Don't Make Your Product Easier to Buy. Make It Harder to Purchase.

The conventional wisdom is that if you want to increase your sales and profits you should make your products (or services) better and easier to purchase. I'll take the contrarian view: that you should make them worse and harder to buy. Oddly enough, doing this will actually benefit your customers as well as your business. 

If you want to reach more budget-conscious, price-sensitive buyers, you have two choices. You can lower your prices across the board for everyone. Or, you can lower the price for just that group of buyers, and leave it unchanged for everyone else. But that raises the question: how does one identify who the price-sensitive buyers really are? Isn't it in the interest of any buyer to claim that price is the most important driver of their purchase decision? 

If you want to reach more budget-conscious, price-sensitive buyers, you have two choices. You can lower your prices across the board for everyone. Or, you can lower the price for just that group of buyers, and leave it unchanged for everyone else.

The answer, in a nutshell, is to make buyers give up something valuable in order to secure a lower price. Let’s look at three different ways to do this:

Using inconvenience to sort buyers by how price sensitive they are

Imposing a cost of time and effort is a powerful way to reach budget-conscious buyers while protecting your overall margins.

Segment buyers with strategic friction

The key to this strategy is recognizing that different customers value their time and money in very different ways. Some buyers are time-rich, but money-poor. These price-sensitive individuals are often willing to sacrifice some of their time in order to pay a lower price. Their  willingness to “work” for a deal provides a clear signal of their true price sensitivity.

Other customers are money-rich, but time-poor. They place a high premium on ease and convenience. These individuals will choose to pay full price simply to avoid the hassle associated with paying a lower price – such as queuing in line. This means you can create a system where customers sort themselves based on their priority – saving time or saving money. This ensures your discounts go to the people who care about price the most.

The key to this strategy is recognizing that different customers value their time and money in very different ways.

Protect your premium price

Every price discount carries the risk of cannibalization. This happens when your best customers take a lower price that was never intended for them. Using friction creates a "fence" that separates these different segments. This barrier ensures that quality-sensitive buyers continue to pay full price.

The inconvenience serves as a natural filter for your customer base. A time-pressed customer finds clipping coupons or monitoring price drops to be a poor use of their energy. They prefer the simplicity of a standard, full-price transaction. This strategy allows you to maintain the perceived value of your premium offerings while still expanding your reach. You gain volume while protecting your brand from the negative effects of across-the-board price cuts.

Every price discount carries the risk of cannibalization. This happens when your best customers take a lower price that was never intended for them.

Set up a hurdle for a lower price

You have several options for building these hurdles into your sales process. Promotion codes and traditional coupons are common tools for this. They require the customer to actively find, save, and redeem the promised discount at the point of sale. Mail-in or digital rebates use a different form of effort by requiring paperwork after the purchase is completed. However, in-store coupons, or instant rebates, don’t count because they require minimal effort to get a lower price. Price match or price drop guarantees are other forms of effort-based discounts. The customer must make an effort (e.g., proving a competitor has a lower price, monitoring your business for a price reduction after they purchased) to receive a lower price. 

You might also consider using physical hurdles like waiting. Requiring customers to join a waiting list or to queue in a physical line can effectively filter buyers by their patience and the value of their time. Some buyers are willing to spend hours standing in line for the chance of getting a good deal on a theater ticket or a big screen TV. The specific amount of effort must be balanced carefully. If the hurdle to secure a lower price is too high, even budget-conscious buyers will walk away. If it is too low, every buyer will take the discount and your profit margins will suffer. The goal is to find the right level of hassle or inconvenience that segments your market effectively. 

Requiring customers to join a waiting list or to queue in a physical line can effectively filter buyers by their patience and the value of their time.

Using versioning to sort buyers by how price sensitive they are

A second way to attract price-sensitive buyers while maintaining your profitability is to create a less expensive version of your current offering.

Capture new market segments

An "economy" version of your product or service version targets budget-conscious buyers that might otherwise be priced out of your market. It’s also a tool for fighting off cut-price rivals. Instead of lowering prices for everyone, you offer a “no-frills” version of your product or service that meets basic needs. This protects the price integrity and positioning of your premium version.

Having a less expensive version is also a powerful negotiation tool. When a customer asks for a discount, you can offer them your "economy" version. This forces them to prove how price sensitive they really are. By offering two different versions of your product you’re also subtly shifting the buyer’s thinking from “Should I buy this?” to “Which version is right for me?” Like with effort-base price discounts, a versioning strategy reserves a lower price for buyers who’re willing to sacrifice something in return. This allows you to grow your customer base without eroding your overall profit margins.

Instead of lowering prices for everyone, you offer a “no-frills” version of your product or service that meets basic needs. This protects the price integrity and positioning of your premium version.

Pinpoint important quality attributes

For a versioning strategy to work, your "economy" version must be clearly inferior to your “premium” version, not just different. You must ensure that buyers who pay less receive less value in their eyes. You do this by modifying one or more of your product’s “quality” attributes. A quality attribute is a product attribute pretty much all buyers prefer more (or less) of. That is, they agree when more (or less) of this attribute makes the product or service better. Consider, for example, leg room on an air flight. Every flyer prefers more legroom to less. For another example, consider connecting flights. All other things being the same, every flyer prefers fewer layovers to more.

