It’s not a secret that pricing is one of the key aspects to running a successful business. Carefully selected pricing strategy not only generates sales volumes, but also delivers key product messages to consumers. For example, higher prices can signal higher quality for a specific set of products, while rock bottom price tags can cause suspicion and quality mistrust. Below are a few of the many well-known, time-tested pricing techniques that can help you find the right pricing strategy for your business:
Price similar products differently
According to research, offering too many options as very similar prices creates a so called ‘analysis paralysis’ and often leads to customers not making any purchase at all. A study done at Yale University demonstrated that when participants were asked to choose between two packs of gum priced at the same level, only 44% made a purchase. Conversely, 77% purchased gum when the same two packs were priced at slightly different price points. Therefore, to facilitate decision making and increase the likelihood of purchase, price products with similar attributes differently. This will increase perception of difference between products and will make it easier for consumers to make a choice.
Keep it simple
The way the human brain processes numbers and symbols should also be considered when pricing your products. According to a study published in the Journal of Consumer Psychology, our minds interpret prices with comas and periods as being more expensive than prices without any symbols.
Consider the following price tags:
Our minds tend to read the first price as just fifteen hundred versus the second price as one thousand five hundred. The third price tag creates an even higher price perception by making it seem longer and thus more expensive. Although obviously all three prices are the same, consumers are more like to purchase an item priced at ‘just fifteen hundred’ as opposed to the one that costs a ‘whole one thousand five hundred’. This bias works not only when the prices are spoke out loud, but also when they a silently considered by consumers.
Price anchoring is another very effective technique, which uses a common human tendency to rely heavily on the first available piece of information. A good example of this technique is a sale price tag – consumers can see what an item was priced at before versus the sale price. The larger is the gap, the greater is the perception of value and more likely consumers are to purchase the item. Another way price anchoring works is by placing two similar products at two very different price points. For example, if you want to sell a $500 camera, place it next to a $1,000 one with very similar features - comparing to a $1,000 one, a camera that is costs $500 looks like a great deal!
So, price wisely.