Nigerians are getting poorer every day.
You can blame it on the pandemic, recession or government policies.
But when you’re selling in a market where over 50% of the population is living in extreme poverty, you should expect a good number of your customers to be price sensitive.
In the last few months, many brands in Nigeria have launched low-priced versions of their products to meet the lowering purchasing power of the average Nigerian.
What is your small business doing to sell to these price-sensitive customers?
In this article, we’d share a few strategies that would help you sell more to customers who are increasingly worried about prices.
First, let’s start with what price sensitivity means.
What Is Price Sensitivity?
The price sensitivity of your customers is the degree to which price influences their choice to buy your products or services.
It determines the impact of price points on the buyer’s purchasing behaviours.
There are various tools and surveys you can use to determine the degree of your customers’ price sensitivity.
But one rule of thumb is when you have customers who believe that only one factor matters – price.
They keep bargaining your prices, no matter how much you reduce them, and how low your profit margins are.
Many small businesses have adopted a strategy of undercutting their prices to satisfy their price-sensitive customers – it rarely works.
It only erodes the brand equity of a business and reduces its profit margin.
So, how do you sell to price-sensitive customers?
3 Strategies For Selling To Price Sensitive Customers
1. Emphasize Value
What determines the price a customer is willing to pay for your product or service is the value he or she attaches to it.
When a customer says your price is too high or your products are too expensive, what they are saying is that they don’t think that it is worth that much.
What you have to do to get them to pay your price is to increase their perceived value of your product or service.
Here are a few tips you can use to increase perceived value:
a. Convey a sense of scarcity or urgency – this enhances the desirability and perceived value of the product/service.
b. Emphasize the benefits of your offering – Show your customer how your product or service can help them achieve their goals, and solve their problems.
Avoid listing the features and state the benefits.
c. Provide Guarantees & Social proof – The less risky you make their buying decision, the more valuable your product or service would be perceived.
Offer guarantees that would take out the risks of buying from you, and also provide testimonials that show what others think of your product or service.
d. Provide Bonus Value – Sweeten the deal for your customers by adding more value to them that cost you little to nothing.
Course creators do this a lot.
They offer a course for 50,000 Naira and add three other bonus mini-courses that would value the total deal for 100,000 Naira, and ask you to only pay the 50,000 Naira.
This automatically increases the perceived value of the course and makes paying the 50,000 Naira a good deal.
2. Differentiate Your Product
Price sensitive customers are very good at researching and comparing the prices of products with a similar offering.
Small business owners like yourself can avoid this sort of classification, by differentiating your products or services so that they are in a class of their own.
The more difficult it is for customers to compare your product with your competitors, the more difficult price-sensitive customers would have a reference source for determining the base value of your product or service.
Read our article on differentiation to get more ideas on how you can stand out in your marketplace.
3. Adopt New Price Strategies
You would structure your price in a way that showcases the value you provide, without necessarily changing your prices.
Here are a few price strategies you can implement in your small business to communicate value:
a. Price Anchoring – As explained earlier, price-sensitive customers love to compare, now you can differentiate to curb that, or you could set the standards of such comparison by setting a price anchor.
Price anchoring is a practice of influencing the customer’s decision by providing a reference price or an anchor.
Price anchoring aims to create the perception of value in the customer’s mind.
You see this at work on websites that offer you three different price levels; Standard, Premium and VIP.
They give you a very high price, a medium price, and a low price, and now you’re comparing between their prices.
b. Price By Components – You can also consider unbundling your product or service and selling it in smaller components.
This strategy would help to highlight the individual aspects of your product that are often overlooked, as well as present the price into smaller chunks that customers can swallow.
If you sell laptops, for instance, you can decide to sell the charger, the laptop, an external storage drive, and even an add-on camera or improved web camera as individual components.
This will reduce the price the customer would pay for just the laptop, but also makes them realize the value of getting a long-lasting battery or a webcam with better pixels.
c. Pay in Instalment – How you present your price matters too. Instead of asking your customers to pay 150,000 for a laptop, you ask them to pay 30,000 per month until they pay it off.
Breaking down your price into smaller bits customers can pay over time can help make the total cost look smaller.
If you want more personalized strategies and practical tips you implement to accelerate the growth of your small business in Nigeria, you better call The SME Coach.
Our years of experience running many successful small businesses and working with many others set us apart.
Leverage our network and knowledge to grow faster and bigger.
Contact the SME Coach today!!!