For some sales and marketing teams, creating a sense of urgency can come easily. Think about the most popular event in your city. If you’re aware that there are only a few tickets left, you will be motivated to buy those tickets as soon as you possibly can. The fact is, there is real scarcity situation, with a limited number of seats in the venue. Your sense of urgency arises in response to this rareness.

But what about in cloud software products and services, where a key aspect of the business model (high volume distribution) is that there is not any such limitation? How do you create a sense of urgency to convert and close your leads more quickly, when, let’s be honest, there is no real scarcity at play?

1.Urgency Arises From Current Pain

The most effective way to create a sense of urgency is to educate your prospect about the tangible cost of their current pain, and the relieving benefits of your solution. You need to convince your prospect that they will suffer (more cost, lost sale, QA issues resulting in lost conversions, etc.) for each and every day that they do not have your product or service up and running. If you can quantify the missed opportunity, even better. This is the foundation for creating a true sense of urgency that will deliver results over and over.

How to Use It?

The key is to listen. Listening to your prospect will give you an insight into the priorities of the company, and the company’s biggest pain points. Start a dialogue and help them tell you the pain they will experience during each day they wait. Make sure they know how expensive each day will be without your product or service.

Example:

Fast-growing marketing and CRM cloud company HubSpot communicates the pain they will solve for customers, loud and clear:

The company explains how they achieve a sense of urgency through addressing a genuine customer pain:

“If you’re a sales manager and you have a salesperson struggling with a sense of urgency development, schedule a weekly meeting to review all the new opportunities created that week. For each opportunity, ask the rep the same three questions:

1. Why does the prospect need to buy today?
2. What are the negative implications if they don’t?
3. What are the positive implications if they do?”
   To see an example of HubSpot’s customer dialogue using these three questions, see their full how-to article, here.

2. Offer Rare, Limited-Time Discounts & Upgrades

Even though your cloud products and services don’t have a natural scarcity associated with them, you can begin to create a scarcity effect using rare, limited time offers with your pricing and packaging. Use this strategy in addition to achieving the pain-based urgency described above.

How to Use it?

This tactic is the classic strategy used across consumer packaged goods, travel, and entertainment products. You too can use this by researching the discounts and upgrades that really entice your customers. Offer a desirable upgrade if your customer buys before a specific date, or offer a discount to the first 10, 20, or 30 customers who buy your new offering.

The trick here is to use this sparingly. To create a scarcity effect that drives urgency, it’s crucial that the incentive is rare and highly desirable. Otherwise, prospects will know that these offers are abundant, and they won’t have any reason to act now. Your offer must be extremely rare and not recurring so prospects know that it really doesn’t come around very often.

You can use this strategy on your website, or offer it individually over a sales call. On your website, you can visibly indicate the limited time or units left for the special promotion, to alert your prospect that they need to act now. You can also use this strategy as part of your free trial program. At the end of the free trial, send your prospect an invite to a special limited-time upgrade with their purchase, to amplify the effect of the free trial. Whatever you choose, pick one and don’t offer multiple.

Example:

In 2014, Amazon Prime used the strategy of declaring an upcoming price increase, ($99/year) and offering new customers today’s low price of $79 if they committed to purchasing before a deadline. The campaign received widespread media attention, and resulted in a 53% increase in memberships that year. (Source: Geekwire.)

Image source: Forbes.

3. Know Key Milestones

The more knowledge you have about your prospect’s key dates and milestones, the better. For example: is it close to financial year-end, in which case, they may be more willing to use their budget before it’s reset? Or, is there an upcoming grant that your prospect could apply this cost toward? Is the most important event of the year coming up, and you could promise that your product or service will solve a key pain at this event?

How to Use it?

Once you understand your customer’s most important upcoming milestones, you can use this information to amplify the sense of urgency you established in step one above. Using the upcoming milestone as a target, describe all the problems you can solve before the key event. Like most conversations, this strategy will be most successful if it’s in-person, or over the phone.

4. Use Urgent Language

Simple tweaks to language can be all it takes to boost the level urgency that prospects have while considering your product or service.

How to Use it?

Bring your customer to the present with words like “now“, “today“, “this morning” and “this week“, to help create a sense of urgency.

Example:

Let’s examine an example by ADT home security systems, below. Here, ADT achieves a sense of urgency by listing how long the customer has to place an order based on their geographic location and the hours of the nearest ADT office. The language on the red banner uses words “today“, “call now“, and then the text describing time remaining helps to reinforce the energizing language.

ADT creates a sense of urgency through the red banner near the top of their website, which lists the precise time remaining for the customer to call today and order the system. Notice the choice of colour (red!), the urgent language, and the capital font type (TODAY, CALL NOW), which further the urgency effect. Image Source: AWA Digital Blog.

5. Use Red, Orange, & Yellow Strategically

These colours evoke attention, so use them!

How to Use it?

You can leverage the urgency and attention created with these colours by using them in small doses on key placements. Use them in your call to action, and the most important parts of your website. This is something you will want to test and refine: try using variations of these colours and see how it affects your results.

Example:

SAP Business Objects used this technique to increase their conversions 32.5%. All it took was switching from a blue hypertext link to a large orange button, as shown in this image:

Image Source: Crazy Egg Blog

Your Turn!

Now it’s time for you to dive in and try these strategies in your company. Start by listening intently to your customers. From there, you can create a conversation around your prospect’s needs that will drive genuine urgency. As you go, try one strategy at a time to enhance the effect, and test the sense of urgency incrementally.

