Direct Marketing Article
Your Customer's PIR: Price Investment Ratio
By Mark Hunter "The Sales Hunter"
Have you ever really considered how price affects your customer with regard
to their perceived benefit? Too often, we use a simplistic approach to
determining a price - figure the cost to produce a product or service, tack
on some arbitrary percentage, and call it good, right?
Price, though, is consequential in ways we may not initially consider. The
price a person pays for something goes a long way in determining the
perceived benefit they expect to get from it. The perceived benefit cuts two
ways. First, the expectation of service goes up the more a person pays for
something. Second, the perception of what they're gaining also goes up with
the amount they pay. The two are not opposites; they work in tandem, and in
nearly all businesses, this tandem relationship can and does work to your
Many companies, hopefully including yours, are known for delivering
incredible service. This quality service may be what your customers comment
upon and why they are willing to refer you to other customers. This level of
service comes at a price. One of the things you always should be doing is
explaining to and showing your customers how your level of service helps
The more you share this type of information with your customers, the more
comfortable you become in seeing the value of what you offer. Having
confidence in your service allows you to increase your "Price Investment
Ratio" (PIR). This all has to do with what you expect customers to pay.
For the customer, the PIR is revealed when you help frame their
expectations. To help explain this best, let me refer to what I call the
"IBM paradox." This is the belief people have that although you will pay
more for anything you buy from IBM, you will never be fired for using IBM.
What this means is there are plenty of companies that sell the exact same
items and services as IBM, but at a less expensive price. Although other
vendors will be less money, there is a level of safety and confidence in
using IBM - so much so that it translates to a premium price that customers
The "Price Investment Ratio" (PIR) is the amount over the minimum amount a
person would have to pay for something. They are willing to pay it to feel
confident in what they are buying. You might say the PIR should really be
the CP - the "Confidence Premium."
There are no two ways about it - when you have great service but do not
reflect it in your PIR, then you are underselling. If you are underselling,
you are not making the profits you could be making.
I can hear some of you at this point thinking, "What if we don't have a
solid sense of how good our customer service really is?" In other words,
maybe your company receives very few complaints, but at the same time, you
are not sure if your service is at a higher caliber than what your
competitors bring to the table.
In order to find out your "Price Investment Ratio" (PIR), you must do a deep
dive with your existing customers to get them to tell you what your service
means to them. Once you do this, you can then match up what existing
customers are telling you with what prospective customers are asking you to
do. When you grasp this, you begin to understand what the PIR really should
be. How much "investment" is the customer willing to make in going with you
instead of your competitor?
As I have often said, in the B2B arena, companies don't buy anything, they
only invest. If your customer can't see the return on investment, they won't
invest - they won't pay the price you want to get. When they do see the
value, though, then you can feel very confident in charging a price above
what your competitors charge. Don't settle for a lower price when doing so
is detrimental to your bottom line.
About the Author:
Mark Hunter, "The Sales Hunter," is a sales expert who speaks to thousands
each year on how to increase their sales profitability. For more
information, to receive a free weekly email sales tip, or to read his Sales
Motivation Blog, visit
www.TheSalesHunter.com. You can also follow him on
www.LinkedIn.com/in/MarkHunter, and on