How Buyers Make Purchase Decisions: Pricing Foundations 2
If you read the blog Foundation 1: Adopt Value-Based Pricing (VBP), you realize that we should set prices based on how much value buyers perceive from our offering. This concept of ‘Will I’ and ‘Which One’ is crucial to understand our buyers’ willingness to pay (WTP).
When people make a purchase decision, they almost always make two decisions: Will I? and then Which one? First, they answer, “Will I buy something in this product category.” Only after saying yes to this question do they then answer, “Which one will I buy?”
Here is a really important point: buyers are not price sensitive when making the ‘Will I’ decision. They are very price sensitive when making the ‘Which One’ decision.
A purchase decision journey
Imagine Debbie. She is the type of person who buys her cars new. The last two were new when she bought them. She bought them at the same dealership. But she’s not in the market for a new car right now. She’s not shopping. She gets a coupon for 10% off the price of a new car. Does she go to buy a new car? Probably not. I wouldn’t.
Now imagine Debbie is shopping for a new car. She likes her current car dealer, but she’s thinking about changing brands. She’s narrowed it down to two cars but still hasn’t made the decision. She gets a coupon for 10% off of one of the cars. Does that sway her decision? Probably.
Do you have a motorcycle? (I’m assuming you don’t.) There’s a reason, and it’s probably not the price. How much they have to discount a new motorcycle before you buy one? I’m guessing a lot. But let’s say your best friend learns to ride and convinces you that you should ride with him. You finally decide to buy a motorcycle. Now, how important is the price?
We could go through a ton of examples. The key point is that price doesn’t drive the ‘Will I’ decision, yet the price is extremely important in ‘Which One’ decision.
Why should you care? Because you have products and situations where buyers only make the ‘Will I’ decision and never go on to make the ‘Which One’ decision.
More on that in a future next blog.
Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.