Pricing your products or services in a way that keeps you competitive while turning a profit can be an ongoing challenge for the small business owner. While your underlying costs always have to be taken into account, strategic pricing practices go well beyond the numbers to include proven buying behaviors.
The psychology behind successful pricing is full of weird and wonderful surprises. As you continue to hone your pricing skills, and measure your profitability through trial and error, consider these eight fascinating insights to gain inspiration for setting the most appealing price points for your product or service.
- It’s important to evaluate whether what you’re selling would be more effectively promoted in terms of cost savings, or experiential value. Depending on the product or service, customers may be far more influenced by what they’re gaining in buying from you, than by what they’re saving. Examples of this include anything associated in the buyer’s mind with a positive or pleasurable experience, whether it’s a satisfying meal, an uplifting massage, or an unforgettable concert performance.
- Quite often, when faced with too many choices or too many comparisons, consumers become overwhelmed and simply opt for no choice at all. But if you think that offering two similar options for the same price will help to overcome your customer’s reluctance and make their decision easier, think again. Research indicates that consumers are far more likely to make a buying decision when presented with two items at two different price points, than when those same choices are priced identically.
- Potential customers don’t like to feel they’re being talked down to, or worse, that they’re being fooled in some way. If you simply boast about lower prices without explaining how it is that you’re able to beat the competition, your would-be customers will be tempted to think you’re either hiding something that’s going to come back and bite them later, or that there’s simply something inferior about your product or service.
- What’s so magical about the number “9” when it comes to effective pricing? The tactic of ending your price tag with a nine may have been around for years, but that’s because it works. When compared with the same product or service boasting a lower price point, the one with the price ending in a nine will tend to sell as much as 25% better in most cases! This is especially true when there’s a price cut involved, and the reduced price ends in a 9. So the next time you’re having a sale, try emphasizing “was $50, now $39”, instead of “was $50, now $35”.
- A decision-making behavior known as “anchoring” can come in handy any time you need to price a product or service a little higher than you’d like in order to make a reasonable profit. When you offer a higher-priced, premium item alongside the less expensive option you want to sell, consumers will tend to look more favorably on the pricing and value of the cheaper service simply by virtue of comparison.
- The concept of keeping it simple applies just as much to pricing as it does to many other things in life. Believe it or not, research indicates that the more syllables a price contains, the higher it’s perceived to be by your customer. So leave the proper expression of numbers to your outsourced bookkeeper, and forego a printed price of $2,500.00 in favor of the less expensive sounding $2500.
- Perception can be everything when it comes to impressing potential clients. Studies show that the average consumer is willing to pay more for the same product or service if it’s offered in just the right way – in an upscale environment, or with a certain level of prestige attached to it, for example. To benefit from this, think restaurant ambience, the high quality that can be implied by a product’s name, or any associations you can make with the rich and famous.
- Avoid nickel-and-diming your customers by tacking on extra or hidden fees
- Describe your rate as an hourly, daily, or monthly fee instead of an annual charge
- Make savings obvious to your customers, by always choosing words that emphasize just how attractive your pricing really is