As marketers, there are many games we play with price…
Especially in fields like publishing, where the real cost of delivering our products can be pennies on the dollar compared to the retail price of what we’re selling.
This leads to a conundrum.
Because we can offer huge deals to get the maximum number of people in the door. But in the long run, our business is not sustainable if we only charge the “huge deal” price. So we have to switch people over from their very low introductory pricing to the much higher full price.
And often the more overt we are up front about the fact that we’re going to make that switch, the less people we bring in up front…
But the more covert we are about the switch, the more likely we are to create customer service headaches on the back end…
It’s all on a spectrum. And you have to decide where you’re going to place yourself. At one end is completely honest and ethical and forthright, but sometimes harder to sell. At the other end of the spectrum, you can be completely manipulative and predatory in your pricing.
Now, I have some ideas for you in a minute. But first, I want to share some examples that have rubbed me the wrong way…
My first experience with bad pricing of subscription products…
In college, I sold subscriptions to the local newspaper. I worked in the telemarketing department, and we went out into grocery stores to offer subscriptions to their patrons.
We frequently ran a special. It was $2 per week for a 13-week subscription. That worked out to $26 per quarter.
But once you agreed to that, you were put on an auto-renew program. The renewal subscription jumped from $2 per week to $3.75 per week — or $48.75 a quarter.
Now, as long as this is well-communicated, that’s fine. But it seldom was. And so we frequently dealt with customers who were irate about the bill for nearly $50, when they’d only agreed to a 13-week subscription for $26.
And here’s where it got even worse.
The $26 rate was considered an “introductory” rate. But all you had to do to get it over again was to cancel your subscription, and start it again. Or even threaten to cancel, and the newspaper’s retention department would offer you the deal to keep you on. In some cases, past-due subscription debt was forgiven on the spot, if you simply agreed to start a new subscription.
It got to be a game. Customers learned to take advantage of the manipulative pricing model, and all the accommodations put in place because of it.
For customers who didn’t play the game, they were charged the $48.75 every 13 weeks, by the calendar.
The way it worked out is if you gamed the system and always acted like a new customer, you get the best deal on delivery. But if you were a loyal subscriber who simply agreed to pay your bill every time it came, the paper took advantage of your loyalty by charging you more.
I had almost no marketing or business sophistication at the time. But on a gut level, I thought, “Why not take care of your long-term customers? Why not reward people for continuing to subscribe?”
Now, the newspaper never got in trouble for this game they played with price. But it never felt right to me, because I wouldn’t have wanted to be on the other side of it.
Other businesses have left a far worse taste in my mouth…
Most recently I saw an offer for financial education for kids that will teach the parents a lesson about financial responsibility, too!
I had a link forwarded to me the other day for a “free” DVD.
Now, at first this looked like a fairly straightforward offer for “Free+Shipping” like I offer for The Copywriter’s Guide to Getting Paid.
That is, you pay a small shipping cost, and get the product free. This is an effective “welcome mat” offer for new customers, to get people in the door and spending their first dollar with you. In general, this is a nice threshold for making sure you’re focusing your marketing on buyers, not freebie-seekers.
But then I read the fine print.
This particular DVD — which was designed to teach kids about financial responsibility — was the first in a series of lessons.
You paid $1 shipping and got the DVD free. But once you paid that $1 shipping, you were also authorizing recurring charges of $14.95 plus $4.95 shipping every three weeks, for more DVDs.
In other words, you were authorizing $359.20 in automatic charges to your credit card, over the next year.
Presumably to teach kids financial responsibility?
The irony wasn’t lost on me.
While they didn’t completely hide this deal, it was definitely buried in the fine print. Once you got past the sales page and into the cart, you were required to agree to the terms and conditions, but those were hidden in a scroll box and very hard to read.
This definitely fell more toward the manipulative and predatory end of the spectrum when it came to pricing models.
Not horrible, because they’re not hiding the charges completely. But it’s clear they’re not real big fans of making sure you know about the future charges, either.
Video Professor ran on this same model for a very long time…
Do you remember the Video Professor infomercials?
John wanted to teach us how to use our computers. And, because of how much he cared, he wanted us to try his product. And so for $6.95 shipping, we could get a free DVD tutorial on using our computers, delivered.
Then, the complaints started rolling in.
By agreeing to that initial charge, you were getting the first of a series of DVD tutorials. Subsequent tutorials, shipped automatically, cost anywhere from $49 to $199 or more.
Some got refunds easily. Others claimed they were quite difficult to get.
Investigative journalists who were trying to shine a negative light on Video Professor ended up getting refunds easily, even undercover. So they were likely not that hard to get.
But even so, Video Professor ended up with an ever-expanding negative reputation. And after growing sales to over $100 million per year, they went out of business.
Another publisher I know had to stop running one of their biggest winners for similar complaints…
There’s a lot of insider detail in this story, and I don’t want to speak out of turn. But one publisher I know of had tremendous success with an offer for around $5 shipping for a free book.
By taking that offer, you were also agreeing to three free trials of different subscription services, that expired in sequence. By the time all trials were over, you were charged about $250 on your credit card.
They worked very hard to make this clear. They sent out lots of notices to customers, by email and by mail, before charging their cards. They put copy in the initial marketing pieces and on the order forms, to make all these charges known.
But still, the number of complaints that came in was so high, their merchant account provider threatened to shut down their credit card processing if they didn’t change the offer.
And so they had to reverse course and create an offer that was very clear from the beginning, and didn’t have the cascading charges.
Although it was based around the same successful copy, in never had the same impact the original offer had.
How to do pricing right…
I’ve thought a lot about this, and even in writing this article it’s forced me to reflect.
I don’t think in any of the cases above that the business was ethically wrong in what they did.
There are companies who are even more manipulative and predatory, who actually lie, and who should be shut down or put in jail over their pricing and billing practices.
But all of the above companies were playing on the spectrum of pricing between 100% upfront and 100% manipulative. They were trying to find their spot. And they found that they were able to bring in more customers by pushing more toward the manipulative end of the spectrum.
If this makes you uncomfortable, maybe marketing isn’t the field for you.
However, my #1 core value in my business is to follow The Golden Rule. Treat others how you want to be treated.
And so I personally lean toward over-informing, especially when it comes to future charges that are going to show up on my customers’ bank statements.
And when in doubt, make the customer be proactive about renewals, rather than having to be reactive with a cancellation and refund request.
And understand that if you do this, you need a very good customer service team who is able to respond to customer complaints in a flash, and right any perceived wrongs.
The customer isn’t always right. I think that’s especially true in situations like this. You can be crystal-clear and get them to agree to future charges, and they’ll later argue that you didn’t get their consent.
But at the same time, the customer always believes that they’re in the right. Within the context of their memory, their experience, and their worldview, they think they know what’s right.
It’s your job to step into that experience for a moment, validate it, and figure out the best way to move forward. Better to part ways with a good reputation, than keep their money and develop a bad one.
At least, that’s how I would want to be treated in that situation.
Yours for bigger breakthroughs,