Pricing is about perceived value more than it is about numbers. We can only know about how the clients perceive value if they tell us, and therein lies the problem.
I’ve always noted how most of us in the business of expertise tend to undervalue our services and chalked it down to myopic clients and bad education. Those play a part, but today, in Ulrik Lehrskov-Schmidt’s SaaS pricing seminar I got the piece I’ve been missing – it’s mostly about the feedback we prioritize.
To explain, consider three types of clients:
– Type 1: Thinks your price is too high.
– Type 2: Believes your price is fair.
– Type 3: Would pay more without hesitation.
Type 1 clients will typically voice their concerns and demand change, making their opinions highly visible. Type 3 clients, who see a bargain, will usually stay silent.
Here’s the principle: [feedback shapes pricing behavior].
Squeaky wheel gets the grease if you like.
Taking only Type 1 feedback into consideration leads directly to an availability bias. It makes us focus more on the painful “wound” of a clear loss of revenue from Type 1 who are not buying so much that we ignore the silent “cancer” – missed opportunity cost of Type 3 clients paying less than they would be ready to.
All I’m saying is that embracing the silent opportunities of Type 3 surplus can often get you more funds than avoiding loud Type 1 losses ever could.