||Psychological pricing techniques
Tuesday, July 10, 2012
When was the last time you changed the pricing of your products?
There are a number of different psychological pricing techniques around with varying levels of effectiveness.
Below I have summarized four of these techniques and explained how you can use them in your pricing strategy:
‘Useless’ price points
This is a very interesting phenomenon and has been proven to help sell higher priced products.
Let’s say you offer three options as below
- Product A - $45
- Product B - $95
- Product A + Product B - $95
This may seem silly as option 2 appears to be useless, why would anyone choose Product B on its own when you can get A and B for the same price?
What this actually does is make customers compare option 2 with option 3 then pick the option they think offers best value.
If you take away option 2 customers will simply compare the lower and higher prices and may find it difficult to convince themselves they need to spend the extra money.
The inclusion of option 2 makes option 3 look like great value and great value is something which customers find very difficult to resist.
The power of 9
Almost every store you look at uses prices that end in ‘9’ but does this technique actually work?
MIT and the University of Chicago tested the sale of a woman’s clothing item at the prices of $34, $39 and $44.
The item sold most at $39, even more than when on sale at $34!
However, something which has been proven to outsell prices ending in 9 is sale reduction prices.
In another study, an item with the price ‘was $48, now $40’ outsold the same item priced at '$39’.
You could of course combine these two techniques – ‘was $48, now $39’ for maximum effectiveness!
Another very interesting theory is how people view prices / cost differently depending on the context, below are a few examples which, while may not be applicable to the pricing of your products, still make interesting reading:
- People will travel across the city to save $10 on a DVD but not to save $10 on a big screen TV
- Most people wouldn’t purchase a $50 bottle of wine to drink with dinner on a Tuesday night however if you already owned the wine having purchased it weeks earlier you are more likely to uncork it
- A study into taxi drivers showed that the majority of them have a set earnings target per day, meaning they work shorter hours on more lucrative days (such as when the weather is bad) and longer hours on slower days.
Lots of companies offer high cost premium products to help sell lower priced products, for example if you sell two types of lawnmower priced at $200 and $400, the majority of customers would go for the $200 mower.
However, if you added a third option priced at $700 you would almost definitely see an increase in sales of the $400 mower due to the anchoring effect of the premium mower.
If you have never experimented with different pricing techniques before I think it’s well worth giving a few of these methods a try.