Have you chosen your product pricing based on psychology?
Pricing involves more than just making sure that you are getting a return on your investment, it is also deeply psychological.
When it comes to creating a price point, you want to be able to tune into your customers needs and create a sense of value.
If you want to know the top psychological factors that go into pricing products then you are in the right place…Here are 5 of the best:
1.) Round numbers:
It became common practice many years ago to create pricing that ends in .99. This was said to make customers feel like they were spending less however, it has been so commonly overused that consumers have little reaction to it.
In fact, studies are now suggesting that using cents and half dollar price points actually confuse the customer and create an unnecessary distraction. This eludes to the fact that whole dollar amounts actually convert better.
Research is also starting to prove this and found that 57 percent of customers prefer whole dollar amounts rather than half dollar amounts or amounts that end in .99.
Another study also found that round numbers created a sense of openness and trust between the consumer and the business. This was especially noted for high ticket items.
This just goes to show that in today’s competitive market, consumers really value simplicity over anything else.
2.) Anchoring Prices
The anchoring effect is sort of like the “before” price and is meant to position the consumer to view your actual price as a bargain or good value.
For example, say you are offering different priced packages for your services. Most of the time companies will put the highest amount to the left and the cheapest amounts to the right. Because we read from left to right, by the time the consumer moves their eyes to the cheapest amount it may seem like a deal, rather than if they just saw the cheapest amount on its own.
The same is applied to the retail space. How often do you see a before price and the new sale price and then feel compelled to buy because you are getting a discount?
The psychology behind this is that our minds crave a reference point. It is human instinct to latch on to any reference point and playing this to your advantage in terms of pricing has many benefits.
Anchoring can definitely create an illusion of getting a better deal and therefore can help increase conversions.
3.) Product Value
Are your customers complaining that the price of your products or services is too high? Often this has nothing to do with the price and everything to do with the quality of your services.
Sure, there are going to be certain people that perhaps cannot afford your services, but if you have paying customers who are complaining, it is a sure sign that something is not being done right.
Another way to look at it is that people like expensive things and strive to have expensive things, so there is nothing wrong with setting your price point high. The issue is when your price point doesn’t match the quality of your services.
The bottom line when it comes to value and price- increase the value first before you think about lowering the price.
3.) Prestige Pricing
Psychologically speaking, when you tell someone that a wine for example, is expensive they are more likely to enjoy it. Give them the same wine however, and tell them it’s cheap and majority of people will tell you that the wine is just ok.
Buried deep in our psyche, most of us have come to associate price with quality and success and therefore, most of us feel pride in purchasing expensive things.
Expensive items also carry a higher perceived value and therefore make them more desirable for customers.
A higher expense definitely creates the illusion of greater value but it also allows customers to justify their expenses. For example, if a customer spends $300 as opposed to $30, they justify that the $300 item gave them more value.
It may be difficult to drastically increase the price of your existing products, however there is nothing wrong with gradually increasing the price, or testing new products at a higher price point. Just remember to make sure that your price matches the quality of what you are providing.
5. Remove Dollar Signs
Dollar signs carry the connotation of spending, and no one wants to be reminded that they are spending.
Studies have shown that when the dollar symbol was removed, customers were more likely to spend because they were less aware of actually having to spend.
It seems that when the dollar sign is present, some customers get shy about making a purchase and tend to hesitate more so than when the dollar sign is not present.
Psychologically speaking, dollar signs act as an unconscious cognitive barrier to spending.
This is a practice that is commonly seen at restaurants. Rarely will a menu ever include dollar signs, as they don’t want customer to focus on the price, instead they want them to focus on ordering what they really have an appetite for.
Online it may be tricker to remove the dollar sign altogether, but you can definitely make it smaller so you are not drawing attention to it.
No matter what psychological pricing tactic you choose to use, always remember that customers want to feel like they have purchased something of value.
At the end of the day, price really doesn’t mean as much as the value you have been able to offer them.
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