How to Get Decisionmakers to See Your Services as the Best Possible Bargain

0:00 You're listening to the Nonprofit Power Podcast. In today's episode, we share how to get decision makers to see your services as the best possible bargain. So stay tuned. If you wanna have real and powerful influence over the money and policy decisions that impact your organization and the people you serve, then you're in the right place. I'm Kath Patrick, and I've helped dozens of progressive Nonprofit leaders take their organizations to new and higher levels of impact and success by building powerful influence with the decision makers that matter.

0:40 It is possible to get a critical mass of the money and policy decision makers in your world to be as invested in your success as you are, to have them seeking you out as an equal partner and to have them. Bringing opportunities and resources to you. This podcast will help you do just that. Welcome to the Nonprofit Power Podcast. Hey there folks. Welcome to the Nonprofit Power Podcast. I'm your host, Kath Patrick. I'm so glad you're here for today's episode because it's time to talk about a couple of questions that I get all the time and I bet are probably on your mind right now.

1:23 How many times have you dealt with a funding decision maker who is tempted by the low cost alternative to your services? And how many times have you been challenged on your prices? This is a really common problem and it came up in a session with one of my private coaching clients last week. As we were talking, I realized that there is a key piece that I use all the time, but that we haven't talked about before on the podcast, and it's a critical ingredient to dealing with this specific problem. Lemme tell you what was going on. My client was dealing with a group of decision makers who were failing to see why my client's version of transportation services cost significantly more than the version offered by the other transportation providers also being funded.

2:12 The basic difference is that my client provides a totally client-centered door-to-door transportation service on demand. And the other providers are modeled on more of a group transport thing where they're taking 10 or 20 people in a bus from one place to another. So you can see why those are obviously different animals. But the decision makers were hung up on the cost piece. And they were challenging my clients' prices and questioning why they were so much higher than the others. Their focus on cost and their desire to pay the least to get the desired result, which they were broadly characterizing as transportation, was blinding them to all the other details.

2:54 So I worked with my client and we crafted a multi-pronged messaging strategy to turn this situation around. But one of the strategies that was a key ingredient I realized we haven't talked about here on the podcast. And honestly, I rarely see it being used by nonprofits. So today I'm gonna introduce you to a powerful marketing technique that is tailor made for exactly this problem. I know you've been there, right? You're in a conversation with a decision maker about investing in your work, and somewhere along the way the issue of cost comes up. Maybe you've had an arrangement with them for a while and they start to realize, oh, hey, wait a second. There's cheaper alternatives out there.

3:35 Or maybe you're just in the first negotiations with them and they're wondering about couldn't the price be lower? There's all different kind of ways this conversation comes up, but the bottom line is the decision maker is looking to pay less. And they're questioning the price you're proposing. Now, first up, let's talk about the three most common mistakes that I see happen over and over again when Nonprofit leaders find themselves in this situation. And it particularly tends to happen when you're caught off guard. You think that you have an agreement, and then all of a sudden they're saying, well, wait a second now. Couldn't this be cheaper? Couldn't you lower your price, couldn't we, blah, blah, blah.

4:15 So the three things I see Nonprofit leaders do much too often are, number one, we get defensive. We start defending the price and saying, well, no, it really needs to cost that much because, because, because, because. Once you're on the defensive, you're pretty much in a losing stance. Because now on some level you've legitimized the idea that your stuff costs too much. And you're trying to, mistake number two, trying to prove your stuff is worth the price. And that gets into, well, but you don't understand. We, we have all these things. We're extra this way, we're extra that way. We have all these bells and whistles, and this is why we cost more, blah, blah, blah.

4:56 Higher quality, so on. Those components do need to be in your messaging, but when we come to it from a place of trying to prove that what we are offering is worth the price we're charging, it's still operating in that defensive space. And where we wanna get to is where they look at your stuff, the results you produce, and the price you've set. And they see it as the greatest bargain on the planet, a complete no-brainer. How do I get in on this deal before they realize that they're charging too little? That's where you want them. So the worst thing that you can do, and I have seen this happen so many times and I know it still goes on.

