Is Your Price FRAMED Right?

price frame

 

Before we did a change in business model, our prices in STORM for flexible benefits looked something like this:

0-500 Employees:                   P75,000/month

500-750 Employees:               P120,000/month

750-1000 Employees:             P150,000/month

Then we changed business models in 2013. We started making revenue from our vendors instead. We became an online shop for benefits. Since we did this, we reduced our reliance on the monthly retainer fee. We became a volume-driven company.

More employees, more people buying benefits our store – more revenue.

At a certain threshold, we could give our services for free.

Our pricing then became something like this:

0-250 employees:                  P37,500

250-500 employees:             P27,500

500 and upwards:                  FREE!

I figured, EVERYONE would be ecstatic, right? The big companies would get a chance to radically improve their benefits system for free. The smaller-to-medium sized firms would get a great, great discount! Everyone happy right?

Not exactly.

When I started selling this with the new pricing scheme, I would notice the executives in the smaller-to-midsize firms would wince a bit at their price range.

wince

Wincing?! To prices this much cheaper?! Why?! 

Then they started questions like: “If we increase to 400, do we get to become free as well?”

Boom. That was it.

They framed the lower pricing with the FREE price offered to larger firms.

So no matter how gargantuan my discount was, it would still pale in comparison to FREE.

So the next time I presented to a sub-500 man firm, I just REMOVED the FREE pricing detail offered to larger firms (it wouldn’t apply to them anyway). Instead, I put the new prices side by side with the old prices, all on one side.

No wincing this time.

Same discount, vastly different reaction. The discount was MUCH more appreciated.

HOW you frame your price when you sell your wares will be VASTLY important.

It’s good to note – how are you framing your price right now? Pay attention to the details with which you show your prices.

The right price, seen with the wrong frame, just isn’t right.

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Comments

  1. Reymon Reyes says:

    I can’t quite get passed the “500 and upwards – FREE” thing. Why?

    • Its rooted on how flexible benefits ran. before we would just supply the system – we would allow people to convert their current benefits into currency which they can use to buy other stuff FROM OUTSIDE. Now, we have become the store as well – so the more employees, the more people would buy, the more margin we get. Its a win-win

      • Reymon Reyes says:

        I never realized pricing could get tricky as this. Achieving a win-win pricing situation seemed like an art.

      • It’s constantly one of the things i know a lot of entreps struggle with, especially b2b and services (im b2c, its easier to survey the market). then theres framing…

  2. The psychological effects of numbers plus effective strategic presentation, very nice combo indeed!

  3. Interesting! I guess it would be somewhat different for self-service apps since you can’t really customize information as easily. Then again, maybe a simple “xxx above – contact us.”

    Btw, won’t your current clients see this :p

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