5 Psychological Pricing Tips To Drive Online Sales
Figuring out the right price for a product consists of more than adding 20% to the cost price and slapping a sticker on it. Psychological factors are a big part of meeting consumer needs, they get satisfaction from finding a great deal and enjoy the feeling of getting value for money.
Whenever it’s time to price a product, it’s critical to understand these 5 psychological factors to boost your profits and keep customers happy.
1. Remove the $
The dollar, pound, euro, yen – they are all a symbol of spending money.
Consumers see the dollar sign and pain creeps into their mind as they come to the realization they have to spend money. You have likely come across restaurants that don’t have a dollar sign on their menu, but just numerical numbers. Why? Because they manipulate you into spending more money.
While I don’t believe removing the dollar sign from online products is wise (can lead to confusion), you can reduce the font size of the $.
Take Mailchimp for example, they have gotten clever with their pricing system, the font of their dollar symbol is half the size of their the number:
Smart move as it reduces attention from the idea of spending money.
2. Ditch the .99 unless you’re selling to Macklemore
Pricing that ends in .99 is all the rave in the retail industry, as studies once showed the one cent difference convinced shoppers into thinking they are getting a better deal.
However, this method has been done to death and consumers today would rather pay the extra cent as not to have a pocket full of change.
Don’t just take my word for it, Strategy Business concluded this when 57% of consumers said they prefer whole amounts or half dollar price points. Furthermore, $199 looks much cleaner, desirable and honest than than $199.99.
Here’s some of Sprint’s pricing plans, they have dropped the remainder and rounded down:
3. Anchoring Effect
In a nutshell, the anchoring effect is when a consumer makes a decision based on the first piece of data they see. For example, if you see a pair of jeans listed for $150 from afar, then you pick them up and see a 90% off sticker, you will think it’s an amazing price. Why? Because a few seconds earlier you thought they were $150.
The mind is a mysterious things, it wants to label, box and reference everything . Why do you think branding works so well?
How to use the anchoring effect to your advantage?
Flip your sales page.
Most businesses tend to display their product pricing from left to right, for example, AT&T’s Internet pricing package:
Naturally, you start on the left as subconsciously you know that’s where the cheapest package will be. But what if you went from right to left?
Consumers first notice the $29 pricing plan which has been leveraged as the ‘anchor’, and when they get to the end, they see the basic package at $14 which is half the price.
4. If you experience price complaints – increase the value proposition (but keep the price the same)
When you receive complaints about a product being too expensive, this doesn’t mean what you think it means. Rather:
- The consumer does not have enough disposable income, so moans the price is too high for them. This is not your problem.
- The consumer feels they cannot get enough value to justify the price. This is your fault.
Consumers will say a first class plane ticket is too expensive, but is it really? You’re given the space of several economy chairs, offered champagne on tap, gourmet food and a comfortable bed you can move around in at 42,000 feet. What they mean is: they don’t have that sort of cash lying around to burn.
Expensive items are hard to obtain and is why consumers are driven to them. Consumers like to show off their fancy watches, cars, suits and gadgets, the actual price is not the problem, the price-to-quality is their worry.
In-balanced price-to-quality ratios can be due to bad copy, misinformed consumers, a lack of communication between both parties or inadequate branding.
Check out the Shopify features page, there have covered every piece of value their product brings:
There is no doubt about the price-to-quality here.
5. Price your products even higher
You can go out and buy a Rolex for well over $10,000 which does the same job as a $10 Casio watch. In fact, a regular $10 watch does a better job at time keeping!
So why does everyone want a Rolex and not a Casio? Because the value and prestige that comes with owning a Rolex. This is known as prestige pricing and used by luxury brands.
Consumers justify their spending based on perceived value. Does a bottle of $5,000 wine taste better than a $50 bottle? What if a week later the price of the $5,000 bottle was cut to $500, did it just lose $4,500 of taste? Of course not.
The success of many luxury brands is down to prestige pricing, acquiring expensive things is hard as you very well know. You will need the right products, target market and branding to pull this off.
Most consumers are not worried about the price, they just want the right price-to-value ratio. Value can come in many forms, branding, level of customer service, experience and support are all illusions to balance the price-to-value ratio in your favor.
Follow these 5 tips and watch your sales orders grow. Also don’t forget to read my article on how to convert customers during the trial period.
Founder of CrushCampaigns
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