Validate your quality hierarchy

Ultimately, there should be an unmistakable consensus on which version is superior. You can tell when you achieved this by using something I call the equal price test. If both versions were offered for the same exact price, would nearly every buyer pick the same version? If not, it’s back to the drawing board. Once you have successfully applied this equal price test and defined your versions, the strategy yields a powerful result. It creates a natural self-sorting mechanism where customers choose the level of impact they want to buy.

The sorting effect of this tactic comes from the fact that while buyers agree which version is better, they don’t agree on how much extra the premium version is worth. Quality-conscious buyers will opt to pay more for a higher level of quality. But price sensitive buyers will decide the economy version is “good enough” for their needs. But beware! If your economy option is too good for the price, you will cannibalize your own sales. This trade-off between price and quality acts to prevent your quality-conscious customers from "trading down" to your cheaper, economy version. This encourages quality-sensitive buyers to stick with your higher-margin, premium version.

If both versions were offered for the same exact price, would nearly every buyer pick the same version? If not, it’s back to the drawing board.

Using unbundling to sort buyers by how price sensitive they are

A third way to reach budget-conscious buyers while maintaining your profitability is by unbundling your offering: sell its essential components as an economical base product, and offer the remaining components as optional add-ons.

Deconstruct your current offering

Many businesses fall into the trap of selling "the works" by default. This approach alienates price-sensitive buyers who don’t want to pay for things that aren’t important for them, while simultaneously giving away value to customers who would have been willing to pay extra for those features. Unbundling is simply taking an offering and breaking it into pieces you can sell separately. You're moving away from a "take-it-or-leave-it" package and toward a menu where customers pick only what matters to them.

The classic example of unbundling comes from the airline industry. Before deregulation, airfares were largely “all-inclusive.” Your ticket price included a seat on the airplane, meals, entertainment, baggage transport, and maybe even a cocktail (or two). Now, your ticket price doesn’t include much more than a seat on the plane. Everything else is an upcharge. Unbundling became a competitive tactic the upstart airlines used to compete against the legacy airlines with their full-service flights. By breaking your offer down to its constituent parts, you gain the flexibility to meet different budgets and turn a fixed scenario into a customizable solution that appeals to a wider audience.

Start by taking a hard look at everything you provide to your customers. The key is to identify your offering's core value—the essential elements that every buyer expects. You want to break apart your offering's components and separate them into two categories: the elements that every buyer expects, and the elements that are valued highly by some buyers but not by others. 

Unbundling is simply taking an offering and breaking it into pieces you can sell separately. You're moving away from a "take-it-or-leave-it" package and toward a menu where customers pick only what matters to them.

Build a "no-frills" base product

Create a stripped-down version of your product that includes only the absolute essentials. This "no-frills" core product serves as a powerful magnet for price-sensitive customers, allowing you to advertise a lower base price to get more buyers through the door. Like versioning, this base product acts as a defensive tool for handling price objections and countering low-price competitors. It serves as your entry point, while you capture and increase your overall profits through the sale of higher-margin, value-enhancing add-ons.

Capture profit with optional add-ons

An unbundling strategy doesn’t mean cutting margins across the board; it’s a re-engineering of your revenue model. You sacrifice margin on your core product to attract a wider base of buyers. You then recover and often increase your profits through high margin add ons. Think of these extras as a pathway to customization. These optional products and services allow quality-sensitive buyers to upgrade their purchase to fit their specific needs and budget. 

The key is that these add-ons must provide genuine value by delivering superior results or a better experience with the base product. While these add-ons should be priced relatively low compared to the base product to encourage adoption, they should carry higher profit margins because of the specific value they deliver. This structure ensures you maximize the revenue from every segment of your market simultaneously.

An unbundling strategy doesn’t mean cutting margins across the board; it’s a re-engineering of your revenue model. You sacrifice margin on your core product to attract a wider base of buyers.

Choose Your Strategy: Versioning vs. Unbundling

To choose between versioning and unbundling, consider the nature of your customers' needs. Consider creating a less expensive version of your offering when you are essentially selling the same core product with "more-is-better" (or “less-is-better”) attributes. This approach appeals to diverse budgets by letting customers purchase just the level of quality they are willing to pay for. Consider unbundling your offering when your customers have highly diverse, specific needs. This approach lowers the barrier to entry with a cheap, basic product, while giving customers the flexibility to pay only for the extra items that will deliver significant benefits.

Consider unbundling your offering when your customers have highly diverse, specific needs.

Putting Your New Pricing Strategy into Practice

At the outset, I made a promise that might have seemed counterintuitive: that by making your products and services "worse" and harder to buy, you would actually improve your business and better serve your customers. We have explored how adding an inconvenience, creating a stripped-down version, or unbundling your offering enables you to serve price-sensitive buyers who’d otherwise be priced out of the market for your product or service. And you don’t have to sacrifice margin from buyers who are willing and able to pay more.

While pricing decisions can involve many additional factors, this framework provides a starting point for rethinking your pricing strategy. Moving forward, stop viewing product "limitations" and buying "hassles" as things to always be avoided. Instead, start thinking of them as strategic tools for increasing your revenue and reach.