5:37 Is you're operating from the defensive, you're trying to prove that it's worth what you say, and they're still resisting. And you really want this investment. So then you offer to lower your price in order to get the investment. And I don't have to tell you why that's a bad idea'cause I know you know that it is. But I see Nonprofit leaders do it all the time when they are stressed and feeling like they're unable to convince the decision maker that the thing you're selling is worth the price you're charging. When you're in convincing mode, you're losing. If you're defensive, if you're trying to convince, you are not in a position of strength.

6:18 You are defending, rather than engaging and pulling them in and helping them understand why your stuff is brilliant and a great investment. So we talk a lot about all the messaging ingredients that go into that, but I wanna single out a specific missing ingredient that is absolutely key to getting decision makers to pay top dollar for your work. And that is the concept of the price anchor. Now, this term may be new to you, but when I start describing it, you're gonna understand that you already know what it is. It's just that you may not be applying it in your messaging with decision makers about your price. Price anchors are always present, whether we realize it or not.

6:58 A price anchor is basically the point of reference by which a decision maker is evaluating your price. They're pegging your price to something else in their head. They make comparisons in their mind to help them reach a conclusion about whether your price is too high, too low, or just right. And like I said, it's very important to understand that decision makers are like everybody else. They always wanna pay the lowest price possible. That's human nature. That's why Walmart exists. Everybody's always looking for a bargain. So another mistake that I see happen a lot is folks trying to talk decision makers out of hunting for the bargain.

7:41 And that's the wrong argument. We need to simply show them why our stuff is in fact a bargain given the results it produces. Okay, so we know decision makers always want to pay the lowest price. That's normal. We should not get resentful about that, or engaged emotionally with it at all. Accept that it is human nature. And you know, if we're honest with ourselves, we all love a bargain too, right? Wouldn't we rather pay less for whatever the thing is that we want? If someone's offering us an identical item and one place is charging a hundred dollars for it and another place is charging$70 for it, well chances are you're gonna go for the$70 version If you can prove to yourself that they are identical.

8:26 Here's the problem. Money decision makers in the direct service space often are not as focused on that diligent price comparison and saying, Ooh, now let me do the research and make sure that the reason for the price difference is not an unacceptable difference in quality or results. They wanna go straight to, oh, that's cheaper over there, let's get the cheap one. So we spend a lot of messaging energy on helping them understand the difference in quality, the difference in results from the cheap versus the expensive. That we have to do, that has to be part of our messaging.

9:08 One of the challenges we face is that decision makers often don't fully understand the value of your services, the complexity, the level of impact they have, and the value of that impact. So you absolutely have to address all those pieces. But again, today I'm calling out one very specific element, which is the price anchor. And decision makers will always find a price anchor. Very often they will find one that is not helpful to you. We really don't want them coming up with their own price anchors because they will almost always pick something that leads them to conclude that cheaper is better. Instead, we need to give them a price anchor that will serve us and them better.

9:51 A good price anchor does two things. It anchors to an alternative that is at least as high quality as what you are offering, and that costs more than your prices. And therefore makes your stuff look like a bargain. Pretty simple. A really clean example of how price anchoring has worked commercially is there was an appliance company that was making a high-end mixer blender appliance. And they priced it at like$600 and everybody was like, oh my god,$600 for a mixer blender thing. That's terrible. That's way too expensive. What they did was they deliberately created a lower end alternative that was not as good.

10:37 And they priced that at$300. Guess what happened? People bought the$600 one because they were like, oh, well here's this one that doesn't do as much and isn't as good and it's 300. I'd rather have the one that does everything I want. Ah, okay. $600 is okay. What the consumer had done on their own, without any prompting from the company, was that they had established a price anchor in their head of like the$25 blender that they could pick up at Walmart.And like$600, I could get that for$25. And so what the company did was they created a more comparable alternative that was a lower priced version, but shared similar features, just not quite as good quality.

