Why Are Business People So Price Sensitive?
If I walked up to ten business owners right now and told them to raise their prices 5%, what do you think they’d say?
“No way! My customers will leave!”
Then comes the usual backup excuses:
“My competitors already charge less than me!”
All your competitors?
“Well, no… but a lot do.”
That’s where the thinking goes off the rails.
Price only matters when everything else is equal. The only time price is truly the deciding factor is when you’re selling a commodity—or when an entire industry has trained its customers to shop solely on price.
Most business owners act like they’re selling a commodity when they’re not—at least not in the eyes of their customers.
When You’re the Customer
When you shop, do you pick solely based on price? Rarely.
If all else is equal, sure, you might go cheaper. But in most cases, you’re looking for:
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Great service
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High quality
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On-time delivery
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A solid guarantee
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After-sales support
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Competent, helpful staff who can solve your problem
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Sound advice
And when those things show up, price stops being the main issue.
The Only Viewpoint That Matters
If you’re basing your prices on one of these two perspectives, you’re dead wrong:
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Your cost structure
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Your competitors’ prices
The only perspective that matters is your customer’s perception of value.
When you buy something, do you care what it costs the seller to make it? Of course not. You’re focused on the value it gives you.
Imagine someone saying:
“Our prices are higher because our utility bills and staff costs went up.”
Crazy, right?
Customers don’t care about your costs—they care about the outcome, the solution. People don’t buy a drill; they buy the hole the drill creates.
Why Customers Really Leave
Here’s what research shows about why people stop buying from a business:
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Convenience: 3%
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Relationship change (e.g., family/friends): 9%
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Product/price/timing issues: 15%
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Miscellaneous: 5%
That totals 32%.
So why do the other 68% leave?
Perceived indifference.
That word perceived matters. Business owners often say, “We love our customers.” But if the customer doesn’t feel it, they leave.
It’s like a husband saying, “Of course I love you. If that ever changed, I’d let you know.”
It doesn’t work in marriage, and it doesn’t work in business.
You can’t assume loyalty just because they’ve been with you for 15 years. If they stop feeling cared for or valued, they’ll move on to someone who shows them they matter.
What the Numbers Reveal
Let’s talk numbers.
Suppose your gross margin is 30%. That means your cost of goods sold is 70%.
If you discount your prices by 10%, you’ll need to increase your sales volume by 50% just to break even.
That’s a dead-end strategy.
Now flip it. If you raise your prices by 10% at the same margin, you could lose 25% of your customers and still make the same profit as before.
In reality, if you’re adding genuine value to loyal clients, you’re unlikely to lose much of anyone.
The Real Game: Value, Not Price
Most accountants push cost-cutting and discounting as the path to profit.
That’s a losing game.
Our approach?
We help clients increase their value package—so they can confidently charge more based on perceived value, not cost.
Because when customers see real value, price stops being the conversation.
Thanks for reading.
If you want to shift your business from price pressure to value power, start by asking yourself:
“What do my customers really value—and how can I show them they’re getting it?”