How To Get People To Pay More For Your Goods And Services
Psychological pricing is a marketing strategy designed to coerce people to pay more for your products or services. We also use this model to increase donations for Non-Profits. Here are the basics:
Psychological pricing is a marketing strategy designed to coerce people to pay more for your products or services. We also use this model to increase donations for Non-Profits. Here are the basics:
Use “Charm Pricing” on inexpensive goods and services
Since the invention of money, marketers have used prices that end in 9, 99, or 95 and it works!
And it’s not just the 9’s in the price. This type of pricing is most effective when the left digit changes. A one-cent difference between $3.80 and $3.79 won’t matter. However, a one-cent difference between $3.00 and $2.99 will make a huge difference.
Our brains encode numbers so quickly (and beyond consciousness) that we encode the size of a number before we finish reading it:
“While evaluating “2.99,” the magnitude encoding process starts as soon as our eyes encounter the digit “2.” Consequently, the encoded magnitude of $2.99 gets anchored on the leftmost digit (i.e., $2) and becomes significantly lower than the encoded magnitude of $3.00”.
Use “Prestige Pricing” on expensive items
Round prices — because they are fluently processed — work better for expensive or emotional purchases. This pricing method works based on the assumption that consumers perceive more value in the product if it’s priced high, and they’re willing to pay a higher price for quality.
Research shows that consumers are more inclined to buy a bottle of champagne when it was priced at $40.00, rather than $39.72 or $40.28.
Fashion, technology, and luxury goods are often priced with this method because they can be marketed as exclusive or rare.
Be precise with Very Large numbers
Buyers pay more money when prices are specific ($362,978 vs. $350,000).
Precise numbers trigger an association with small values and influence people’s perception. People are more likely to use precise values when you’re dealing with small numbers, so when you use them on large numbers is hijacks the brain’s neurology to convince us we are getting a better deal. It also gives the impression the number is well thought our.
Remove the Comma
Researchers found that removing commas can make your price seem lower. When you remove the comma, you reduce the phonetic length of your price:
$1,599: One-thousand five hundred and ninety-nine (10 syllables)
$1599: Fifteen ninety-nine (5 syllables)
When we read more syllables we need more mental resources to process that stimuli, likewise if we expend a less mental resources to process a number, we falsely infer that the number must be smaller.
Remove the Currency Symbol
Each time we purchase something, we feel a sense of pain — often referred to as the “pain of paying”. The pain of paying is something everyone wants to avoid. The dollar sign in your price is a trigger and can remind people of that pain and will cause people to spend less. Take away the dollar sign and you will take away that pain and they will spend more!
Offer a Decoy Option
When you offer different versions of your product, people will naturally compare those options. To guide people toward the more expensive version, add a similar, yet worse, version of your expensive product to influence the comparison process so your expensive product becomes more appealing.
In his book, Predictably Irrational, Dan Ariely describes an offering from Economist magazine. Three subscription options:
Web Only: $59
Print Only: $125
Web and Print: $125
Because Print Only was a similar, yet worse, version of the “web and print” option, people went for the web and print subscription (a more expensive alternative to web only) which generated 43% more revenue.
Anchor Your Pricing
The best way to sell a $2,000 watch is to put it right next to a $10,000 watch. This is because of a cognitive bias called anchoring. Anchoring refers to the tendency to rely on the first piece of information offered when making decisions.
Anchoring works because the same area of your brain that determines your emotions about a purchase also determines the value you associate with the purchase.
In a study evaluating the effects of price anchors, researchers asked subjects to estimate the worth of a sample home. They provided pamphlets that included information about the surrounding houses; some had normal prices and others had artificially inflated prices.
Both a group of undergraduate students and a selection of real-estate experts were swayed by the pamphlets with the higher prices
FOOD FOR THOUGHT: Instead of adjusting price, try adjusting your value proposition instead. What is it that you do differently and BETTER than your competition? If you can answer this surprisingly difficult question, you may not even need to worry about pricing.
