Is Your Start-Up Struggling for Sales?

The more non-price barriers disappear, the more customers will say yes.

Struggling for sales? One of the things entrepreneurs often don’t consider is the price customers actually pay when purchasing. While price is obvious, there are several less obvious costs to your customer when they acquire a new, shiny thing. Economists call these non-price expenses switching costs and categorize them into three buckets:

  1. Time cost
  2. Effort cost
  3. Psychological cost

Here are a few examples of these costs you need to consider:

  • Training costs required in order to fully use a new product or service, for both individuals and companies
  • Disposal costs related to their current product or service, and perhaps even the future cost of disposing of your product or service
  • Mental cost of a purchase, time to complete a transaction, like when you have to click ten times and fill-in redundant or unnecessary information to make an online purchase
  • Integration costs with current business systems or consumer lifestyle, such as legacy database usage or accessing personal libraries online in other applications
  • Emotional costs related to any change, such as losing a friendship with a rival sales person, or parting with another product where there exists sentimental value to the customer
  • Finding cost if your product is hidden in the back of a store, or on a shelf top

If you want someone to purchase new product or service, you need to help the customer reduce or eliminate as many of these costs as possible. For example, Amazon.com introduced one click purchasing precisely because it lowers the time, effort, and psychological cost of an online purchase decision. They made it easy to say yes.

You can make it easy to say yes too. Get together with your team, your family, and friends and brainstorm ways you can automate training, disposal, integration, and add features to the purchasing process to eliminate any form of stress to the person making the purchase decision.

For example, if you’re replacing a legacy product that is bulky, providing a free disposal service for the old unit can make saying yes easier. For B2B SaaS, perhaps making the integration free or one-click automated to the customer. You get the idea?

The more these non-price barriers disappear, the more customers will say yes.

Do you have any pro-tips for entrepreneurs on lowering switching costs? Feel free to share your ideas and creative tips in the comment section.

Author: Joe Merrill

I'm a VC in Austin, TX.

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