The lifeblood of any business is sales. Without it, your business dies. With it, you have the freedom to expand, pivot, hire, improve, and accomplish greater and greater things.
Everyone knows this, but the fact of the matter is that not everybody knows how to optimize your sales funnel so that you can increase conversion rates, and decrease the number of people that leave after a few months of your service.
With the global coworking market experiencing massive growth, you want to position yourself to get as big of a piece of the pie as possible as it continues to expand.
But the reality is that the businesses that generate the most revenue from growing markets don't always have the best product, they aren't always led by the smartest people, and they don't always deliver the greatest service. What they do excel at, however, is understanding the power of human psychology and leveraging that to influence peoples' purchasing decisions.
Now obviously we want to provide the best product and service we can, but what if with a few tweaks to our system, we could skyrocket our sales simply by understanding the power of psychology? Now you could try creative ideas like a healthcare plan for your clients, a monthly giveaway for your members (like a high-quality laptop that would get people excited or maybe even the newest iPhone), or a loyalty program that offers better rewards the longer someone stays. But those things all require either cutting into your profit or increasing your prices to make up the difference. What if I told you there was a way that you could increase your sales and retention without having to spend a dime?
As a coworking space owner, you want to do everything in your power to increase sales and conversions (as well as retention over the long haul). It can be tough to stand out in a competitive market especially as the coworking industry continues to grow, but understanding and utilizing psychology can give you an edge in converting prospects to customers.
Things like showcasing social proof at every opportunity, implementing effective branding to create trust, optimizing your website search rankings using SEO audit tools, and overall business marketing strategy are obviously important aspects of getting new customers. But once you understand the psychology of purchasing decisions, your business will never be the same.
In this blog post, we will discuss 3 powerful psychological hacks that will take your sales to the next level and keep your customers coming back for years to come.
The idea of anchoring is simple: just begin the user experience with the highest-priced item, and everything they see after that will seem like a steal. A small portion of the population will buy the premium product anyways just because they like spending money, but for everyone else, you have now anchored in their mind what the standard price of your product is, so everything under that now feels cheap.
Take Wal-Mart for example. When you walk down the snack aisle, and you see the large bin of name-brand Planters mixed nuts for $25, and look over to see the Great Value Wal-Mart brand is only $15, that is anchoring. Some people will buy the $25 thing of nuts just because they like the name-brand items and don't mind spending the money. But many people will be shocked at spending $25 on nuts. However, when they look over and see the great value brand is only $15, they'll think, "Oh that's not that bad."
If they would have seen the $15 nuts first, they might have thought, "$15 for nuts!? No way." But since they've seen the $25 price first, now $15 feels like a huge value.
In the same way, if you go to the store for a new coffee maker and on the shelf you have the choice between a $40 coffee maker and a $150 one, you might feel a little ridiculous spending $150 on a coffee maker. "After all, I'm not a connoisseur," you tell yourself. However, let's add a $675 coffee maker to the shelf. Now you have the choice between a $675 coffee maker, a $150 one, and a $40 option. The $40 option now seems ridiculously cheap, so you go with the $150 -- a nice, reasonable, moderately priced option.
The products didn't change. Your salary didn't change. Your coffee-tasting skills didn't change. The only thing different was your psychology. You see, effective pricing is all relative to perceived value.
If you offer your prospect a $1900 per month executive office, a few of them will go ahead and buy that. Yay!
But for the rest of the prospects, when they saw the $1900 price tag they gulped a little because they weren't expecting it to be that expensive. However, when you then show them a single desk option for $450 per month, they're suddenly thinking, "Oh, $450? That's not that bad. I can do that."
It's a simple way to help reframe the internal conversation they are having about value. Anchor the price correctly, and they will perceive your offering as more valuable.
To anchor your prices in the minds of your prospects, it's effective to showcase your premium offering first and then work your way down to lower-priced options. This can be done through an online pricing page, during a tour of your space, or even in person when showcasing your space.
Here's an example of effective price anchoring for a SaaS company.
Most customers see that $199 option and are shocked, then they look over and the $19 seems dirt cheap. Now the $99 option seems pretty reasonable and will generate more sales for that option as a result.
Apply anchoring to your pricing structure, and watch your sales take off.
