In 1983, behavioural economist Richard Thaler did an interesting experiment involving beer. Thaler had a group of people in the study, and essentially, he wanted to find out how much they were prepared to pay for a particular bottle of beer. The product was the same for everybody, it never changed, the only thing that changed was the way it was sold.
Thaler found that people were willing to pay a very different price depending on where and how the product was sold. This is called the Power of Context. If the beer is being sold in a messy corner shop, stacked in a dusty corner, people are willing to pay a much lower price for it than if they bought the exact same beer next door in a hotel bar, cold from the refrigerator. Likewise, they would pay more for the cold beer on a hot day than a cold one, sometimes even 2 or 3 times the price! Simply changing the context in which you are selling can raise prices.
Another study in 2002 from price psychologists Adaval and Monroe tested this more recently:
‘The context in which a product is seen influences the internal standard that consumers use to judge both this and other products. Two experiments showed that a product was judged as less expensive in a high-priced context than in a low-priced context even though the product’s actual price was recalled as higher in the first condition than in the second.’
Automatic construction and use of contextual information for product and price evaluations
Journal of Consumer Research, March 2002
Adaval and Monroe
What this means is that the context in which you sell something has a huge impact on how much people are willing to pay.
Before the recent move to predominantly online interaction, you likely met with clients in person. If they were to come into your office and the desk was messy, there were files on the floor, they have to huddle around your laptop for your presentation, the drink you offered them was bad coffee in a dirty mug – all these things impact on how much that client would be willing to pay you. You could be the best accountant or bookkeeper in the world, but if you have that messy, low-value environment, people will want to pay a lower price.
Alternatively, if you have a clean, bright boardroom, a menu of drinks with tea, coffee, maybe even champagne, served on a beautiful tray, and you show your presentation on a big display, then people will be willing to, and will expect to, pay you much higher prices.
That’s the power of context. It makes a huge difference to how much you can charge clients!
The problem is the world has changed.
You’re probably finding right now that you’re not having many face-to-face meetings. You’re having meetings over Zoom, or on Microsoft Teams. And this situation isn’t going to change in a hurry, this online world isn’t going away. So, the power of context means we have to find a way to position ourselves as the expert and stand out from others in this new online world of communication.
This means improving our confidence when communicating online. Learning how to use the technology and communicate in front of our cameras with energy, passion and conviction. In my next blog post, I’ll go through the 7 key tips for better communication in the online world so that you can start to tap into that power of context, position yourself as the expert in your field, and stand out, because this move to online is new, but it’s here to stay.
Watch the full video on becoming more confident online, standing out, and impressing clients here: How to Use Online Meetings to Grow Your Accounting Firm
The world has changed. We have all gone online. We are living with Zoom and Microsoft Teams every day. And it’s changing the way we communicate. You need a different set of skills to communicate through a webcam or camera, and when you master these skills, you will stand out from the rest of the profession, win more work and have more success.
If you found this content helpful and want to build your confidence in online communication, enrol in the Online Live Academy to get live training every month, plus additional video training, systems, tools and resources designed to get results FAST!
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Wishing you every success on your pricing journey
Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”
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