Let’s set some ground rules for Pricing.
The first is that Heidi, your customer, is not buying a product or service per se. Instead, she is paying to get a job done. If what you offer doesn’t help with her primary objective, then you achieve nothing—regardless of your price. But Heidi will pay more if she believes you can help her get the job done perfectly; and more so if she believes you can help her more efficiently than your competition.
The second element is the emotions you evoke in determining value. As already hinted to, the biggest and brightest emotions have to do with fear, sex and greed. I hate to say it, but nothing has changed over the centuries and it probably won’t for a long time to come.
Value (as seen by Heidi, not you) is what determines your selling price. Therefore you need to discover what Heidi’s real needs are. Most business people don’t know that when you learn this, you put yourself way ahead of the pack.
Let’s look at these three Emotions Briefly
Heidi has two fears in her buying spree: fear of change that the product or service represents, and fear of being cheated on price and result. You can overcome these two obstacles by showing Heidi HOW the product will help her get the job done perfectly. You are increasing her gains and reducing or eliminating her pains.
Sex sells. Popular men’s magazines have often experimented with sex in relation to the impact on sales. Overwhelmingly, when a sexy, semi-naked woman appears on the cover, it outperforms an image of a male star. Because sex is so powerful in advertising, when used with the appropriate products it can improve the value of your brand and command higher prices.
Oscar Wilde famously said, “A cynic is man who knows the price of everything and the value of nothing.” Price is certainly a key attribute consumers consider before making a purchase. But even a cynic can be moved away from price alone. Let me give some examples.
Pricing Display Tips
A tested example in selling beer showed that best results were derived by offering 3 options of beers. The price you wanted people to buy at was put in the middle. With the third option set very high, some people will buy the highest-priced item regardless of their cynicism.
|Set||Options||Super Bargain||Bargain||Premium||Super Premium||Avg Price||Increase|
Do the math. A 32% sales/profit increase occurred just because of a pricing option!
– Decoy Pricing
Offer different options with similar prices attached to two of them. Of these two, one is a decoy and the other is the more attractive choice you want people to pay. Dan Ariely is a behavioural scientist who conducted a study where three different subscriptions for the Economist magazine were offered to 100 MIT students. These options were: web only ($59), print only ($125), web and print ($125). 16% bought at the $59 price and 84% bought the web and print offer. When he took out the decoy, the ratio changed to 68% for the $59 web only, and 32% for the $ 125 combined offer. Decoy pricing gave a 43% increase in sales/profit return! Go figure.
|Set||Options||Web Only||Print Only||Web & Print||Avg Price||Increase|
– No Dollar Sign
Remove the currency symbol from your products. This seems to reduce the pain associated with paying. The theory was tested on a New York restaurant menu. Items with no currency symbol outsold currency items regardless of whether or not they contained decimal points.
– The Magic 9
The University of Chicago and MIT tested the sale of the same dress at three prices; $34, $39 and $44. The $39 price was the biggest seller.
– Size Matters
When you have a sale, show the discounted price smaller than the normal price. This may seem counter-intuitive, but it works.
That’s enough for now. Next time I want to focus on some other important pricing factors you should consider.
CEO and Co-Founder
neXtep Business Builder Community Pte Ltd
Singapore ACRA Business Registration Number: 201424522Z
80 Kitchener Road #09-09/10 Singapore 208539