Percentage is not a number
How percentage pricing can negatively influence your product?
When it comes to choosing a price for your product there are 2 overarching choices available:
- Fixed amount
- Percentage of value
In e-commerce, 80c per transaction is an example of fixed amount while 6.5% per transaction is an example of percentage of value
The problem with percentage pricing is that, percentage is not a number, if it’s not a number it’s not quantifiable.
It’s easy to imagine 100g of sugar compared to 60% of a packet of sugar
After all, how big is your packet of sugar?
If you cannot imagine how much you will end paying for a service, it’s human to assume the worst and become defensive and fearful. This will most certainly lead to a negative response.
When your potential client is trying to quantify the percentage of transaction value, I bet he is not going to think though the average transaction, instead he is going to imagine either an unreasonably high value or if you are lucky the maximum transaction value. This will create an impression that he might end-up paying a lot.
He is not being logical here. He is just being defensive.
Do not mistake me for a minute. I’m neither suggesting one form of pricing over the other nor criticising your client for being irrational. Instead all I’m asking for is to choose a price that is quantifiable and to remember that —
Percentage is not a number — it’s merely a ratio!