While estimate deadlines are practical they also have a psychological impact. They are a sales closing technique that can increase conversions of those estimates into actual sales (invoices).
From a practical standpoint, first and foremost, setting estimate expiry deadlines protects you from being forced to honor an old estimate – one that someone decides to act on X number of months or X number of years after you send it. Prices on an estimate are directly tied to your costs of doing business at the time you create the estimate and perhaps for a short window of time after creating it. In 6 months, or a 1 year, your costs may have risen, and having to honor an old estimate may mean you wind up absorbing the increased expenses and reducing your profit for the job.
The Psychological Impact of Estimate Deadlines
Retail sellers (and some online sellers) understand the need to create sense of urgency or scarcity when selling a product. Creating a sense of scarcity and/or urgency are tried and true sales closing techniques. For example, a time limit on a sale or offer creates a sense of urgency. If a consumer understands that the great price on your sale product is only available until some date in the near future, that sense of urgency created by the time limit is more likely to convert them from looky-loo (a window shopper) to purchaser. If the consumer is told that a widget is only available for a limited time or you have few in stock, it creates a sense of scarcity. They must have the product soon or it will no longer be available.
Why does creating a sense of urgency or scarcity influence a purchase decision? Most people are naturally risk averse and try to avoid loss. In fact, not only are people naturally risk averse, they’d rather avoid loss than acquire gains. Studies indicate that the desire to avoid loss is twice as powerful as the desire to achieve gains.
Shopify’s article While Supplies Last, describes the powerful effect that urgency and scarcity can have on purchase decisions. That article cites a Which Test Won test, in which an A/B split test was performed on two ads. Both ads advertised the sale of a jacket at the same price. Ad “A” had a simple countdown timer placed near the “Buy Now” button. Ad “B” had no countdown timer. Ad “A” (with the timer) had nearly 9% more purchases than ad “B”. The test also demonstrated that the nearer to the deadline, the higher the conversion rate.
In another Which Test Won test, two ads for an Email Marketing paid subscription signup were A/B tested. The ad “A” call-to-action button used the words “Get Started Now for just $1” and the ad “B” call-to-action used the text “Get Started for just $1”. The simple addition of the word “Now” created a sense of urgency that increased paid signups by 12%.
Flareapps.com small business tip #075Create a Sense of Urgency with Estimate Expiry Deadlines
This knowledge of risk aversion behavior suggests that creating an estimate with an expiry deadline can create that urgency-to-purchase effect. Consider that if you are sending an estimate, you have an interested consumer, they are more than merely window shopping. They are on the path to a decision and require an incentive that leads to a purchase.
In Flare, you can choose an estimate deadline when you create an estimate.
After sending the estimate, if your would-be customer hasn’t approved it as the deadline draws near, send a reminder. We know from the test cited above that conversions increase the closer to the deadline.
Flareapps.com small business tip #076Create a Sense of Scarcity with Discount Expiry Deadlines
If you are considering discounting your services as a sale closing technique, you can create a sense of scarcity by tying the discount to the estimate expiry deadline. Let the customer know that if the purchase is made before the estimate expires, a discount applies. After the deadline, you won’t provide the discount.
With Flare, you can set the discount when you create the estimate.
Again, as the deadline draws near, you can increase urgency about the scarcity of this discount by sending a reminder.
to Convert an Estimate to a Purchase