Pricing your products isn't as easy as you can imagine of, indeed it's a big headache when you are the one who going to decide the prices - the main element for the revenue number.
The situation where sellers rush to launch their online store often happens, so all of them tends to wing the pricing strategy and simply follow their intuition to mark the prices. Obviously, this wrong move could harm the business growth in a long run. Although only the real sale results can measure the effectiveness of current pricing, a well planned effective pricing strategies could contribute 50% success to your business.
Here are the several easy illustrations on the psychological pricing strategies:
Similarity Vs Price
One experiment is conducted to investigate the humans purchasing behavior on the different set of pricing. Researchers gave users a choice of buying a similar product or keeping the money. When given a choice between two set of bracelets, only 46% made a purchase when both were priced at 2 pounds. Conversely, when the two sets of bracelets were differently priced—at 2 pounds and 2.50 pounds—about 77% of consumers chose to buy a set. In short, it can be concluded that if two similar items are priced different, the peoples are more likely to purchase than if the two similar items are priced the same.
A very common marketing out there was to put a more expensive product next to the standard priced product. For examples, I would put a $50 fidget spinner right next to a $200 fidget spinner in order to sell bunches of the $50 fidget spinner. In short, placing premium products near standard options can create a clearer sense of value for potential customers, whom they will see the less expensive options as a very good bargain in comparison.
Ending price value with 9!
Mother of price's marketing - Ending prices with the number nine, but does it really work? The answer is a YES!
According to research from the journal Quantitative Marketing and Economics. Prices ending in nine were able to outperform even lower prices for the same product.
A study compared clothing priced at $69 versus $65 found that the prices ending in nine outsold the lower prices by an average of 25%. In a word, no matter original price or sales price, the last showing price number ending with 9 is better in sales. Apparently, pricing with nines may be an old trick, but it’s still very useful.
Different level of pricing
William Poundstone, in his book Priceless: The Myth of Fair Value, talks about offering three options with this story. (Quoting from ConversionXL, you can read more about more in depth pricing strategies there). Meanwhile, the salient points from the books are summarized here:
A study on the purchasing behavior over a selection of beers: test#1, test#2, and test#3...
80% of the population would choosepremium option. However, the experiment can be further carried out by asking could add a third item and price point increase revenue by targeting those looking for a cheaper option? The researchers tested this by adding a $1.60 beer to the menu.
Surprisingly, the cheapest beer was ignored and it twisted the ratio of standard to premium purchases. It's noticed that the anchoring is not working well for more than 2 products as since it showed a negative result. If customers don’t want a cheaper beer, perhaps a more expensive beer might work? The experiment then continues for the third phase.
Cool ! at this point, if you are the business owner, you should keep smiling while sleeping throughout the night. These examples show just how important it is to test out different pricing strategy for one business to grow, especially if you think the business is undervalued. Undoubtedly, some customers are always wanting the premium options and you as the boss, please feel free to charge them even higher.
In the nutshell, brace yourselves to charge higher with the correct pricing strategy. A great pricing strategy can give a very good profit margin while other business operation remains the same!
The effectiveness of pricing strategy can be varied very differently for every business, the purpose of this blog was to give a concept where the behaviors of human could be controlled psychologically.