“It’s too expensive” doesn’t mean “can’t afford it” or “don’t have budget for it”; it means : I’m not getting enough value to justify what I’m spending.”
Last week, I wrote that “I don’t have time” is one of the polite yesses that trap product people. The other trap is “it’s too expensive.”
We hear “it’s too expensive” and assume that this isn’t our target customer. Or that we need to reduce the price of our solutions. And often, neither of those solves the underlying problems.
(Trust me – If you’re selling to enterprises, it’s probably not too expensive in dollar costs (or euro costs, etc.). Teams spend a ton on software, and most software is a rounding error in cost compared to hiring a fully-loaded engineer or director of UX. If you’re selling to people who always have the latest iPhone, same thing – the money is there and they have chosen not to spend it on your solution. You need to find out why.)
Pricing is hard, and you may well have priced your product sub-optimally, and also I’m not qualified to give you advice on how to fix your pricing. (I recommend slogging through The Strategy and Tactics of Pricing if you’re new to pricing theory.).
The good news is that there is a LOT you can learn without having to tackle the pricing question head-on.
How can you learn your way out of this?
- Listen to / observe how customers are actually using it
- Learn what else customers are already paying for
- Understand how buying/procurement works for your customer
- Understand what value would be game-changing (unlock new capabilities, eliminate uncertainties)
Listen to / observe how customers are actually using it
Customers are rarely using a solution in the way we envisioned.
Let’s say your customer bought your expensive coat, but wasn’t able to zip it up. (Perhaps it’s an amazing 5G-enabled zipper and also happens to be hidden by default.)
In their minds, they spent the money expecting to be warm, and they were disappointed. Sounds like a waste of money to me!
This isn’t always the customer’s fault. Maybe your setup instructions were insufficient; maybe you designed a product assuming conditions X and Y, but in the real world your customers are living with conditions Z and Q instead.
Some years back, I talked with a CTO who said that some devops service* was too expensive. Once we prompted him with “tell me more…” a few times, we learned that he was paying for two seemingly redundant services. The product manager’s assumption was that service A would replace service B – one cost replacing another. But the customer wasn’t confident enough that service A would be sufficient alone.
Eventually that customer said “I would prefer to only need to use one service, and if I could, then service A isn’t too expensive at all. In fact I’d pay more for A, if I could turn off service B and not have to think about this again.”
*sorry, honestly don’t remember the specifics of what it was / what it did
Sometimes the customer is using your product sub-optimally or downright destructively. And also, there’s never any point in blaming the customer; until they get full value from your solution, you’re the one who loses.
Learn what else your customers are already paying for
Every price is too expensive for a customer who doesn’t want to pay for anything. Most early-stage startups will choose ‘free’ over any paid alternative. Many customers may not control the budget – US education and healthcare, products for kids, small divisions within big enterprises, to name a few
Does this customer pay for anything? If so, how do they justify it? Who do they have to convince and how do they make a case for it? Sometimes these arguments are made in dollars (“X will save us $25K/year”), sometimes there’s a value alignment (“cost increases as our revenues increase”). Sometimes you can guess at value indirectly – if a customer describes the value as ‘time saved’, you can learn how much time and whose labor was saved.
Understand how buying/procurement works for your customer
In enterprises, there is often a dividing line between what can be easily expensed and what requires a multi-step procurement approval. A lot of SaaS companies have mastered offering monthly billing that falls below this threshold, versus a larger annual fee. There are also budget cycles, where teams may alternate between “out of budget” and “need to use up this year’s budget ASAP.”
In the consumer world, look at how customers use deferred payment solutions like AfterPay or Klarna or “choose your billing date” to align purchases with when the money comes in.
Understand what value would be game-changing (unlock new capabilities, eliminate uncertainties)
Lots of products offer “do X faster” – sure, it’s nice if it takes me 2 fewer minutes to complete a task — what can I do with that 2 minutes? Get another cup of coffee?
“Do X faster” and “do X cheaper” only matters when the savings is so high that you can unlock a new capability. Saving 2 minutes (or even an hour) doesn’t mean you can staff one fewer person or build one more thing. Saving 10 hours does.
What’s more likely to be a game-changer is “I couldn’t do X before; now I can” or “I used to have to worry about X; now I don’t have to think about it”. It’s hard to execute on this level of value – and when you can, it’s incredibly sticky.