The basic idea of reciprocity is this: most of us feel bad when given something for free, so we feel the need to repay the giver in some way.
Think about it, do you feel a little awkward when you take that free sample at the grocery store without buying the product? I do. That's because of the innate compulsion for reciprocity that each of us possesses. Most of us feel a little guilty for just taking the free sample and walking away, and that's why grocery stores spend so much money on free samples. It increases purchases. A lot.
Do you think that multi-billion dollar companies like Sam's Club and Costco would be "throwing away" millions of dollars in free samples and employee labor each year just for the charity of it? No. They regularly offer free samples because they have heavily researched it and know that it absolutely increases their sales.
It's the old idea of, "you scratch my back, and I'll scratch yours."
In Dr. Robert Cialdini's book, "The Psychology of Persuasion", he included a study that highlighted the idea of reciprocity at a restaurant. A waiter's tips were increased by 3% after diners received a free mint with their bill, and shot up 14% when given two mints. They also showed that if the waiter left only one mint with the bill and quickly returned to offer a second complimentary mint, amazingly the tips jumped up to 23%.
This example shows how powerful a simple gift can be. Customers feel appreciated and valued when they receive gifts, which makes them much more likely to respond favorably to your offer and spend more money with you.
So how can you apply this to your coworking space?
Well, the more freebies that you can offer, the more money that people are willing to spend with you (and the longer they'll stay). It's as simple as that. Offer valuable things up front to begin the relationship, and exponentially more value will come back to you as time goes on.
Examples of free gifts & services you can offer to facilitate reciprocity:
There are many different ways that you can apply the principle of reciprocity. The key is to offer gifts/help early and often to keep them coming back for years to come. You can always increase your prices to make up for the cost of the gifts.
Offer free things to get them in the door, and continue offering freebies as they stay with you, and you'll increase both conversions and retention.
The idea of framing is simple and goes along with anchoring -- in fact, combining anchoring and framing is a powerful sales duo. Framing simply means that how we frame the conversation will influence the prospect to either feel great about their decision or terrible.
For instance, if I tell you that you have these two options for eating ice cream today:
Which would you choose?
You can either have ice cream that "contains 20% fat", or you can have the "80% fat-free" kind -- and we all know that they are exactly the same thing.
BUT, you'll be more inclined to feel good about your decision to eat ice cream if it's "80% fat-free", instead of ice cream that "contains 20% fat". The ice cream didn't change, only the way that you thought about it did.
So how can we apply this to our coworking spaces?
One simple way to do this is by getting the prospect to see how much money they're spending on their current or potential office space. Once we show them plainly how much they are currently spending, it makes the coworking space seem like a steal.
They may hesitate at the initial asking price of $1000/month. "Oh, that's expensive," they may say.
We need to remind them what they are currently paying for their office lease, commuting gas, coffee shops they freelance work at, etc. to help them see the true cost of their current arrangement.
If we can reframe the conversation to not be "spend $1000/month", but instead "save $200/month", it can make that sale incredibly easy.
You can have a calculator or chart on the pricing page to help them calculate how much they'll save at your coworking space instead of in their current situation. It doesn't have to be anything complex, just something that will show them the math of how much they'll save by doing business with you. And if instead, you are giving them tours in person, make sure to touch on this point in your conversation to get their mind thinking about saving money with you instead of spending it.
Add some simple framing techniques to your pricing and conversations with prospects, and your sales will increase dramatically.
Getting new customers can feel daunting at times, especially with rising competition in the coworking space market, but if you keep in mind these simple ideas for using human psychology to increase conversions, your business will never be the same. Don't limit yourself to what you can do.
Just remember that when it comes to sales, psychology is key. By understanding how people think and making small tweaks to your sales strategy, you can see a big increase in conversions.
These three psychological hacks are just the beginning – there are many more ways to use psychology to boost your coworking space sales. Keep experimenting and find what works best for you and your business. There are a million creative ideas out there that will increase your customer base and keep them happy for years to come.
This article was written by Kalen Houck, a personal finance and online business expert who is passionate about teaching people the secrets to building generational wealth. He is the founder of KalenHouck.com where he regularly writes about online business, personal finance, and mental mastery.