Behind the Glasses Blog

Want to learn more about our story? Alex talks about his journey building Xander.

What does “too expensive” mean?

Our high fidelity testing is going very well. Right now we’re hovering just above our hypothesis that 1/3 people we interview would commit to a pre-order of our product in its current design.

Of the people who are passing, most cite the cost—that the product is just too expensive for them. But what does that really mean? What if we could quantify that for each customer?

Testing price and value

We’ve probed deeper into this reaction to test lower price points, payment plans, and financing. One customer converted after we carefully explained our payment plan option, and then offered an additional 33% off the asking price.

More interesting, however, we tried to learn what value we could add that would justify our higher asking price. This has led to a couple of exciting new ideas that are feasible, impactful, and well-aligned with our product goals.

For the customers who couldn’t justify our asking price for our value proposition, it’s clear that they simply aren’t experiencing a deep enough pain related to the problem we’re solving — in a way that aligns with their past purchase behaviors.

How might we estimate the customer’s expected price?

We can think about the customer’s target price/value for a new solution in terms of:

  • their current depth of pain, given their existing solutions

  • their depth of pain prior to their existing solutions

  • cost/price the paid for their existing solutions

  • expected depth of pain after they use a new solution

The customer has already paid for existing solutions to reduce their depth of pain. We can measure depth of pain on a 1-10 scale, with 10 being maximum pain. A helpful solution would have reduced their pain by some number, and we can also calculate a ratio of dollars spent per unit of pain relief. We can then use this ratio to predict the customer’s price point of a new solution that may further reduce his pain.

Cosmo: low pain, low spend

Cosmo was experiencing moderate hearing loss and bought a pair of hearing aids at Costco. He is quite pleased with them. We estimate his current depth of pain regarding his hearing loss at a 3. Prior to his purchase, we estimate his depth of pain to have been a 7.

He spent $1500 at Costco, which eased his pain by 4 points, or $375 per point: $1500 / (7 - 3).

Cosmo is presented with a new solution, and we observe that this new solution might bring his pain down from a 3 to a 2.

Given his prior willingness to pay $375/point of pain relief, we expect he might pay $375 for this new solution.

Our solution is priced too high for Cosmo, as he is doing quite well with a solution that didn’t cost him a lot of money.

Audrey: medium pain, high spend

Audrey was experiencing more severe hearing loss and went to see an audiologist, who fit her with an advanced pair of hearing aids for $4,000. She has since enjoyed some benefits of her new hearing aids, but she still has trouble understanding people in noisy environments. We estimate her current depth of pain at a 4.

Prior to getting fit with hearing aids, we estimate her depth of pain to have been an 8.

Audrey previously paid $1,000/point of pain relief: $4,000 / (8 - 4)

Audrey is now presented with a new solution that will improve her ability to understand speech in noise, and we observe that this solution might lower her pain to a 3—this is 1 point lower than her current level of pain.

At a fraction of the cost of her last pair of hearing aids, Audrey might pay $1,000 to get a 1 point reduction in pain relief from this new solution.

Audrey might pay for our solution, as she wants to improve her ability to understand speech in noise, and she has demonstrated that she is willing to pay more for her hearing health.

Koki: medium pain, medium spend

Koki was suffering from profound hearing loss and her advanced hearing aids were still not enough to help her. She qualified for cochlear implants. She proceeded with the surgery and was very diligent with her post-op therapy. Most of her costs were covered by insurance, except for $2,500 that she had to pay for her deductible.

Prior to her implants, we perceive her depth of pain at a 9.

Her surgery went well, and she’s continuing to see benefits, especially given where she was just a year ago. Now her depth of pain is at a 4.

If we only consider her financial costs, we would calculate her spend/benefit to be $500: $2,500 / (9 - 4).

Now she’s presented with a new solution that can better help her understand what other people are saying. We observe that her level of pain would drop 1 point to a 3, and so we expect she might pay $500 for this solution.

Cochlear implants have been a tremendous help for Koki, who continues to see benefits. Her insurance covered nearly all of her costs, so her financial burden was relatively low. Her current level of pain combined with her past level of spending behavior put her in a position where she can’t justify the price of our solution.

Harry: high pain, high spend

Harry has severe hearing loss and is on his third pair of hearing aids, fit by his audiologist whom he’s worked with for 15 years.

Prior to receiving his third pair of hearing aids, his depth of pain was a 7.

His new $4,500 hearing aids only yielded a slight improvement—they don’t help him as much as he had hoped they would. His current depth of pain is a 6, as he has a lot of trouble in noisy places, and especially when multiple people are talking.

Harry’s spend/benefit ratio is a very high $4,500: $4,500 / (7-6)

Harry is presented with a new solution that he thinks could help him much more than his current pair of hearing aids. We observe that his level of pain could drop to a 4, which is where he had hoped he would be.

Using the same formula from the previous examples, we could imagine that Harry might pay $9,000 ($4,500 x 2 points) for this new solution.

But that seems very high. He’s never spent that amount of money before, and he wasn’t fully satisfied with the last $4,500 he spent. Rather, he had hoped that his current pair of hearing aids would have brought his level of pain from a 7 down to a 4.

We might, therefore, calculate his target spend/benefit ratio at $1,500: $4,500 / (7-4).

Given he is currently at a 6, we believe Harry might spend as much as $3,000 on this new solution ($1,500 x 2 points), which is higher than our expected price. Given that he feels burned by his previous experience, he will most certainly want a 100% satisfaction guarantee.

What “too expensive” means

“Too expensive” is relative to each customer. We have to consider:

  • their current depth of pain, given their existing solutions

  • their depth of pain prior to their existing solutions

  • cost/price the paid for their existing solutions

  • expected depth of pain after they use a new solution

Therefore, too expensive could mean:

  • Low pain, not looking for a solution. The customer is generally satisfied with their existing solutions—their current depth of pain is relatively low.

  • Great value from last solution, would seek future value solutions. The customer spent less money on their prior solution, which brought them a high gain. The customer would consider a new solution if it had a similar ROI.

  • New solution isn’t a fit. The customer may not believe the new solution will help them enough to justify the price.

We can see that our pre-order customers are experiencing medium+ pain, and have spent more on previous solutions, We’ve also learned a couple of ways in which we could expand our market by creating more value. Lastly, we’ve learned that lowering our costs may be essential to the company’s long term health.