Ever heard of price conditioning? Chances are you’ve experienced it, probably several times every day. Here’s how it works.
Companies know that you want a “great deal”. Who doesn’t, right? Think of what happens every time someone you know buys a new house. What’s the first thing they tell you? They tell you all about how they got such a great deal. Of course they did, nobody buys a bad deal (insert sarcasm here).
How do they know they got a “great deal” on that house? They might compare the price they paid to the asking price, or to the Zestimate, or the price their sister paid. That’s price conditioning. They got another price in their head, that price was higher than the price they paid so they must have gotten a great price. It makes sense and it’s often not based in reality.
How is this used against you?
The odds are pretty good that you’re not a window expert. You don’t know what custom windows like this cost, but everyone knows you want a good deal. How can the company convince you that they’re offering a great deal? Easy, they’ll show you a really bad deal and then show you how their deal is better than that.
Their deal might still be a long way from good, but if it’s better than the horrible price they showed you they’ll at least have a chance of getting you to think it’s a smart buy.
You got $40,000 worth of windows for $25,000 whoa you must be a great shopper!
You’ll see companies start with a very high price only to lower it right away with a “special sale”. They might show you the regular price of $40,000 only to then let you know about the sale that is going on right now. With the price at only $25,000 on sale you’d be a fool to pass up this deal. Never mind the fact that you could get similar windows for $15,000 from someone else.
They know full well that nobody is going to buy those windows for $40,000. They start at $40k, let you hit the ceiling, tell them to get out of their house, etc. Then they talk you back down. They let you know about the sale that’s going on now and the fact that they need one more order to hit their monthly goal.
They tell you that you might not have to pay that price to get $40k worth of windows. If they could offer you a substantial discount on your order tonight would you be interested in hearing about it? Of course you would. Now you’re sitting back down and they have you right where they want you. That’s price conditioning.
Do you want to hear a funny story?
One of our competitors in Maryland is a one of these old fashioned companies who uses all of the old timey tricks. They do the half off installation and the buy 2 get one free and more. It’s fun to listen to their radio commercials.
One of their reps met with a potential customer and gave her the full treatment. Our rep was the next person in there that night and the customer was so upset at the other company she spent half an hour venting abut what a jerk that other guy was.
It turns out the other guy left a binder behind by accident. In it he had probably 10 other “quotes” from brand name companies for ridiculous amounts. Something like 10 vinyl replacement windows for $18,000, etc.
They were using that binder to try to overcome the objection about getting more quotes. They know one thing you might say to avoid committing to their order is to say you have 2 other quotes scheduled. They’re ready for that with their binder. They’ll show you 5 other quotes that are much worse than theirs so you just might decide to buy their windows for $1,200 each so you don’t need to mess with window salesmen anymore.
After all, that’s a much better price than these other companies offer and you can see that for yourself right here in these quotes. It’s not a great deal, but you might find it to be reasonable.
Why do companies operate that way?
Well, working in the home improvement business isn’t easy. It’s especially challenging for companies with a bad value proposition. They know if they give you time to shop around you won’t be calling them back.
You can see it in some of the comments on our other sales articles. Salespeople write in to talk about how they need to close the deal today because customers never call them back. The important point they’re missing is that people would call them back if they offered a good deal. Since they don’t, their options are limited. They can either get you to buy tonight or they can go home hungry. Which do you think they’ll pick?
How can you avoid price conditioning?
It’s easy, you just need to keep an eye on what’s going on. For example you probably wouldn’t buy a car without a reasonable idea of what that amount of money would get you from another manufacturer. If you’re spending $30k on a Toyota you’d want to know what Ford would give you for $30k. That doesn’t mean you shouldn’t pay more for one than another. Get what you want, just do it with both eyes open.
In keeping with the car analogy does it matter that the Ford is normally $50k, but discounted to $30k if you buy today? It shouldn’t. What matters is what your $30k will buy you. Do you like it more than the other options? If so, but it and be happy.
Can I have one more real life example?
Sure, just today I was emailing with a customer who wanted external grids or Simulated Divided Lites (SDLs) in his windows. This option costs a few bucks and it’s not the most popular, but some people prefer that over internal grids.
The pricing for the model he was looking at was $204 for the grids and he was shocked. Keep in mind the total price for double hung windows, in beige, with Energy Star rated glass, professional measuring and installation by the manufacturer including the external grids was about $650 per window.
You’ll see folks commenting with prices much higher than that for typically white vinyl windows with internal grids all the time. Unfortunately this customer was price conditioned by us to think that $200 per window for grids was ridiculous.
It can work both ways. He saw our low prices for internal grids and somehow that made the prices for external grids seem too high. He lost sight of the fact that $650 including a color, upgraded glass and external grids is not a bad number. He was sure he “could do better”.
When considering your options its best to focus on the opportunity cost. If $5k spent with this company gets me this and it takes $7k with the other company to get me something similar than the first company is a better deal. If the s
It can he hard to sort through the clutter. Companies make it hard on purpose, but knowing is half the battle and now you know all about price conditioning. Have fun out there!