Pricing is a complex process with no ready-made solutions. In reality, marketers often don’t know where to start and act intuitively when pricing products. But this is a mistaken approach – smart pricing is always based on verified and deliberate strategies. Although intuition is important in some cases, you will learn much more through actual work “in the fields”, the proverbial trial and error method.
Today we will look at several aspects of behavioral psychology as applied to value strategies.
1. Similar prices of different offers
Restricting choices helps confront so-called “analysis paralysis,” where too many choices demotivate shoppers. Customers are less inclined to choose one product over another if their prices are the same than if they cost differently.
The point is not to set the same value even for identical goods – and even if, in a good way, they carry the same value. After all, if two offers have equal prices, consumers are more likely to postpone the purchase until better times, rather than take the targeted action.
2. Price fixing
The greatest way to sell a $2,000 watch is to place it next to a $10,000 watch, as the adage goes. This is related to the “anchor effect,” a typical cognitive error. Simply explained, anchoring is the propensity to base a judgment on the first piece of information received.
Placing premium items and services next to standard alternatives and prices will increase potential clients’ feeling of value, making them more likely to accept less expensive options.
3. Weber’s Law
The strength of sensation is exactly proportional to the logarithm of the intensity of the stimulus, according to the rule. In other words, modifying something is determined by how big that “something” was previously.
When raising prices, it’s hard to give one-size-fits-all advice. But experts say that 10% is the very “threshold”, after which you are more likely to meet an adverse reaction from users.
4. Leveling pain points
A key factor in decision-making for our brains is the desire to avoid pain and get pleasure. If the perceived discomfort outweighs the perceived benefit, we try to distance ourselves. Research at Carnegie Mellon University has identified a number of principles that can alleviate pain points and improve post-purchase satisfaction.
If you want to dive into the intricacies of pricing, you can read more about professional pricing strategy consulting.
5. Focus on proven methods
Oddly enough, prices ending in “nine” still work. Tests show that prices with a nine overtake even lower offers for similar products!
Another positioning – based on a discount (was $60, became $45) – reversed this trend. However, after testing two discount offers (up to $45 off and up to $49 off), the version with the nine on end outperformed its more profitable competitor again.
6. Wasted time vs. Saving
Across many product categories, customers value positive memories more than money saved. Because the experience of using the product forms a personal connection with the brand, which leads to new conversions and repeat purchases.
For example, when buying a ticket to a concert, we expect to get an outstanding performance experience. When purchasing a unique designer item, we expect to increase our prestige for a substantial amount of money.
7. Price comparison
Comparative pricing will lead to disaster if the low cost is not justified.
The insurance company Esurance justified the low cost of its offer by eliminating unnecessary expenses – since all activities were carried out online, the company reduced many cost items, but the quality of the service did not suffer.
That is, the emphasis should be on why prices are lower, and not on the fact that they are the lowest in the market.
8. The power of context
Customers are willing to pay more for a conventional Budweiser when it’s offered in an upscale hotel rather than a seedy suburban grocery store. Context matters a lot here – the hotel’s credibility enhances the perceived value of food and drinks at the bar.
We tend to be hesitant when buying, and justifying the cost is often an irrational process, the success of which depends on presentation and context.
9. Different levels of pricing
Most buyers find it difficult to adequately define value. Sometimes we can be convinced by things that in a different context (or against the background of other offers) will seem uninteresting.
It is very important to check different pricing options, especially when you have a pricing or product grid. Some customers always buy the most expensive – you can give them this opportunity while highlighting the most favorable rate for you.
10. Enter simple prices
Researchers at Consumer Psychology found that “multi-syllabic” prices are perceived as more expensive. Here are examples:
The first two options are perceived as something more expensive than the third form of notation. All unnecessary additions and clarifications should be eliminated to make it easier to read.
High conversions for you!
The Editorial Team at Healthcare Business Today is made up of skilled healthcare writers and experts, led by our managing editor, Daniel Casciato, who has over 25 years of experience in healthcare writing. Since 1998, we have produced compelling and informative content for numerous publications, establishing ourselves as a trusted resource for health and wellness information. We offer readers access to fresh health, medicine, science, and technology developments and the latest in patient news, emphasizing how these developments affect our lives.