Marketing is so much more than advertising, as I’ve said multiple times on this website. One of the most overlooked aspects of marketing has to do with pricing strategies. Choosing the right price is important for making a profit. However, it can also be important from a marketing standpoint. There is a certain psychology to pricing that is important to consider when making products look more attractive to your target market. Too high a price and consumers don’t see sufficient value to justify making a purchase; too low a price and consumers feel your product lacks quality. Pricing strategies impact your sales volume so sometimes a lower price results in a higher sales volume and higher profits. This post details a few examples of pricing strategies that can help to increase sales.
7 pricing strategies you need to use
1. Make use of Weber’s Law
Discounts can often attract customers by convincing them that they are about to save money – even if they had no previous intention of buying that product. But just how much of a discount must you offer to get a response out of customers? Weber’s Law states that 10% is the average point where people are stirred to respond. This means that if you’re discounting a $4 beer, changing the price to $3.60 is likely to attract people more than $3.70.
When discounting products, coupons are a good way to go. As a manufacturer, coupons of the fastest way to get discounts to the consumer, since retailers will want to recover the original price paid for the inventory they have on hand before discounting lower-priced inventory purchased after you instituted a discount. Plus, consumers view the opportunity of buying with coupons favorably to form behavioral intentions, which increases the volume you sell even when few consumers actually use the coupon to save money. A rebate is another great tool for getting discounts to customers and has the added benefit of building a mailing list of interested consumers.
One interesting thing about discounting products is the impact of limiting the number of products you can buy at the discounted price, an aspect included as part of psychological pricing strategies (along with the next one). If you post a sign stating the price but limiting purchases to a maximum of four, you’ll find consumers purchase four instead of just one of the discounted products. They may even push the system by buying four and then having a shopping buddy buy four so they have a total of eight products.
This fits into the scarcity principle from the principles of persuasion shown below.
2. End discount prices in a 9
Knocking a cent off the price to make the price seem smaller (e.g. advertising something as $49.99 instead of $50) is another of the psychological pricing strategies that worked for nearly every brand and product over the years. However, the number 9 is even more powerful than many people realize. One study compared discounted women’s clothing priced at $35 and $39 and found that the clothing priced at $39 outsold the clothing priced at $35 – even though $35 is cheaper! We are clearly so used to associating a ‘9’ at the end of a price with a good deal that it somehow becomes more enticing.
3. Offer bundle/bulk discounts
You can also encourage customers to spend more by bundling items together at a discounted price. For example, you might bundle a computer with a printer and offer a price that’s somewhat lower than the price of both products together. When creating bundles, consider products and services that are popularly bought together, such as a phone and a screen protector.
Alternatively, you might create attractive pricing bundles to sell items that aren’t selling well on their own by bundling them with two or more popular items that sell for a slightly higher price than the popular products alone. For instance, you might bundle home internet, TV, and a landline together as a means to sell unpopular landlines while still making some profit as the bundle is priced slightly higher than the internet/ TV combination alone.
By offering a discount on a bulk purchase, you similarly sell more volume than selling the products priced as individual products. For instance, if you offer cans of beans at a price of four for five dollars, more consumers will choose to buy four cans of beans than if you price the cans at $1.25.
4. Highlight ‘free’ extras
Using the word ‘free’ is a sure way to grab customers’ attention. Of course, that doesn’t mean you should give your product away for free, however, if you offer free stuff that’s included in the price when you advertise a product, you will sell your product more easily. Such freebie extras can make an otherwise expensively-priced product seem like a good deal.
For instance, you might include free oil changes for life when selling a new car to make your product seem more affordable and compete with other car brands. Since many buyers won’t even take advantage of the freebie after the first oil change or two (finding it more convenient and less hassle to take their car elsewhere for an oil change or they want more control over the type of oil, etc than offered by the dealer), the absolute cost of this freebie is relatively low.
5. Know when (and how) to hide the price
Keeping your promises is a key element of gaining the consumer’s trust and the last thing you want to do is to be in a position where you can’t keep your promises. Hence, there are many industries where individualized quotes are a better solution than fixed prices due to the varied demands of customers. In these cases, it’s best to avoid listing any prices so as to not create unreasonable expectations. Some companies simply use a ‘request quote’ button such as this seller of Telemecanique parts.
Another option could be to use various example package options with prices, but make it clear that the price could vary if they want to customize any of the details of these packages or conditions warrant a higher price such as finding bad plumbing that requires repairs when installing a new tub. One pool installer found he captured significant business from his competitors by providing examples of pools and the costs associated with building them rather than totally hiding the cost.
6. Be upfront with extra fees
One common cause of abandoned shopping carts is revealing hidden delivery fees or packaging fees during the checkout process (as you can see in the image below). These fees can make customers feel cheated – particularly if they’re shopping on a tight budget. Adding shipping fees also flies in the face of consumer expectations as most consumers today expect free shipping as well as super fast delivery. For this reason, you should always detail these fees upfront with the price so that the customer knows exactly what they’re paying, rather than trying to make the price look lower than it really is.
7. Use the right language
Using certain terms, you may be able to make a deal look better than it is, or even upsell an item. For example, wording something as ‘only $19 per month’ instead of ‘$19 per month’ could make the cost seem smaller. Also, $19 per month looks a whole lot easier to swallow than $228 per year and makes the product easier to fit into the consumer’s budget when they can pay per month. Such pricing strategies lower the perceived risk associated with a purchase, as well.
Always avoid using words like ‘expensive’ or ‘ pricey’ when it comes to your higher-priced items. Instead emphasize the superior quality with words like ‘premium’ or ‘luxury’ to make it feel like it’s still value for money.
Another interesting aspect of language in pricing comes from SaaS companies. In one instance, a company discovered that by dropping their free tier and replacing it with a low-priced tier with a 30-day trial, they converted most of the folks easily to a paid pricing tier.
Conclusion
Pricing strategies are a great tool to help you make more profit from your marketing efforts and point to the many marketing tools available to boost your profitability beyond advertising.
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Nice!