Almost one quarter your customers can, with reseachers' very academic description, be called “tightwads”. These customers are particular difficult to sell to, not because they don't need your product or don't feel it's worth the price, but because they experience more pain when spending money than others. The difference between the tightwads and their opposites, the spendthrifts, can be seen in the brain.
Gregory Ciotti gives a thorough presentation of what companies can do in order to help the tightwad open his pockets. Among other things, he says that researchers from Carnegie Mellon, Stanford and MIT, through brain scans have found that the brain’s pain center is activated, when we see prices we think are to high. And it's the same place inside the brain that is thought to be the cause of the tightwad’s reluctance to paying. This is because he experiences a higher amount of “pain of paying”.
Researchers have examined “pain of paying” by asking test subjects to indicate in a questionnaire, whether their consumer habits varies from their desired consumer habits. And a clear image of three different types emerges:
24 % Tightwads: Spends less money than they want
61 % “Unconflicted”: Buys what they feel is necessary
15 % Spendthrifts: Buys more than they want
Tightwads spend less than they actually want to. Spendthrifts spend more than they want. The group in the middle spends the amount of money that they would like to.
Here, it is of course interesting for a company to look at how you are able to help the 24 % of your customers who spend less money than they want to.
So how can you calm their, and the rest of your customer’s, pain of paying? By minimizing the pain of a purchase. Research shows that the difference between tightwads and the spendthrifts is biggest in situations that enhances pain of paying and smallest in situations where the pain is minimized.
To minimize the pain, Ciotti proposes the following 5 tactics:
While we all have trouble understanding abstract concepts such as time and money, this is even more difficult for conservative consumers such as your tightwad-customer. It's harder for her to rationalize high cost consumption that stretches over a long period of time. This is why, it could be a good idea to break down such an offer into smaller parts. Instead of a product that costs € 1,000 a year, you create an offer that costs € 84,- a month.
This makes it easier for the tightwad to assess the value of your proposition. You can even point out that it costs € 2.75 a day.
With one-time purchases, Ciotti recommends that you highlight how long the product lasts. It is easier to pay € 5,000 for a camera, if you know that it takes good pictures for five years or more.
If your product have a lot of supplementary benefits, like cars that offer leather seats, air-condition, radio etc., it makes perfect sense, like the car dealers, to collect those in package offers. This means that buyers only need to consider one purchase and not a long range of purchases. It reduces the resistance of the tightwad.
Sometimes very small things are required. Literally, adding of the word “small” in a text meant a 20 % higher conversion.
In a sub-experiment in the research mentioned above, 20 % more of the test subjects ordered a free DVD (for instance with The Sopranos or Seinfeld) with a shipping fee of $ 5 with the text “a small $ 5 fee” in compared to the text: “a $ 5 fee”.
In the same study, results indicate that the tightwad is easier to convince into buying, if you focus your message on the value of the offer instead of the pleasure it can accommodate.
The researchers designed an offer for a back rub in two different ways: Use-focused (“It can relieve backaches”) and pleasure-focused (“It is a comfortable and relaxing experience”). Even though it was 26 % less likely that the tightwad-group were convinced about the pleasurable message, they were actually only 9 % less likely to be convinced of the message focused on the useability of the offer.
Many products will, of course, emphasize both messages, but these results indicate that you should make sure to highlight the products’ value of use. Unless you're selling an exceptionally luxurious product, where one can only expect that the main purpose is pleasure.
Even little fees can detain the tightwad from shopping at your company. For instance, a fee of merely 1 franc lowered the conversion on Amazon’s books drastically.
So consider whether you're able to get rid of some of the small fees and instead include them in the price.
It's important to emphasize that the customers who, in this article, has been labeled tightwads are not customers, who doubt the quality or value of your product. It's not these customers you'll have bargaining for the price or complaining and never be satisfied.
Instead, we're talking about customers who, if they were more rational, actually would like to buy your product, but because they experience a higher level of “buying pain”, it is hard for them to make the choice. By following the advice above, you can remove some of the obstacles that blocks their way.