|Start Selling More By Implementing Psychology Pricing|
Friday, July 8, 2016
You want to start earning $$$ and more $$$, right ? And that is the primary reason why you run a business especially an online business (take note that having a standard brick-and-mortar shop isn't enough anymore in 2016). Regardless of whether you are selling a product or a service - you'll have to be compelled to place a worth on what you are commercializing at some point, isn't it ?
Well, if only putting a price/value onto something was as easy as ABC and this is where lots of business owners grind to a halt. Cause, by placing a whimsical variety of prices on their products it will barely returns a decent margin of profit.
But fast forward those things, are you aware that you'll be able to build a pricing strategy for your business that not only will solely increase your margin of profits but, eventually help you to sell even more ?
And that’s why we took heed to write this post. We’ll lay the inspiration for a good pricing strategy by exploiting psychological pricing tactics - your golden ticket to commercialism.
What Is Psychological Pricing Strategy ?
According to Wikipedia, Psychological pricing (also sometimes referred to as "price ending" and "charm pricing") is a pricing/marketing strategy based on the theory that certain prices have a psychological impact on consumers. Retail prices are often expressed as "odd prices" : a little less than a round number. For an example, $19.99 or £2.98.
Simply put, it is a strategic way to worth your product or services to influence folks when creating a buying decision.
It isn’t clear how psychological pricing came into existence. However, our research shows that the practice arose sometime during the late nineteenth century with newspaper pricing competition in the USA.
Companies, both massive and tiny, typically have groups dedicated to pricing products - and in some cases, a psychological pricing strategy is constructed as part of their brand promotion. Below, we take a look at some pricing strategies applied by famous businesses.
Psychological Pricing By Apple
Here, we'll take a glance at how Apple has used pricing as a part of their overall promotions and products strategy to land them in the high-end tech hardware market.
Psychological Pricing The Apple Method
Apple has maintained a price purpose that hovers around $1000 (and with the new Apple Watch, some where $2,000) for practically their entire line of products.
And, even with that kind of expensive pricing, consumers ought to flock to each product's launch ; making them perhaps, the primary company to ever to be valued at $1 trillion.
So, how do they do it ?
It's because Apple has continuously planned to be aggressive with their pricing methods. It goes back to the psychological phenomenon that if one thing is pricey, it should be good - well, we'll get into that a bit later.
This echoes the thoughts of Steve Jobs, whose strategy for Apple has four pillars :
- Offer a small variety of products
- Focus on high end products and customers
- Give priority to profits over market share
- Create a halo result that creates individuals to starve for brand new Apple items (anticipation)
In this case (depending on who you speak to) that holds true - Apple products are pretty great. But essentially, they are simply selling laptop computers, desktop computers, smart phones, MP3 players called iPod, and currently smart watches.
By the way, I completely love Apple products and I’m not making an attempt to downplay their quality in any manner.
Tim Cook (CEO) said in an interview in regards to iPhone "We never had an objective to sell a cheap phone. Our primary objective is to sell an excellent phone and supply an excellent experience.”
And, with that in mind - it has paid off for them, enormously and globally.
Apple seldom (if ever) offers discounts on their products. The most you’ll see is usually a student discount in a certain western countries only, and the discount is a meager $100 off a $1000+ product.
That pricing strategy is applied across all retail locations globally and even for resellers. You simply won’t find a brand new and sealed Apple product (besides a web marketplace like eBay) for anything less than what they sell it for at their stores.
Let’s take a more in-depth look at some samples of Apple’s pricing strategy. See if there's something you'll learn from Apple and apply it to your business.
The Left Digit Result Helps You To Sell Even More
Honestly speaking, there’s a reason why businesses like Apple ought to price a laptop computer at $1299.99 instead of a flat pricing of $1300. And that is because, that $0.01 truly makes a stunning distinction within the amount of sales which will be created.
Instead of charging $1300, charging $1299 for the merchandise makes the value seem to be within the "$1200”range instead of the "$1300” range.
Thus as a consumer, we perceive the price to be lower than it actually is. We think of it as a bargain. In fact, several studies have shown that shoppers prefer to pay less for products and most often associate prices ending in a 9 with discounts and bargains.
This works thanks to one thing referred to as the "left digit effect". The bulk of individuals scans from left to right. Apple incorporates this into everything on their line of businesses.