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Imagine this scenario. Your team has worked extremely hard to bring your latest cloud subscription service to market. Now, you’re walking into a meeting with Product and Marketing, with a goal of devising the final prices for your new service. You’ve done lots of research with target customers and have a pretty good idea of a price range. (Your research suggests somewhere between $18 and $20 would be the best price for your lowest-tier subscription offering.) But how do you come up with that final number that becomes your price? And, how can you support that price with the best call to action? Here we will describe some psychology that will help you in deciding between pricing your product at $20, $18, and $19.99, and in deciding the optimal number of words to use in your call to action.

Tip 1: End Your Price With 9

If you’re deciding between offering your cloud service at $19.99 per month, or $20, go with $19.99.

Why is that?

According to a paper published in Quantitative Marketing and Economics by researchers at MIT and University of Chicago’s Graduate School of Business, the effect is true. A price ending in 9 increases demand. It’s called price-ending effects, and there is a fair amount of research done on the topic. The MIT/Chicago researchers reviewed years of literature on the topic and found several possible theories explaining the effect. Some theories suggested that the price-ending affects the left-most digit, while others suggested its importance is an impact on the rightmost digit:

“The literature contains a range of explanations for price ending effects. These explanations fall into two broad categories. Explanations in the first category posit various reasons for why customers ‘‘drop-off ’’ the right-most digits and therefore overweight the leftmost digits. The most common of these explanations is that customers round prices down (Gabor and Granger, 1964; Lambert, 1975; Schindler and Kibarian, 1993) and essentially ignore the right-most digits. For example $59.99 might be coded as $59 or, in an extreme case, as $50.

A second class of theories posits that price endings provide information about relative price levels and/or product quality (Schindler, 1991). In these theories, customers pay more attention to the rightmost digits because of the information that they convey. This contrasts with the customer’s emphasis on the left-most digits in the ‘‘dropping off ’’ theories. Researchers have suggested that one inference customers may draw from $9-endings is that a price is low, discounted, or on ‘‘Sale’’ (Schindler and Warren, 1988). For example, Salmon and Ortmeyer (1993) describe a department store that uses a 0-cent ending for regularly priced items and 98-cent endings for clearance items.”

After completing their review, the researchers found most convincing evidence for the rightmost digit theory, although it’s not crystal clear, with several studies reporting evidence for the leftmost digit theory. It appears to be context dependent, and it’s clear that there are still gaps in understanding the mechanisms behind price-ending effects. In any case, that shouldn’t stop you from experimenting with achieving price-ending effects.

Implement A Price-Ending of 9 In Your Pricing!

• Price your products with the rightmost digit ending in 9.
• Any other number will not work as well. (There is a gap in the research as to why a price ending with a number other than 9– for example $19.80 or $19.50– would not be as favourable an effect as a price ending in 9.)
• Effects are best for “new items that customers have seen less frequently in the past”  (Anderson, Simester, 2003.)

Tip 2: Make Your Call to Action Seven (Plus/Minus 2) Words

You just learned that ending your price in 9 is powerful, and you’ve updated your prices with this principle. Now, how can you support your well-formed pricing with the most engaging call to action? Now it’s time to apply Miller’s Magic Number.

In one of the most highly cited research papers in psychology to date, cognitive psychologist George A. Miller discovered that the maximum amount of elements that humans can store at once is 7,± 2. These “elements” can be letters, digits, or words– and Miller found that 7 seems to be the limit of our capacity for short-term memory. This magic number 7 can also be “stretched”, by categorizing information into related groups. How can you apply Miller’s Magic Number to pricing?

Use The Magic Number in Your Call to Action

Try using it on your call to action, by constraining your copy to Miller’s number– 7± 2 words.

As an example, let’s take a look at Salesforce.com’s Sales Cloud pricing page. Notice how each call to action follows the principle of Miller’s Magic number, and as a result, how easy it is to digest the information. Each call to action uses a limit of 7 ± 2 words, which allows customers to absorb the entire call to action at once. In contrast, let’s examine an instance where Miller’s principle is not followed: take a look at the Dropbox business pricing page. In this example, notice how it seems much harder to process the information here, even though these call to action statements are only a few more words than the Salesforce example.

Use The Magic Number in Your Features List

You can also apply Miller’s principle to the number of bullet points in your features list. This will help you ensure your customers are reading and retaining everything you’ve worked so hard to build them.

This may be challenging in practice, with so many benefits that your team is excited to convey. The point here, is that by constraining your content to manageable chunks, you can get customers to read all of your benefits, rather than overwhelming them with a long list that seems like work to read. To observe this in action, let’s take a look at some examples of companies’ feature lists. First let’s revisit our previous Salesforce example. Notice how this page violates Miller’s principle in its lengthy product descriptions for each tier. How do you feel when reading this? Now, compare it to the company’s Marketing Cloud pricing page, which sticks to Miller’s principle for the benefits of each tier. Notice how the information is much more easy to consume with this offering. This is a great example of how you can design your features list into manageable “chunks” to fit within your customers’ short term memory limits. (Although, the prices are not listed on the website, which we never recommend!)

In the example depicted in this photo, the call to action statements are too wordy. However, the number of items in the features lists do fit within Miller’s principles.

Implement Miller’s Magic Number in Your Pricing Page!

• Craft calls to action that are your best 7 ± 2 words.
• Extend this learning to your product description, with a maximum of 7 ± 2 bullet points to describe each offering.
• Consider other ways to limit your content to chunks following Miller’s principle.

Now, back to our scenario from the beginning. You attend your meeting, eager to share your customer research, and your recommendations to price the new service at $19.99. Your team moves forward with the pricing, as well as a refined call to action statement and feature list. By the end of the meeting, the team has a well-formulated pricing strategy, and an appreciation for considering customers’ psychology for optimal results.

These insights are just an initial starting block for learning lots more about pricing psychology for your business. To get started, try implementing one new idea, and be sure to arrange a plan to test and understand the results. The greatest rewards will come when you continue to tweak and understand how these insights are relevant to your specific business.

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