The Fascinating History of Market “Bubbles” — One Investment Book That You MUST Read

When you reveal your price to your customer and she’s flabbergasted because it’s so high – that’s “sticker shock.” And it greatly reduces your chances of closing the sale. If your customer immediately protests “I could never afford this,” it means that you have not convinced her that the price of your product is a “drop in the bucket” compared to its value. And even if you’ve done a good job of communicating value, the prospect may experience sticker shock if the price really is beyond her means.

In other words, if she gasps when she learns the price, she’s probably not ready or able to pay it. How do you head off sticker shock before it happens? One way is to first show the customer products in your line that have higher prices … and then show her the product you want her to buy. In his book “Influence: The Psychology of Persuasion”, Robert Cialdini describes how this is typically done in a retail setting. Say you want to sell $100 sweaters in your store … but you’re afraid your customers will faint at the price. So you put a table in the aisle near the front door and place three stacks of sweaters on it.

As the customer walks into the room, she sees the first stack. All of the sweaters in this pile cost $200. “What a rip-off!” she thinks. “No way would I pay that.” Then she examines the second pile, which is made up of $150 sweaters. “Phew!” she thinks. “That’s a little better.” She continues to the third stack on the table – your $100 sweaters. By that time, the $100 you are asking seems like an incredible bargain. Another effective way to minimize sticker shock is to break a high price into small monthly installments.

For instance, the Franklin Mint was selling a collectible chess set. Each piece was a hand-painted pewter miniature of a Civil War figure. They were sent to you one at a time, one per month – for only $17.50. Seems like a bargain for a hand-painted collectible, right? But if you multiply $17.50 times the number of pieces (32), the entire chess set cost a hefty $560. (The board was yours free once you bought all 32 pieces.)

If the ad had said, “Civil War Chess Set – $560,” how many do you think the Franklin Mint would have sold? Not many. Yet another way to avoid sticker shock is to present the price at the beginning – and get any price objections out of the way up front. Most direct-mail promotions for expensive products do it this way. They build desire and perceived value, and then reveal price once the customer is sold. An alternate approach is to state price up front and use the exclusivity of that big number to weed out non-prospects.

Example: “This service is for serious investors only. It costs $2,500 a year. If that price scares you, this is not for you.” In addition to exclusivity, there’s an element of snob appeal at work here. The more you tell someone they do not qualify for your offer, the more they will insist they do. The classic example is Hank Burnett’s famous letter for the Admiral Bird Society’s fund-raising expedition.

The second paragraph states: “It will cost you $10,000 and about 26 days of your time. Frankly, you will endure some discomfort, and may even face some danger.” Once the reader has heard the price and decides to continue reading, the possibility of sticker shock is eliminated. He already knows what the product costs. Surprise is eliminated … and sticker shock is all about surprise.

(Ed. Note: Bob Bly is the editor of Direct Marketing University, ETR’s program to help you start your own successful direct-mail business. For information, click here.)