Establishing prices for your brand’s products and services can be a challenging task. The process of making a purchase is an emotional one. Simply calculating your cost, adding what you’d like to make on top of that and coming to a final price won’t cut it. You need to take into account the emotions of your buyers. That strategy is called psychological pricing.
Psychological pricing takes into account consumers’ innate inclination to respond to certain types of prices. It is a strategic method of pricing products and services to influence consumers’ decision making during the purchasing process. Psychological pricing gauges your target audience’s emotional responses to an item or service and takes that into account for determining perceived value.
At the end of the day, you have to determine a price and run with it. Here are some strategies to consider as you go about that challenge:
Offer something for free. This works on me every time DSW offers a free travel bag with x-amount of dollars purchased! I don’t need any more bags or shoes but it’s free and it usually has a unique feature that makes it different from any other bag I own.
Utilize a tiered product strategy to make something that might seem expensive less so when compared to another product. If my brand offers a dinner place setting for $75 and a second set that has minimally better features for $125, the first set seems like quite a deal.
Use odd pricing – figures that end with unexpected digits like 7, 8, or 9. A price of $47.98 gives the perception of complex calculation to come up with the cost. It can also give the impression that you are trying to be as fair to the customer as possible by not rounding the price up to $50 to make a bit extra on each sale. This strategy also takes into account the “left-digit effect.” We read from left to right, therefore our brains categorize the $47.98 as in the $40 range instead of almost $50.
Don’t be afraid to ask for a higher price. The lowest priced item doesn’t always win. Many consumers equate price with quality and will assume “cheap” before they think “inexpensive but still high-quality.” The common assumption is that a brand wouldn’t charge so much if the product or service didn’t offer an extraordinarily exceptional value.
Offer incentives (beyond something for free). Examine your margins and understand what you can afford to offer in order to motivate your customers to make a purchase. Use language that attracts customers and minimally affects your bottom line. For example, “Buy one, get one ½ off,” or “Purchase today and get a 10% discount.”
Offer bundle pricing. When you buy a dog collar, shouldn’t you buy a matching leash to keep Fido stylish? And how about a complementing vest, a collapsible water bowl, and a poop bag dispenser that hooks to the vest? If you are going to a spa for a manicure, wouldn’t it be easiest to go ahead and get a pedicure as long as you are there? Determine which of your products and services complement one another and then package them at a price that offers a better value than if the consumer were to purchase items or services separately.
Consider offering installment payments when appropriate. I would never hand over $1000 for a mobile phone but happily signed up to give away $41.67 a month for two years. This strategy works well for more costly items.
Create a sense of urgency. Take advantage of people’s FOMO (fear of missing out) and sway them to buy now! Use phrases like, “while inventory lasts,” “Monday and Tuesday only,” or “only five left.”
Use social proof. Consumers trust their peers more readily than they trust businesses. Feature customer reviews and complimentary comments right next to products and services. This pricing strategy encourages consumers to consider others’ experience with your brand to help them make a buying decision.
Include original prices next to the discounted or sales price of items and services. Be sure to add visual contrast to the sale prices. Use a bright color and a differently sized, eye-catching font for the lower price. This strategy not only helps consumers feel like they are getting a bargain, but it also saves them from having to research how much of a deal they are getting. Oh, and a big red “X” through the higher, original price never hurts.
You can always test out different pricing as you go. Keep in mind that consumer purchasing behaviors do change over time and having your thumb on buying trends will help you stay in step with those changes. Let the experts at Strategy Driven Marketing assist your e-commerce efforts. We work with everything from building out product categories to individual product population to image optimization and more. Contact us today!