Episode #0080 - Is the one who pays the boss?

Pricing College Podcast

In this episode of Pricing College - Aidan and Joanna discuss the common psychological scenario - where the seller says thank you - and sometimes in a B2B environment - the procurement team almost seek to grandstand over the seller. Does the seller view the customer as a boss? Is there a power dynamic at play here? What can we learn from a pricing perspective?

TIME-STAMPED SHOW NOTES

[00:00] Introduction

[01:09] Joanna discusses the handover of power between the seller and the buyer when the deal is signed

[03:24] Why shouldn't be beholden to a purchaser? Are they your boss because they are the one who pays?

[05:43] When dealing with a purchaser you have to know your value to avoid the handover of power or to give them an idea of the one who pays are the boss

[07:41] The one who pays is the boss idea is part of human society, It may be related to the capitalism

In today's episode, we want to look into a little bit of human psychology that I think you'll all have experienced. It's when people think they're paying the bill when they're the person purchasing or buying a product or service. They often think that they're the boss. And the old saying I probably, “the customer's always right” has led to this a little bit. To some extent, is the customer always right? But like that's a throwaway statement, fundamentally, they're not. I suppose we want to look into, why people think just because they're paying for something that they are the boss in that relationship?

Well, let's think about this. Okay, so even in terms of professional services, you've got quite a long sort of problem-solving pre-sales process. That could be a bit of negotiation on price establishing problems. It's quite a lengthy process. I think in that sort of process, a lot of emotions builds. A lot of anxiety about the problem not being solved. About timelines, deadlines, things getting done properly or adding to this sort of tension. Then once a deal gets signed, everyone there's a little bit of relief. But then it's back on, “okay, we need things to be done”. But then there's a funny switch in power. That's what we're kind of want to discuss. This happens not even just with professional services, it happens with a sales team selling products to businesses. Everyone's essentially buying something to fix something else a problem of some sort. But when the deal is signed, is there a sort of a handover of power? Even though perhaps the customers come to you for your expertise. Because you've got the products they need to fix a particular problem. In spite of that is there that handover of power, do you lose something as a supplier as a consultant or professional service provider when you sign that deal? Some people say yes. I suppose from a personal perspective, I think not. When somebody comes to you with a problem, essentially you're the one who has the solution to that problem. You can fix that and regardless, you should be paid for what you can do. It's been built up over years. But there is an overwhelming assumption out there. That there is some kind of like debt to pay for, getting the money for working with a client. Is that right? Is that wrong? Have you found that yourself? It'd be interesting to hear from our audience, their view on that. Especially with the rise of procurement. Sort of the difficult pricing discussions suppliers is having with procurement teams. How is that really changing the dimension of the relationship even though they've come to you for help?

I almost think of it as if you're buying and selling a product we also have value-based pricing, you're charging a price that reflects the value that the customer gets. It's an equal relationship. Customers getting something from this product or service is equal to the money they're spending. So in reality, it's a win-win. If you're beholden to the purchaser, it's almost insinuated they're doing you a favour. It almost insinuates that you're overcharging. That the product or service you're providing is not worth the value that they're paying you for it. And that you're the one benefiting, not the purchaser. Which likes, to be honest, shouldn't be the way for anybody to do business. I would see that as a scenario that you're beholden to a purchaser. If there's some level of corruption or bribery going on if you're providing a product or service to someone. And obviously, this has nothing to do with customer service. Because you're selling customer service, solving problems, warranties, guarantees, those sorts of things. And you do everything you can possibly do to rectify problems, etc. But at the same time, you're not doing the customer a favour. It's a professional arrangement where you're providing great value, great service, great quality to them. It's not a favour-based relationship. They're not your boss, they cannot realistically make you jump. The question is not, how high? The question is, is the terms of the agreement that we agreed to jump as part of this arrangement? Fundamentally, what are you selling? What are they buying? And, why would just roll over like a puppy dog just because someone tells you to? They're not your boss. Oftentimes, if you behave in that manner, it just gets worse to just start pushing you around. You'll see this much more in a B2B environment than a B2C. When it's B2B, the person purchasing the procurement officer often has no emotional attachment to the product or service they're buying. Often they're not the end-user of that product or service. So the relationship very much can be about the win. The win in the negotiation, the win in that deal. And in that deal sometimes they can get, let us be honest, they get a kick out of winning big and making you feel bad. Then it can be a power kick for certain people. Not all that common but you know, we've seen it and I'm sure you have.

I think when you said that, the phrase, “they're not your boss”. I think that's key to this. It's sort of when the exchange of money is handed over. Is there sort of a latent psychological shift to feeling like you're an employee? As opposed to the person providing the solution. The solution provider, the expert. That person has changed the shift in power and there's like an employee mindset has taken over. Yeah, I've taken over the supplier taking over the salesperson or whoever's who was leading the solution delivery. Is there some kind of latent? Has the client picked up on that? Alternatively, indeed, is it that you're feeling there's a shift in power but because you're actually working with a client who is fundamentally very hierarchical old fashion. Their culture is all based on a very hierarchical structure. Where there's a leader and there are followers and you have to toe the line to some sort of latent cultural norm. That was didn't know existed in the pre-sales and the sales, the process. Then it's like, “bang!”. It hits you and you get a taste of the client's culture. And that often can be quite a shock. But I think the saving grace with all of this is that you've always got to remember why they came to you in the first place. They came to you for help. You've got the solution that they need to fix it. They may not have the answers to all their problems. If they did, they wouldn't indeed spend the money with you. So it's always reframing, remaining confident in your position and knowing your value. And this is intrinsic to value-based pricing, but also in life. Having those value principles is key to being a successful individual and a happy person.

I think we can give this good messaging I think fundamentally, there is something in granted human society is very deep. If you're going to a restaurant and you pay for the meal. Or, you buy a product, you go to an electronics store and you buy an electronic gadget you pay at the counter. The person who takes the money generally says thank you. The person who takes the product generally doesn't. It's something I think is green, probably from maybe the early days of capitalism or consumer society. Where maybe the highest society would buy products or services and just hand over money. That they learn from an aristocracy and the person, the tradesman selling it was of a lower social class. And perhaps I see that probably is ingrained somewhere inside people. You still see it in Britain, for example, where companies will put a badge on their product or service that the consumer, the Queen or the Duke of Edinburgh somewhere that's bought the product. Almost as if the purchaser is more important than the person manufacturing it. I think that somewhere it gets into society whereby when you're handing over that money and you play the Big Shot, and that is something that sometimes can be beneficial as a customer service person. You want them to feel that way. Because they can take their money elsewhere. Obviously, your business will not exist if you don't have that customer. But at the same time, by no means beholden to that person. And it's of course, your right to refuse service if you want under certain legislation or different areas. But also it's like you're doing it through choice and you're not an indentured servant. So yeah, getting into a bit of politics there in moral philosophy, but that's fine, I suppose.

I think this is all this all happens when you ask people for money and this is why pricing is so important. You need to get the price point right. The conversation is set up well because there's a huge depth. Yeah, tradition, rituals, psychological responses, emotions, as well as financial outcomes and results that occur from literally having that pricing discussion. So this is the depth of pricing. I think it's sort of revealed that and it'd be great to hear anybody's feedback on that in the pricing community elsewhere.