The Psychology Behind Sales Price, Value, and Quality

When it comes to closing a deal, the biggest objection faced by a salesperson is usually price. But there’s an interesting psychological bias that happens when it comes to price: our tendency to depreciate something when it’s cheap or free.


Why we think something cheap must suck

We tend to use price as an indicator of how valuable a product or service is going to be. The relationship between a product’s price and its perceived value is well known (e.g., Li, Monroe, & Chan, 1994): as a product gets more expensive, our perception of its value decreases. We also use price as an indicator of a product’s quality but in the opposite direction: the cheaper the price, the lower we believe the quality will be.

A study by Harvard Business School Professor Francesca Gino highlights this relationship between price and quality: adding a price tag to advice makes us believe it’s more credible, regardless of the actual content of the advice. Even when the same advice is given for free, people tend to prefer the advice that was paid for.

This helps explain why a market leader isn’t always the cheapest option available.

But what about free trials?

If price is negatively correlated with perceived value, why do so many companies offer a free trial or use a freemium model? Well, because the data show they work. Neil Patel, co-founder of KISSmetrics, found that offering a 7-day free trial doubled the number of signups, which increased revenue by 24%.

So what’s going on? A free trial or a free version of a product or service taps into another one of our psychological biases: our love of getting a discount. As well, providing value first before asking for payment creates a feeling of gratitude in the other person and makes them want to be loyal to you in return.

As long as your product or service offers genuine value to your customers, a free trial should help establish trust and credibility and increase your sales.

The bottom line

Understanding that people use price as an indicator of value tells you that an objection to price often means you haven’t proven the value of your product. Being able to show the ROI of your product or service will be invaluable to help you close more deals.

How do you overcome objections to price? Let me know in the comments.

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Ji-A Min

Ji-A Min

Head Data Scientist at Ideal
Ji-A Min is the Head Data Scientist at Ideal. With a Master’s in Industrial-Organizational Psychology, Ji-A promotes best practices in data-based recruitment. She writes about research and trends in talent acquisition, recruitment tech, and people analytics.
Ji-A Min