The three costs your customers pay
My son was walking fast through the toy store with a serious look on his face. His hand was tight over his zipped up pocket, in an effort to protect the $50 bill inside, a Christmas present from his grandfather. He points suddenly with his whole hand, finger and body “This! This is the toy I want!”. I look up to see the biggest box in the whole store. The toy inside could have easily been placed in a box a third that size. Oh, and batteries not included.
There was a time back in the day when us, adults, also cared more about the biggest and the longest. When I was a child, the bigger the box, the more justified the high price.
These days though...do you ever find yourself thinking that less is more and faster is better? If you do, you’re not alone. Your customers are thinking the same.
We tend to think that customers only pay us with their money, but our products also cost them their time and their space. Think about it...
Most people feel like they don’t have an unlimited amount of time, money or space at their disposal. Most people want to use their time, money and space wisely. They won’t throw them around aimlessly. Even those who feel an unlimited abundance of time, money and space won’t offer their resources unintelligently, to anyone.
Customers pay with three costs: time, money and space.
One way to increase your price - the money cost - is to reduce the other two costs - time and space. Then, the sum of the costs people pay you with stays the same, but you get more money, because people pay you a higher price. Stay with me, I’ll explain in a minute. Let’s take a quick look at each of the 3 costs.
Do people have to give you a chunk of their time in order to use your product?
For example, when people buy a book, they don’t just spend $20, they also “spend” with a chunk of their time, because they have to spend time reading the book afterwards. It’s not just the $20 that matters to people, but it’s also the time they have to spend reading the book that matters to them. In fact, for many people, when it comes to books, time matters much more than money. Have you ever heard people say I don’t have time to read books? I heard that much more often than I heard I don’t have money to read books.
Or, think about services like Stitch Fix (a monthly custom selection of clothes) or True & Co’s bra quiz (a quiz that helps you find the best bra for your body type). These companies reduce your time cost, because you have to spend less time finding the right products for you, and more time doing what you love.
Or, think about a photographer who sells photo sessions. Customers don’t pay just the dollar value to get the photos. They pay with the time they have to spend clearing their calendar for that day, showing up and then being photographed for hours.
Or, think about group coaching programs. They’re great, but there are people who would pay much more to be in a 1:1 coaching program. Because they value their time, they’re willing to pay a high price to be laser focused on their own life, not on everyone else’s life in the group.
You can’t get back the time you spent in the past. You can only live the present and the future. But, the length (and quality) of the future is unknown. So, the time we live right now is indeed precious. The time cost can be worth a lot of dollars.
The less time people have to spend buying, expecting or using your product in order to get its full benefit, the happier they’ll feel, and the higher the chances they’ll buy again.
You can reduce the time cost even in the most unexpected industries. My friend Sara, a dentist for kids, started a business where she only offers home visits. Instead of having to drag your child to a dental office, you can have your child take her/his dental visit from the comfort of your home. She reduced her customers’ time cost. She also eliminated the emotional pain often associated with dental visits. She came up with this idea because she cares about kids and wanted to make them feel comfortable.
The money cost is obvious. It’s the price you pay for the product or the service. For example, in the book’s case, it’s the $20 you pay to actually own the book.
The space cost is the least obvious. It’s the space your product will occupy in your prospect’s home, on their computer, on their phone, in their car, in their garden, or anywhere where there is a limited physical space. I expect this cost to be worth more and more for people since there are 7.7 billion people on Earth today (2019).
For example, when you buy a chair or a painting, you’re giving away space in your house, not just money. You may also be giving away the freedom you may have felt in connection with that space, because that space can no longer be occupied with something else.
You’re also giving away space when you buy seemingly small items like clothes. There comes a time in every woman’s life when a closet looks better with fewer items, not more.
Space also applies to how physical things can be carried or stored. Foldable wins over non-foldable.
Time, money and space are the three costs people pay us with. Therefore, it follows logically that if we want the Money piece of the equation to be higher (aka, the dollar value you get from customers), we have to decrease the other two costs, time and space. That way, your sales will go up because your price will be higher. You might even get more customers because time and space are becoming more and more precious and people are drawn to products that cost the least time and space.
How to reduce time and space, and charge more money for the same product.
Let’s take a look inside your business and find all the little areas where you can reduce the time and space your customers give you, which will make it easy for you to charge customers more money for the same product.
Can you make it easier and faster for people to buy from you? Can you create cheat sheets, transcripts and audio files in addition to your video tutorials, making it easier and faster for people to consume your content? Can you include a smart sized bag so that your product can be stored away easily? Can you allow people to try out a piece of furniture or a painting before they commit to buying it? There are various ways in which people give their time and their space.
Take a piece of paper or open a Google doc and write “Time” at the top of the page. Then, divide the page into two columns. Label one column “Time costs people pay me with currently”, and label the other column “Potential ways to reduce time costs”.
For example, here are two time costs that customers pay a photographer with. First, there’s the time you spend at the photoshoot. Second, there’s the time it takes to choose the photos you want to keep afterwards.
Here’s how you can reduce each of these time costs. You can tell your customers you’ve been doing this art for a long time. You know what you’re doing. You don’t waste a second. Your photo shoots are always a success. Everybody loves the photos they get. Don’t be afraid to communicate with your customers with confidence. You can share ahead of time your tips for how to get your customers in the right mindset for the photoshoot, so that they show up fully present and ready for the camera. You can make the photo shoots fun for your customers. You can bring a speaker and invite them to listen to the music, podcasts or audiobooks they love while they’re posing for you, so that they’re making the most of their time. After the shoot, you can suggest to them a pre-selection from the big selection, just in case they love what you love.
Next, do the same with space. You might find that time applies to you more than space and vice-versa and that’s ok.
For example, the customers of a furniture company pay with the space cost of their house. It’s hard to return furniture...so you’d better be sure you want it when you buy it. The piece looks good in the store, but customers will ask themselves...what if it doesn’t look in my house?
One way you can reduce this space cost is by making it easy for customers to return their furniture if they change their mind once they see it in their house. Your delivery driver could wait around while the customer looks at it in her house for a minute. If the customer changes her mind, you could take the furniture piece back in the truck. And yes, you can charge more for your furniture because you offer this extra service. Another way to reduce this space cost is to allow customers to “see” digitally the furniture in their house (they upload a picture of their room, you let them drag and drop the furniture piece). Some furniture companies are already doing this.
One last note
When you put yourself in your customers’ shoes frequently and when you think frequently about what they feel, you can naturally reduce any costs they might pay you with and make it effortless for them to buy from you.
Curious about how to create marketing that makes your customers buy again and again? Join me inside Lifelong Customers, where I’ll show you my framework to make customer loyalty the norm, not the exception.