been in the market for a long time.
How complex is the product? If your product is quite complex, then getting on the phone to give your customers a demo is invaluable.
4) What your overall strategy is and what type of company you want to run
Basecamp removed their higher paid tiers completely and started selling their product to everyone at a flat rate to ensure that the product direction and revenue will not be at the mercy of a few key customers. That’s working very well for them, but it’s not for every use case.
A viable strategy for us may be to transition our document display product into something with a more mass market appeal such as online document hosting, in which case we would aim to have a very clear pricing strategy on the website, but we like where we are currently having a smaller number of higher value customers that we’re able to offer a more bespoke service to.
5) What actually works
There is no one size fits all approach and what works for one company or product does not necessarily work for another. You can’t know for sure how effective (or not) something will be until you actually try it, so try new things to see what works! Then do more of what works well and less of what doesn’t.