Improving Conversions with Strategic Pricing Methods
When it comes to pricing your products, it can be difficult to know where to start. Well, let me tell you that the key lies in the consumer psychology of prices and what they see as valuable or a great deal.
Use whole numbers
We have all seen the popular pricing strategies, especially in retail, with prices ending in .99. That one cent can make a big impact towards what customers may deem as a “great deal”. However, times have changed slightly and people are becoming more price sensitive; they are overlooking small cent decreases and are more focused on the whole number and what they can get for it.
Studies have shown that when asked, 57% of people would prefer to choose a round number (e.g. $4.00 rather than $4.50). This shows that people are favouring whole numbers and that the small cent differences are, in fact, distracting and ineffective.
This is particularly true in cases where the ticket item is of a higher price, so it’s not small pennies we are dealing with. Using nice clean round numbers gives a stronger and simpler pricing structure that will be far easier for the customer to digest.
Use the ‘anchoring effect’
This refers to the term that commonly describes the human tendency to reflect on the first piece of information offered when making a decision. For example, if you start the costings at $350 when considering buying a product or service, you are automatically anchored to that number moving forward. Therefore, when you offer a significantly lower or discounted rate, you think you are getting a great deal as you have already set your mind on the higher amount.
Also on this note, most web users go from left to right when reading information. Therefore, placing the higher price on the left, and the lower price on the right would add to the customer’s perception that the customer is getting an affordable option.
Value vs Price
In many instances, depending on your product or service, the customer will question the price. But remember that if the customer is complaining about price, they simply don’t see the value. Of course, it could be that they are plain broke and don’t have food on the table too. Nevertheless, if they don’t see the value in your products, improve this—without decreasing the cost.
Remember, expensive is a good thing. People like to be seen as buying expensive things. Therefore appreciating the cost and the status received with this cost is vital to achieve positive association.
Be wary of your pricing and brand perception
We have already discussed that people like to be seen to own and buy expensive things if they see the value. Therefore, if you feel you should, make your prices more expensive.
Higher expense creates a higher sense of value, which is what every customer wants. If a customer spends $200 on a product, they will see that as being more valuable than buying the same product for $50. But why? Well, because they spent more money, that’s it.
Significantly low prices can actually harm the brand as the customer can perceive the item as being too cheap and not of value to them and will go to someone more expensive as the brand value is perceived as higher.
Dollar signs are a direct reminder that money needs to be exchanged. It’s too obvious. It’s the gut-wrenching feeling that you get when you know you have to fork out for something. There have been multiple studies that have shown that removing the dollar sign altogether actually encourages people to spend more.
We are not suggesting completely remove the dollar sign in all cases. However, there are careful ways of ensuring the dollar sign is there but in a smaller format. Therefore, the digits become more of a prominence instead of the dollar sign.
In essence, the customer always wants to feel that they are gaining value from the product or service you are offering. Make sure you have the right balance of value mixed with your own profits and you will have customers eager to buy.