What’s It Cost? The Psychology of Pricing.
If you run your business like I run mine, money is never far from the front of my mind. My father’s advice in running a business has always been pretty simple: Spend less than you make. That’s the easy equation to figure out. The complicated side of the problem is trying to figure out how to maximize your profits and worth.
There are a lot of factors, some known and some unknown, to the second half of that equation, and too many of them to list here. One simple and effective solution every business can implement, however, is to make sure you items are properly priced to match Pricing Psychology.
You can think of Pricing Psychology as the electronic store front of your digital shop. One of the first things your guests want to know when shopping is how much something is going to cost them. The presentation of your pricing can go a long way towards impacting your guests and pushing your sales. Today, let’s look at five potential strategies to using Pricing Psychology.
The first strategy is by far the most common. You see it every time you are in the store or see an infomercial on TV. Price your items so that the last digit ends in a nine, such as purchasing a king sized candy bar for 1.99. Strangely, studies have shown that consumers see prices ending in .99 or .97 as lower than they really are. As a result. Spending 1.99 is generally seen as spending closer to one dollar instead of two.
Statistically, this strategy works for larger prices as well. Consumers see a price tag of $99 as being significantly lower than a tag of $100. After all, seeing two digits on a price tag instead of three can be a lot less intimidating. According to William Poundstone, Charm Pricing can increase sales by as much as 24% as opposed to whole number pricing.
Strangely, Prestige pricing is almost the opposite of Charm Pricing but with a few small twists. Rather than presenting the price as a few pennies less than a round number, Prestige Pricing goes ahead and leaves the cost at a whole number. The mentality is that these numbers are more easily recognizable by shoppers and are thus more familiar.
In other words, Prestige Pricing, or rounded numbers, “feel” right to the consumers while Charmed Prices, prices adjusted to a penny, require some mental thinking to process the cost. This method can encourage more sales because the price makes sense to the buyer, especially if the price matches the quality of the product.
You can also increase the Prestige of the price by including tax and shipping in the rounded number and letting the customers know that they price they see is the price they pay. Prestige Pricing helps the buyer feel you are being honest with them and offering them the true price of the product.
Bundled Sales and Discounts
When guests come to your site they are already looking to shop, but one of the bigger challenges is convincing them to make the transition from window shopper to actually sale. One way to encourage this is to offer bundled sales and discounts. A guest might not be highly motivated to purchase just one of your products at asking price, but if you turn it into a deal, such as buy two get the third free, it can easily push them into the purchase.
If you would like to know how to offer discounted prices when a guest has purchased a higher quantity, you’re in luck! Ninja Shop makes that easy and can have you running special sales in just a few minutes. Check out our tutorial here to get your sales up and running smoothly.
Comparative and Competitive Pricing
One thing you want to make sure you are aware of is your competitor’s prices and the prices of similar items. Most guests have an idea of what something “should” cost and can be easily discouraged from purchasing if your price doesn’t fit close to their ideal, even if your product is of a better quality.
What’s hard, however, is predicting what the customers idea is? They may be way off from what the actual cost of the item is. Though this is nearly impossible to predict, the customers ideal can be influenced.
One of the best strategies that can influence a customer to purchase and item is to place it’s price tag next to another, more expensive item. That way the customer has something to compare the price too. Strangely, this strategy works to increase the sales of both items. Some customers are looking for a deal and the best price, while others are looking for the best quality. By putting the items close to each other, you can help influence both types of customers.
Highlight the Difference and the Savings
Finally, if you are running a sale then let your guests know what the full sale price of the item would normally be! People love the feeling of getting a great deal. Make sure you let them know exactly how much they are saving by participating in the sale. You never know, they may even want to go and tell someone else about it.
Psychology of Pricing. Do a Little to Help a Lot.
When it comes to influencing and increasing your profit margins, every little bit helps. How you price and present your products is a simple strategy that can be implemented in minutes and have long reaching effects. Give one, or several, of these strategies a chance and see what they can do for your sales. Do you have a pricing strategy that we haven’t mentioned here? Be sure to share it in the comments below!