Effective Pricing Strategies to Increase Sales

 In keeping with that, let's examine ten tried-and-true pricing techniques derived from the study of consumer behavior to offer guidance and inspiration for creating profitable prices

How Similarity Affects Sales

Having fewer possibilities prevents "analysis paralysis," since having too many options can be discouraging. Therefore, it would seem sense to have the same price points for all of your products, right? Not necessarily, according to Yale research: buyers are frequently less inclined to purchase one of two similar things at the same price than if they are even somewhat different.

In one experiment, participants were given the option to keep the money or purchase a pack of gum. When given the option to choose between two packs of gum, just 46 percent of respondents bought one when it was priced at 63 cents. However, when the gum was priced differently—at 64 and 62 cents—more than 77% of buyers selected to purchase a pack. That is a significant rise from the initial cohort.

Setting the prices of your identical vintage T-shirts at different amounts is not the connotation. Instead, understand the rationale behind the inertia: buyers tend to postpone making a decision rather than acting when comparable things are priced similarly.

2. Anchoring Prices

It's often said that placing a $2,000 watch next to a $10,000 watch will increase its sales. However, why? Anchoring is a typical cognitive bias that is the problem. The propensity to base a judgment significantly on the initial piece of information presented is known as "anchoring."

In order to assess the impact of price anchoring, researchers asked participants to calculate the approximate value of a sample house. They gave them booklets with details on the houses around them; some had regular pricing, while others had inflated prices. A panel of real estate specialists and a group of undergraduate students were persuaded by the leaflets that had greater costs. Even professionals were persuaded by anchoring!

When basic alternatives are positioned next to premium options, potential customers may see the premium options as having greater value and consider the less expensive options to be a better deal.

3. The Law of Weber

Weber's law states that the just discernible difference between two stimuli is closely correlated with their respective magnitudes. Put another way, the magnitude of something before it changes influences that something. Weber's law is frequently used in marketing, especially when discussing rises in product and service prices. Although there is no magic number when it comes to price increases, Weber's law indicates that the average point at which customers are compelled to react is roughly 10%. As usual, a wide range of factors influence price. Rather than being an indisputable guideline, Weber's law functions as a testing criterion.

4. Mitigating Pain Areas

According to the study of neuroeconomics, the human brain is hardwired to "spend 'til it hurts." When perceived gain exceeds perceived pain, the limit is achieved. Numerous strategies for easing these pain spots were examined by Carnegie Mellon University research, which in turn improved post-purchase satisfaction and retention.

Here are a few particular techniques:

Recast the worth of the product. Even though the average cost of a $84/month and a $1,000/year subscription is almost same, it is simpler to assess how much you are getting out of the former.

Group things that you buy at the same time. The LX version of automotive packaging, according to Professor George Lowenstein, is a prime illustration of effective bundling. Compared to thinking about getting the navigation, roadside help, and heated leather seats separately, it is simpler to justify making a single investment.

Make an appeal to practicality or enjoyment. A message emphasizing utility is more persuasive to thrifty consumers: "This back massage can ease back pain." Pleasure was emphasized in order to sway more lenient spenders: "This back massage will help you relax."

Either it is or it isn't free. As Dan Ariely's book Predictably Irrational demonstrates, the word "free" has a lot of meaning. As an illustration, consider how much less Amazon sold in France than in any other nation in Europe. The issue was that French orders came with an additional 20 cent postage fee (while shipping elsewhere was free). Setting a price that maximizes value extraction is important, but shortsightedness might eventually lead to increased resistance.

Sweat the little things. Another study from CMU found that when the messaging for a DVD membership was altered from "a $5 fee" to "a small $5 fee," trial rates jumped by 20 percent. This suggests that sometimes the devil is in the details.

5. Putting a Timeless Tradition to the Test

One of the oldest tricks in the book is to end prices with the number nine, but is it really effective? Based on research published in the journal Quantitative Marketing and Economics, the answer is unquestionably yes. For the same product, prices that ended in nine were able to outsell even lower prices.

Women's clothes priced at $35 versus $39 was examined in the study, and it was discovered that the prices ending in nine performed better on average by 24%.

The nine was beaten by sale prices, such as "Was $60, now only $45!" However, the number nine beat lower price points once more when it was added with a decreased sales price.

Customers, for instance, had the following choice:

Just $45 instead of $60!

$60 was, for a just $49!

Despite being more costly, the sale price ending in nine outsold the one ending in five. Pricing in nines seems to be a tried-and-true tactic that still works.

6. Time Used Compared to Money Saved

Why would "It's Miller Time!" be the motto of a cheap beer manufacturer like Miller Lite? Don't they need to highlight their cheaper prices? Jennifer Aaker of Stanford University contends that when consumers are asked to recollect time spent with a product rather than money saved, they tend to have more pleasant memories in numerous product categories.

Referring back to a product's experience "usually leads to more favorable attitudes—and to more purchases," according to Aaker, because it tends to develop sentiments of personal connection with the consumer. Aaker observes in a Wharton Business School conversation that a lot of purchases typically fall into one of two categories: "experiential" or "material." While reminders of money and status help sales of designer jeans, purchases such as concert tickets benefit more from "time spent" messages.

7. Evaluating Costs

If executed incorrectly, boasting about reduced costs can only serve as a one-way ticket to diminished sales. According to Stanford study, if there is no justification for why prices should be compared, the practice of comparative pricing may have unintended consequences. Customers may become less trusting of your messaging if you explicitly ask them to compare the costs of your product with those of your competitors. "The mere fact that we had asked them to make a comparison caused them to fear that they were being tricked in some way," the main researcher observed.

8. Context's Power

Does the value of one Budweiser ever outweigh that of another? Although common sense would say no, bar hoppers are aware that this isn't the case. Spending is influenced by where you purchase goods. When this was tested years ago, economist Richard Thaler discovered that consumers were willing to spend more for a Budweiser if they knew it was coming from a fancy hotel rather than a cheap grocery store. According to Thaler, the straightforward explanation in this case was context: the upmarket hotel's perceived reputation permitted it to charge greater rates.

This is the reason why, even if the content is identical, consumers will pay more for a "multimedia course" than an eBook. It is advantageous to develop a captivating story around a product because perception plays a significant role in determining whether or not a pricing is fair. It's so clear, but founders who don't position their products so frequently forget it. 9. Differing Price Points According to professor William Poundstone, author of Priceless: The Myth of Fair Value, most of us have no idea what "value" even is. As a result, we are susceptible to influence in unexpected ways. Poundstone talks about a research that looked at customer buying habits when they were choosing from a variety of beers (yep, another beer study!). There were just two alternatives available in the initial test: the normal option and the premium option.

This is the reason why, even if the content is identical, consumers will pay more for a "multimedia course" than an eBook. It is advantageous to develop a captivating story around a product because perception plays a significant role in determining whether or not a pricing is fair. It's so clear, but founders who don't position their products so frequently forget it.

9. Differing Price Points

According to professor William Poundstone, author of Priceless: The Myth of Fair Value, most of us have no idea what "value" even is. As a result, we are susceptible to influence in unexpected ways. Poundstone talks about a research that looked at customer buying habits when they were choosing from a variety of beers (yep, another beer study!). There were just two alternatives available in the initial test: the normal option and the premium option.