Whether you’re selling a new product or thinking about repricing your existing products, choose a price that will maximise your profit with these pricing psychology tips.
Pricing psychology involves more than assigning a dollar amount to a product. It’s about understanding the psychology of your buyers, and creating a price point that satisfies cognitive needs and creates a sense of value.
1. The 0.99c mark
Certain prices are more effective than others. Even if you don’t find the exact sweet spot, you can make small adjustments to maximise the effectiveness of your price.
Creating price points that end in .99 is popular in the retail industry because buyers perceive the lower price rather than the higher one. A one-cent difference between $6.80 and $6.79 doesn’t have much impact, but a one-cent difference between $10.00 and $9.99 makes a big difference.
2. Make product value clear
Are buyers complaining that your prices are too high? Consider these two explanations:
- They don’t have enough money to purchase. This is not a situation you can fix.
- They don’t see the value. This is a problem you can address.
Consider working on your sales skills and your marketing collateral to really tell the story about why your product is different from the others. Clearly articulate the benefits it offers your customers to make its value clear.
3. Influence buyer perception
Your customer seeks to justify their expenditure based on the value that they think they’re getting.
One way in which they justify that expenditure is by the amount they spent. If your customer spends $200, they will self-justify their expenditure as being more valuable as obtaining the same item for $20. Why? Because they spent more money on it.
This is also known as prestige pricing. Prestige pricing creates unnecessarily high prices simply to affect the customer’s perception of the brand’s value. Lower prices would harm the value perception of your product.
4. Use the anchoring effect
The “anchoring effect” happens when a buyer compares one product against another you sell, and then makes a decision based on the first piece of information that they receive.
For example, if your buyer is considering one product over another, they are anchored by the first product they see. Simply mention the daily or monthly equivalent. That low number will anchor people toward the lower end of the price spectrum.
5. Offer payments in instalments
When you give people the option to pay for your product in smaller increments (rather than one lump sum), you anchor buy perception on the lower price.
6. Offer more ways to pay
Whenever your buyers are at the checkout, they are torn between payment options. Do they make the purchase on the credit card to earn ‘reward’ points or use cash?
Give your customers the option. While installing a complex POS system may not be in the budget, it’s essential for businesses to accept credit card payments. MYOB PayDirect is a smartphone payment solution which enables businesses to use the smartphone as a secure credit card terminal with the aid of a paired Bluetooth card reader.