As a small business owner, you know how difficult it can be to determine appropriate prices for your goods and services. Ask too much and you’ll turn customers off to your business. Ask too little and you’ll be shortchanging yourself. The key to pricing all lies within the psychology of the consumer. Here are 8 strategies for playing into consumer psychology and coming out on top of the pricing game.
1. Promoting Satisfaction. If you haven’t done this yourself then you probably at least know someone who has…joining a gym that offers a one time fee, going for the first few months, and then quitting only a few months after joining, even after paying for a full year! When consumers pay for a service regularly, say once a month, they perceive that service as having more value than a service they pay for only once. And when they perceive that it has value, they will continue to use it. Keep your customers satisfied by implementing monthly charges rather than one time flat fees.
2. Use Nines. Consumers connect the number 0 to quality and the number 9 to value. So stop focusing on having the lowest price and start pricing your products and services according to this inherent rule. Have you ever noticed how many items are assigned a price of $X.99? That’s because people automatically associate products with lots of nines with high value.
3. Utilize Anchor Pricing. If a consumer is becoming familiar with a product for the first time, she will look to the model with the highest price to help her determine what to purchase for herself. This high price is called the anchor price. Grocery stores use this to their advantage by placing their generic brands next to name brands. Customers use the name brand prices as anchors and then quickly note that the generic brands run roughly 15 less than the name brands.
4. Let Prestige Pricing Work for You. People automatically assume that a higher priced product is a higher quality product. Many people are willing to drive out of their way and pay more for a cup of coffee at Starbucks than a cup of coffee at McDonalds, simply because they perceive Starbucks coffee to be of higher value. You can take advantage of prestige pricing by enhancing the packaging and delivery of your products and then charging more.
5. Suggest Prices. When you package several items or services together and then suggest an appropriate price, you increase the chances that customers will buy all of those items together. “Value meals” at fast food restaurants are a great example of this. Consider packaging your products together in a complementary way and then pricing them accordingly.
6. Play Up Small Losses. How many times have you seen commercials offering products that you can pay for in “just three easy installments of $19.99”? People find a price of $19.99 much more attractive and easy to manage than a one time price of $59.97. And, as mentioned above, they will perceive the product to have greater value if they pay for it over a longer period of time.
7. Stuff the Bundle. If you’ve seen those commercials mentioned in the point above, you also know how popular it is to continue adding other products to the original offer. “If you act now, we’ll also include…” they say. The more products you add while keeping the original price the same, the more your customers will perceive that they’re getting a bargain.
8. Play up the Bargain. Everyone loves to feel like they’re getting a good deal, and nothing screams “good deal” like a big old banner reading “Sale” or “Discount.” Always let your customers know how your product compares to the rest of the market, especially if your products are comparable and your prices are lower.
Let these pricing strategies work for you and see how well your business grows!
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