Last weekend I went to a little town with an old “town square” with a court house in the middle and surrounded by shopping on all four sides.
While we walked around from store to store I watched a guy asking people for money. I was close enough to not only see what was going on but to hear the exchanges and I found it fascinating; I think you will, too.
First of all, this guy knows that the easiest way to get money is to go where the people are already spending money. He wouldn’t have made a dime if he went a few blocks away where there wasn’t any competition but no people, right?
Anyway, I watched this guy go over to a lady sitting at a street-side table in the outdoor area of a cafe. He told her that he needed 87 cents and if she had that, could she spare it.
She was surprised by the odd amount he requested and told him so…. as she picked up and dug through her purse. She looked up at him and said a couple more times that she was surprised he asked for such a specific and odd amount. He just shrugged and grinned.
And then of course, she pulled out… a dollar bill*. And gave it to him. Who has 87 cents, right? Fewer and fewer people any more, but we all might have a dollar bill. He walked away quite happy with his newly acquired dollar bill and the lady was still smiling about the odd encounter and thinking about the great conversation piece this will be with her friends later that day. (OK, I made that last part up – but I bet it is true)
*Now, from a safety standpoint maybe she shouldn’t have pulled her purse out like that – you just never know. And some will say that giving money to people on the street only encourages them… whatever, those are topics for a different day and a different discussion – don’t let those ideas take the focus away from the lessons here.
There actually are very real lessons here that we can use in our every day businesses, with the main theme being that price is a function of marketing, the promotion of that price is super important, and competition isn’t a bad thing.
So this guy came up with 87 cents as an odd number that will break the ice and instantly lower barriers to the person he is targeting for a donation. It is also a very specific request and it makes the person he is asking think there is probably a reason he needs exactly that much – perhaps a cup of coffee or a candy bar is only 87 cents or that is the amount he is missing to be able to afford a meal of food.
Even better than the ice breaker or the specificity of the request is that he knows how his
customers buy benefactors give… in dollar bills. He is almost certain that the people he asks for money will give him a $1 bill even though he offers them the chance to give only 87 cents.
Eighty-seven cents is less convenient than giving $1 so they give the latter. And they’re happy to pay that “premium” if for no other reason then the great story they can tell later.
Understanding how your customers buy – and recognizing that they often buy in ways that are counter to what makes sense financially – is arguably the most important thing you can know about your customers.
Think about this when you’re looking at offering an annual paid-in-full discount vs. monthly payments, especially if you sell a SaaS app on a monthly basis in a B2B environment where the economic buyer might rely on a company credit card.
Willingness to pay and ability to pay are not always the same and if you can figure out how to take advantage of the disconnect you could blow up your margins. Things to consider…