Dead-End Situation Pricing Opportunities
Imagine you are walking in a big city in a not-so-safe area. You feel eyes looking at you. You turn around the corner on a street that happens to be a dead-end street. And you hear footsteps following you. You look around and the person following you doesn’t look like a friendly type. Do you feel the situation? Would you agree that suddenly, your willingness to pay for ‘personal protection’ has significantly increased? Well, that’s what I mean by “dead-end situation pricing.”.
Of course, for the sake of storytelling, I added drama to the intro. But this kind of “dead-end situation” may be happening more often than we think. But first, let’s make sure we’re all on the same wavelength.
A dead-end situation is when you happen to end up in a situation where you feel stuck, helpless, trapped, or difficult to get out of. And in this situation, you almost certainly have a higher willingness to pay to get out. And the reason is simple: the alternative is a far worse situation.
Let’s look at an example that triggered this concept to me. Being passionate about skiing, I spend quite a lot of time in ski areas. And last year, in Les Trois Vallées, something caught my attention. In the middle station of the middle valley, there was a ticket machine where you could buy a “return to my valley” ticket for people with a single valley ski pass that went beyond the limits of their ski pass. Not so much the dramatic, dangerous situation like in the intro, but still a dead-end situation. Because without this option to buy a one-use return ticket, you’d need to ski down the valley and either upgrade your ski pass or hire a taxi to drive you to your valley. The ticket machine gives you a cheaper option than these two alternatives.
Be the hero but not for free.
The essence of the Dead-End Situation concept is to be the hero for the customer who got stuck, but not do it for free. We know already that the willingness to pay will be higher for this “stuck” customer. The big question is now, “What can we charge the customer?”. Well, there are three things to take into account:
Make sure that your proposition (price) is not worse than the alternatives. But also that it doesn’t create possible abuse by the customer.
Make sure that the problem of the customer is fully solved by you on that specific moment (but not necessarily on the longer run)
Try to get out a commercial relationship with the customer on the longer run
The car breakdown example
You have a car breakdown on the highway and no road assistance plan. What should a road assistance business offer to the stuck customer? The easy, yet more of the Vilain way of thinking is: “We can come and help you out, but you pay big time for our intervention, as you are not a customer” or “We can only come if you sign up now for a full year of road assistance”. In both cases, the customer will feel exploited… And also the Dutch court thinks that way, cfr https://www.maxmeldpunt.nl/recht/rechter-legt-koppelverkoop-anwb-bij-hulp-door-wegenwacht-aan-banden/, where the claim this cross-selling practice is illegal. The Hero way would be for example: “We can come and help you. We normally only help customers, but we want to be there for you as well. We can offer a 3 month trial for our
services and this covers already immediately this intervention”. Now you offer a better solution than the hostage-like feeling first options and it gives you the opportunity for 3 months to show the benefits of your road assistance offering.
The marathon example
You have your ticket secured for your first marathon and have trained very hard, well in fact too hard, because you got injured, and so you can’t participate. What would be your Dead-End Situation offer for such a participant? Let’s look first about the alternatives: “Money gone”, “Try to sell it via a platform or social media, but at a lower cost”. I already saw organisers that have a money back approach if you have a medical certificate, others are strict in the “no refund” policy. A win-win offering here could be “We can secure your race entry for the next year, with a small administrative cost” (and you may even add a free preparation plan with it to avoid training injury). This way you don’t lose the customer, but the timing of next year might not suit him. An alternative could be to have your own “ticket swap” option: a service where you can sell your ticket to someone else, for a (small) handling fee. You win double here: good feeling for the injured customer, and the spot is taken by a new customer.
The Free access example
Let’s also give a real case where customers were tricked or trapped into a subscription. You must certainly have seen the “1 month free access” or “3 months free access” type of decoy to convince you in taking a service (Netflix, Zwift, etc). The gentleman way to do this, mentions also “no credit card required”. But, the “villain” way is that you indeed get 1 or 3 months for free, but that you have at the moment of subscription already committed for a full year. I wasn’t able to find any examples that are still there of such a practice, but I’ve read quite some complaints on “difficulty to cancel” after the 1 month trial. Amazon was also formally accused of such practices.
How to start?
We’ll share with you these 5 steps to get started.
Be the customer
Get in the shoes of your customers and brainstorm on when a customer might get into a Dead-End Situation.
A list goes a long way
List the possible ways out of the dead-end situation. Don’t think only about your (possible) solutions, but even more think from how the consumer might reason and look at all possible alternatives or even workarounds.
Cost vs. pain
Try to figure out the “cost” or the “pain” for the customer for each solution.
Think of what to do
Brainstorm on what you can do for that customer, to solve his dead-end situation.
Look at pricing and customer relationship opportunities. These should be looked at together. As a guideline: a good price point would be between 1/3 and 2/3 of the “cost” of alternatives. There should also be at least one or even better more than one “touchpoint opportunities” with the customer to build the relationship on the long term.
It might be a good idea to involve some customers (via interviews or co-creation sessions) or do market research to be as good as possible in the shoes of the customers.
Of course, the starting point is with step 1. Great that you have read this article up to this point. I’m sure that every company has such a Dead-End Situation for its customers. So here’s my challenge for you to end the article: dive into step 1 and find you customers Dead-End Situation(s). Curious by nature, I’d be delighted if you would share which of these situations you have ended up with… That
way, I’ll know of my claim at the start that “Dead-End Situations may be happening more often than we think“ is true or false…
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