Retail

How to contextualise value for your customers and maximise sales

Bri Williams /

Let’s say I give you five oranges. Is that good?

It depends.

Did you want four oranges? Did you want six oranges? Did you want five apples, not oranges? Did you not want anything at all?

Whether the act of giving you five oranges was a good or bad thing depends very much on context.

And yet, in business, we often seem to forget to consider the context of the exchange we have with our customers. We overlook the role we play in shaping the context to ensure our offer is always a good thing.

So is giving you five oranges a good thing?

It depends.

Or-an-ge glad I gave you oranges?

To understand context, we start by asking some basic questions about what is happening.

Who are you to me? Whether you’re a stranger or friend will impact how the act is perceived. Have we been discussing oranges at length, or has this come out of the blue?

Where are you? If you are in a fruit shop and I am the retailer, there’s a chance it’s a commercial transaction. If you are at a sporting event and the oranges are segmented, it’s likely you will be distributing them to those on the field. If you are about to board an aeroplane, it will seem inconvenient and odd.

Who is around you? Are others there to help you carry them? Do you want others to see you receive the oranges, or will this be embarrassing? If you are at a Mango Growers convention, it may seem inflammatory.

What time of day is it? Presenting someone with five oranges at 10pm may not be as helpful as if it occurred at 7am.

What are your needs? Your wants? Do you hate oranges? Do you have more oranges than you know what to do with? Are you suffering from scurvy and desperate for vitamin C?

Contextualising value for your customers

Now that we have considered the context in which the transaction will take place, we can move towards shaping the perception of value.

Remember: value is relative, not absolute. That means your customer will be comparing what they get and have to give with a frame of reference.

Therefore, you have two choices as a business.

You can let them use their existing frame of reference. This is dangerous.

Or, you can create a new frame of reference. This is smart.

Let me illustrate an example. I once had an accounting practice send me a proposal for services, and this is how they communicated price to me:

“Our estimated fee for the completion of work as per appendix A scope of services will be up to $2,000 plus GST.”

Pretty standard phrasing, right? The problem was they left me to define the frame of reference. Was $2,000 good value or not? If I had $900 in mind, then $2,000 seemed expensive. If I had $5,000 in mind, it seemed cheap.

I didn’t end up accepting their terms.

Remember, our job is to frame the value of our goods and services to encourage our customer to proceed. There are many techniques you can use to achieve this outcome, but let’s just tackle two now: numbers and names.

Number framing

Contextualising the numbers you share with customers can make or break your interaction. Your success depends on the first number they see as it ‘anchors’ their perception of what follows.

Use a low anchor to be seen as generous

Use a low anchor if you want to be seen as generous.

For example: ‘I know you only asked for four oranges, but I wanted to give you five as a thank you for choosing us.’

Or perhaps: ‘Last year’s bonus was $1200, but this year I’m pleased to say you will receive $1700.’

Use a high-anchor to diminish perceived cost

Steve Jobs used a high anchor when introducing the iPad so we would think it was great value. He started by citing ‘pundits’ who said it would be priced at $999 before thrilling the audience by revealing it would only be $499!

In the case of my accounting practice example, that could mean contextualising value as follows: “For larger clients we typically charge $5,000, but for your portfolio it would only be $2000”.

Or, if they didn’t have tiered pricing, they could use another larger number to anchor perceptions. For example: “Your current portfolio is $1,245,678. For us to manage everything we’ve discussed for you, the fee will be $2000 plus GST.”

Re-set the anchor

So what do you do if they have a fixed expectation and you can’t deliver? For example, they wanted six oranges but you only have five to give?

Provide a reason for the shortfall, ideally citing an external event that is out of your control and likely to be affecting alternative providers as well, before framing about what you can do for them, right now.

For example: ‘Unfortunately, there is a shortage of oranges at the moment. What I can do for you is give your five right now, and arrange for an additional orange to be delivered to you tomorrow.’

What if the product or industry category has a fixed anchor, but you want to charge more?

Starbucks faced this issue when launching in the US. The existing anchor for diner coffee was about $1, but they wanted to charge four to six times that. How? They re-framed what ‘coffee’ meant.

From their store fit-outs with couches, cool music and the smell of roasting beans, to the fancy names they gave their drink sizes (Grande and Venti), they created so much distance between ‘coffee’ and ‘Starbucks’ that they could re-anchor price expectations.

Back to the accounting practice. If the customer is used to paying $900 and they charge $2000, they need to re-frame expectations of what services from this accountant means.

One approach is to offer the $2000 as the most basic option, introducing two more expensive options to drag the customer up to a higher anchor point.  Now the customer is comparing $2000 to $6000, and thinking they need to at least move to the $4500 option to get value.

Name framing

People are persuaded by descriptions.

Rather than giving you ‘oranges’, what if I gave you ‘sweet, juicy, sun-ripened organic oranges from Australia’s most awarded orchard’.

A restaurant was able to increase sales of one item on its menu by 27% by changing the description from ‘broccoli’ to ‘seasoned Asian-broccoli’.

The language we use conjures up images in the minds of our customer. Not only does that mean paying attention to how we describe our offer, but what we call the product itself.

Imagine you were selling sweets, for example. Calling them ‘fruit chews’ rather than ‘candy chews’ would likely double consumption.

Staging cocktail hour? Listing a drink as ‘Red Bull and Vodka’ rather than ‘fruit cocktail’ would prime your guests to act 51% more intoxicated.

If your product or brand carries a taint due to the connotations of what the name represents, consider changing it. Kentucky Fried Chicken moving to KFC and British Petroleum becoming BP are just two examples of companies distancing themselves from an original meaning.

Common product names you may have seen (or used) have their own framing connotations too.

  • ‘Standard’ — use to normalise it as a default, but avoid if you don’t want them to choose it.
  • ‘Basic’ — use to signal no-frills, low-cost and build tension about selection, but avoid if you don’t want to disparage your product.’
  • ‘Essentials’ — use to signal they can’t live without the product, but avoid for lowest cost option because it will reduce impetus to upgrade.
  • ‘Achiever’ — use to signal aspiration, but avoid for lowest cost option.
  • ‘Pro’ — use to signal status difference between pro and amateur, but avoid if all options are pros because it loses its meaning.

So, you are about to give your customer five oranges. Is that good?

It depends … on you.

NOW READ: Ahead of the times: How Adam and Deborah Drexler built Matt Blatt into a $43 million furniture and homewares empire

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Bri Williams

Bri Williams is Australia's foremost authority on behavioural economics applied to everyday business and personal effectiveness. Author, speaker and leading consultant, Bri can make your life easier through behavioural science. More at www.briwilliams.com.au.

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