11:22 And put that out there and said, okay, so we have one that does a lot of the things that the great one does, but you know, if you're more comfortable with the lower priced alternative, here's the lower priced alternative. The price anchor in the consumer's mind had been$25 and now it's 300. Once you've got them to the 300, then they're like, well, but I want the one that does all the things. I'll, okay, I'll just go with the 600. So that's an example of a pure pricing strategy that is built on price anchoring. I offer that to illustrate how malleable people's perception is about what's expensive and what's not.

12:02 And that the malleability of that is tremendous. So we would be remiss if we did not help to shape decision-maker's perspective about price. And give them cost anchors that will help them see the value and be appreciative of the bargain price that we're actually offering. Now, let me give you another example of a way to think about this. Let's say you're a clothing manufacturer. And you make quality, durable clothing. Your competition is fast fashion. And there's a bunch of fast fashion entities out there flipping out stuff that's cheap, flimsy.

12:44 You wear it a few times, you wash it a few times and it falls apart, but hey, you're up with the latest trends. People gravitate toward fast fashion because it's trendy and it's cheap, and it lets you constantly change out your wardrobe and play with new clothes all the time. Your quality, durable clothing is not that. If you lower your prices to the prices that fast fashion is charging, you'll go outta business. And you don't wanna compromise on quality because that's your mission. So what do you do? The first thing you do, of course, is you call out the deficiencies of the fast fashion items while talking up the superior quality of your product and the superior results it produces for the buyer.

13:25 Examples of that would be, when you buy our stuff, a few classic pieces will stay in style for years. The superior quality means they won't fall apart. The other guy's stuff falls apart after a few washes and winds up in a landfill, and that's bad for the environment. Our stuff is good for you, good for the environment, et cetera, et cetera. Of course you're pointing out all the reasons why your product is better. And then you hit them with the price anchor that makes your product look like the true bargain. So to do that, you would pick a higher quality clothing product that is a lot more expensive. The comparison you would probably use would be the bespoke tailor and the cost of having your clothing custom made.

14:10 Which you know, your item might cost a couple hundred dollars. That item's gonna cost thousands. And even if you're only going for those five or six classic pieces, you're talking about an investment of maybe five to$10,000 if you're gonna have it tailor made. Whereas you can buy from our line of classic quality pieces for, you know, a five piece ensemble might cost you$1,500 versus the 10,000 you would have to spend if you went to a custom tailor to get comparable quality. So all of a sudden, when you were up against fast fashion, the thought of$1,500 for five or six pieces of clothing is like, oh my God, that's a fortune. 'Cause I can go to fill in the name of fast fashion retailer.

14:52 I can go there and I can get five pieces of clothing for a hundred bucks. Yay. But I'll have to buy them again in six months. And again in six months, and again in six months. And so I'm gonna spend the same amount, the landfill's piling up. And you know, you find something you really like, it's still gonna fall apart. Maybe there's something to this idea of buying a few quality pieces. There's no way I can spend 10 K, but I could swing 1500. It probably comes out the same as repeat buying of the cheap stuff. So you see how that works. Okay, so if you wanna do this for your service, your product, your market niche. There's basically three steps to doing this.

15:33 The first thing is you identify the other ways to achieve the result you produce, the outcomes you produce. Identify the other ways to achieve that, that would cost more than your way. In the case of my client with their door-to-door transportation, it turns out a lot of the people they're transporting are for medical things. Dialysis appointments, doctor's appointments, chemotherapy, this, that and the other. And many of them have mobility challenges. They have other health conditions that are compromising their ability to take regular transit or this wouldn't be an issue. So the alternative is medical transport, which is vastly more expensive than my client's service.

16:14 What you don't want is for the funder to say, well, we could just have'em take Uber or Lyft and it would be cheaper. It's like, well, yeah, but the Uber or Lyft driver or the taxi driver is not going to meet them at their apartment door and help them to the car, not going to make sure that they get in and outta the car safely. That maybe if they have a wheelchair, they can accommodate that. If they have oxygen, they can accommodate that. They are trained to assist. And they will do the same thing on the other end, and they'll help them make sure they get into the doctor's office or whatever it is, and that they have the support they need, and then they'll either wait for them or come back at the appointed time and do that all in reverse and get them back home safely.