As a matter of fact, you won’t see an Apple product selling for a round figure. They’ll invariably be priced with the "teen ranges” or "$999" in mind.
Smart, strategic, and definitely intentionally.
Key takeaway : attempt using odd pricing on a brand new product you’re launching. Think about employing 2 completely different price points : one with odd pricing and another with flat pricing to test which one works for you.
Comparison Pricing Could Be A Very Clever Pricing Maneuver
Comparison pricing isn’t simply another word for listing items down to compare one price to one another. It’s a selling technique in which the price of one offer is directly contrasted with the price of another offer.
Here’s an example of what that may seem like from Apple’s position :
Apple is selling 2 MacBook Airs. One is $899 for an 11” MacBook Air and the other is $999 for a 13”. Therefore, the 13” option is $100 additional, which simply means that we presume it to be higher quality. And, in most cases it always is.
But, which one sells more? In Apple’s case, we really don’t know. however with virtually the exact same pricing strategy - Williams-Sonoma was able to move the needle quite considerably on one of their products.
In a study revealed by The Wall Street Journal (WSJ), we learned that Williams-Sonoma had a $275 bread maker in their catalog that wasn’t performing too well.
When they introduced an identical bread maker for $429 which was solely marginally better and placed it next to the $275 bread maker in a print ad, sales for the $275 bread maker skyrocketed and nearly doubled.
"The lesson learned here : when you’re launching a brand new product or service in the market, take into account leveraging relative pricing. Try to create a tiered product strategy like Williams-Sonoma or attempt to provide a discount for an extended commitment (for example, 25% off if you sign up for an annual commitment). Bear in mind that folks don’t create decisions in a vacuum and price your product in a manner that takes advantage of that."
In the Williams-Sonoma example, shoppers could have mentioned, "I do not know much regarding bread machines, however if I can buy the $275 model that is nearly pretty much as good as the $429 model, then I must be getting a decent deal."
Anchoring is what is happening here. Anchoring refers to the tendency to trust heavily on the primary piece of knowledge offered and then weighing their purchasing decision based on that.
Key takeaway : attempt positioning your product collections with comparison pricing in mind. Attempt to introduce a lot of "premium" versions of your product and see if your traditional products will sell more.
If It's Expensive, It Should Be Good
If that doesn’t add up the Apple pricing strategy, I don’t know what does.
Think back some years ago when you saw your friends and family using Apple products. Chances are high that you thought they were crazy for spending such a lot of money on something like a laptop computer or desktop computer. There is a reason behind that too and it is not simply because of Apple's marketing methods.
When you are paying an additional amount for one thing, you tend to appreciate it even more. Now, when you compare a $2,000 Apple Watch to a completely different smart watch product such as the Stone Smartwatch priced at $99 (I understand these product area unit immensely different in terms of style. However, they serve the same purpose), the Apple Watch should be good. Right ?
After all, if it weren't extraordinarily better, they wouldn’t charge so much for it, would they ?
Often, consumers tends to equate price with quality. This was studied through a diners at a brand new restaurant in York.
The group of individuals all ate identical food at an Italian buffet. However, some were charged $4 and others $8. People who paid $8 found the meal to be far better and enjoyed the food way more than people who paid $4.
The conclusion ? expensive = good.
Make sure to google about Kanye West APC's $120 plain white shirt which sold out nearly instantly to see how this strategy is applied to bigger clothing brands.
Key takeaway : pricing methods can be applied to nearly any business. If you're selling a tee shirt for $100 it would sell just as much as the one selling for $20.
Other Psychological Pricing Strategies
In fact there are other psychological pricing strategies too such as :
- Buy One Get One (BOGO)
- Festive Sales/Discounts
- Bundles (this + that + that = less)
- Bulk Discounts (also known as Quantity Discounts)
- Limited Time Special Discounts/Offers
Limited Time Special Discounts/Offers
Bulk Discounts (also known as Quantity Discounts)
Buy One Get One (BOGO)
Now that we’ve studied how psychological pricing works, it’s up to you to implement them into your pricing strategy and remember that with VPCart E-Commerce Software or with VPCart Business Ready Plan (all-in-one solution : hosting + software + basic 24/7 support), you can easily employ psychological pricing for your business.
Happy Pricing :)