More Pricing Psychology Tips to Increase Sales
It’s been a while since I’ve done a post on pricing but it’s actually one of my favorite topics because I love looking at both the psychology and economics behind what motivates consumers to make a purchase. This post is another great example of this as is this one all about strategic sales. I also think that looking at pricing like this reminds us that we can (and should!) be constantly evaluating and tweaking our offering to maximize profits. It’s rare that you’ll nail things right out of the gate but once you have some sales data and analytics to help you gain more insight into how people are responding to your prices you can refine, refine, refine. Here are some common pricing strategies for you to try!
Discount Pricing
My first tip is just a formatting trick for when you decide to offer a discount. Studies have shown that for high dollar value items it’s best to display discounts in terms of dollars off (ex: Save $200!) but for lower dollar value items to display discounts as percentages (ex: Save 25%!). This is because a percentage of a small amount seems like a better deal than that same amount when displayed as a dollar value. For more on discount strategy, check out this post.
Instead of This
Was $9.99
Now $ 7.50
SAVE $2.49
DO This
25% OFF
Was $9.99
Now $ 7.50
Price Anchoring
Customers often make decisions based on the relative prices between items, especially if they may not have a firm grasp on what a “good price” for something is. By setting a “price anchor” you give shoppers a relative baseline to compare all other prices to. This works well if you sell a wide range of similar items. For example, if you sell denim and have low, mid and high end brands, setting the price of the mid-tier brand closer to the high-end cost may help you sell more of both. This is because people will see the mid-tier brand as a better value to the low-end option and may also then be willing to spend a few extra bucks for the premium brand.
It’s easier to justify a costlier option when there is a low price anchor
$9.99
$17.99
$19.99
Charm Pricing
We all see charm pricing every single day and even though it seems like we should be wise to how it works, we still all fall for it! Charm pricing is simply where you drop the price by one cent so instead of $10, it’s $9.99. This works because studies have shown that people are more likely to round prices down in their heads versus up. You’d also think this would only work on small dollar value items but there’s a reason why cars and real estate use the same strategies - it works!
Instead of This
$10.00
DO This
$9.99
Prestige Pricing
A common mistake some rookie entrepreneurs make is thinking that in order to be competitive they have to be cheaper. Prestige pricing works especially well if you have a product that you can position as higher quality or more luxurious than others on the market. A good example of prestige pricing would be looking at Sephora. They sell skincare and makeup at much higher prices than drugstore brands but have no problem doing so because of the real or perceived higher quality of the products. This pricing model works well if your branding is positioned as luxurious, high end or premium. I go way more into depth on this one plus some other strategies in this post!
People will pay for quality and luxury
$9.99
$18.99
Comparative Pricing
Implementing a comparative pricing strategy is very similar to price anchoring, above. The difference is that in this scenario instead of using a mid-tier product to anchor the price up, you set a decoy product at a comparative price just below your target. For example, if you’re selling pillows consider offering an upgrade to a premium pillow fill. People will compare the prices and you can sell them on the benefits of the premium option. They’ll be much more likely to buy the upgraded premium option when compared to the alternative than if it was sold on it’s own. (Hint: you can also use this tactic when setting up the shipping options for your website!)
Position an expensive option as an upgrade
$9.99
UPGRADE FOR $7
Price Differentiation
Shoppers don’t do well when having to compare between two items that are priced exactly the same. When this is the case, they often spend too much time trying to analyze the differences between the products in an attempt to find the one that is the better value. If you’re selling similar products, giving them slightly different prices will help people make a decision more quickly, which is proven to result in higher sales overall. The differences don’t have to be big to be effective; the important aspect of this strategy is to just not price them exactly the same.
It’s easy to compare products that have different prices
$9.97
$9.89
Price Bundling
This one is last because it’s my favorite! I love this not only as an eCommerce pro but also as a shopper! Bundling products is effective especially well if you offer things that work together as a set or when bundles contain one or two of your most popular products paired with complementary products. The reason why this works is that people are more concerned by the amount they are going to save from buying the bundle than the fact that they originally meant to spend less. When bundling, you’ll want to make sure that the total price is less than the sum of the individual products sold separately. Bundles have two other positive side effects; first, it makes it more difficult for shoppers to determine what the fair value of a product is because it’s technically “cheaper” when bought as part of the bundle. Second, it encourages repeat purchases of more items than the customer may have intended to originally purchase.
IF ALREADY SELL THESE
$9.99
$7.99
$6.99
Total Purchased Separately $24.97
OFFER THIS
Product Bundle
$21.99
Bottom Line
One of the most important things to remember isn’t that the strategies on this list shouldn’t be seen as ways to “trick” your customers. You don’t want to come across as smarmy or sleazy at all! But, if you sell products that fit into one of the scenarios above, these methods can help you increase sales. The ultimate goal to make sure that your pricing isn’t confusing so that people can compare quickly and add to the cart without second-guessing themselves or feeling frustrated. Done right, these pricing psychology tips can definitely help you boost your bottom line.