16:58 The only alternative that will do that is medical transport. Uber and Lyft and taxis don't do that. The Rideshare services don't even offer that. Some taxi companies do do that, but they will charge you medical transport rates if they're asked to do that. The decision maker made something up because they lacked information about details and specifics. So they made up a price anchor like, Hey, we could just do rideshare, that'd be cheap. Or a taxi. That'd be cheaper than your stuff. So you say, no, that's not comparable. The only comparable alternative would be medical transport, and that costs double what we charge. And all of a sudden, oh wait, you're giving all this customized support and service and wow, it turns out it's actually pretty cheap.

17:42 That's great. So it shifts the decision maker's perspective in how they see your price. Price is always relative, always. There's always somebody priced higher. There's always somebody priced lower. Doesn't matter what niche you're in, it doesn't matter what you're selling. There's always somebody who costs more. There's always somebody who costs less. And it's our job to make sure that the decision maker understands that actually we are in the sweet spot of best quality for the price you're paying. So if you wanna do this for your product, your service, and your market niche. You identify the other ways to achieve this outcome that would cost more than your way.

18:23 You do the research to find out what that cost is of that higher cost thing. In my client's case, they called around and researched medical transport prices. And they called a couple taxi companies. One said, we don't even do that. Another one said, oh, we do that, but that's medical transport, so it'll cost this big amount of money. So they backed it up. They didn't just yank numbers out of the air and make stuff up. They did the research, called around, got the answers, and then put their framing together to create a new price anchor in the decision maker's head. So then that's the third step, is you develop some simple framing that compares the two. The alternative is this, it costs double what we charge. Now, bonus points if you can come up with more than one high cost alternative.

19:08 That's always great because you can say, well, you could do this or you could do that. And the this thing costs double what we charge and the other alternative costs triple what we charge. You're doing two things with that messaging. One, you're showing them that for the result that you produce, you're actually a bargain. And that comparing what you do to the super low cost alternative is a non comparison because you don't get the results. Yes, they're in the same category in some way, but they don't produce anywhere near the results that you produce, and so they're really not comparable and not worth considering. You have to do both. You discredit the low cost alternative and then you plant a new higher cost alternative in the decision maker's head, which then makes your stuff look like a bargain.

19:53 That's the basic strategy of price anchoring. And like I said, you don't use the words price anchor when you're talking with your decision maker. That's just a frame of reference to help you understand the concept. But I promise you that when you put this together and add this to your messaging as you're talking to decision makers about the quality of your services, it will change the way they respond. Because your complete offer is about the outcome you produce, the promise, the transformation. It's about the process by which you do that, the details of how you make that happen, how you change people's lives. And then lastly, the price for which you do that, the price of getting that result.

20:33 The other benefit to getting good at regularly creating price anchors for decision makers is that it will help you avoid the mistakes that I talked about. It takes you out of defensiveness. It takes you out of trying to prove anything. And it completely eliminates any inkling of an incentive you might have to think about lowering your price to make the decision maker happy. Because you're busy helping them understand that to get the kind of quality you produce, they're lucky to be able to get it for the price you are offering because the alternatives cost way more. So they should probably hurry and invest in you before you think about raising your prices. That last part's a little bit facetious.

21:14 But that's the psychological conditions that you're trying to create, to help them understand that in fact, your prices are great. And they are lucky to be able to invest at that level and get the kind of quality you produce. We go way deep on this and many other messaging strategies inside my coaching programs. But this should be enough for you to get started. I encourage you, take this for a spin. Sit down with your messaging, sit down with your pricing, and do that little bit of research. Identify a couple of higher cost alternatives. Track down the actual dollar figures involved, or as close as you can. It's okay if it's a range. And then add that into your messaging.

21:57 I promise you, it'll make a huge difference in the next conversation you have with a decision maker. Thanks for listening, and I'll see you in the next episode right here on the Nonprofit Power Podcast.