Pricing Strategy: It IS Rocket Science
The other day, I went on eBay to buy myself a handheld microscope. What I noticed was that there were multiple sellers selling what seemed to be the same product at different prices, starting from Rs.599 all the way to Rs.1299. It seemed like a very easy choice to not think further and buy the cheapest product, but I faltered. I thought about the cheapest version and how it might be a fake, and the most expensive one, and how it might be overpriced. The result? I ended up buying seemingly the same product from a seller who had priced it at Rs.999. I don’t know whether I made the right choice that day, neither can I attest to the fact that whether a concrete strategy went into deciding the price for the Rs. 999 product. All we can infer from this story is that a) pricing is an intricate art based on a myriad amount of factors and b) sellers who get their pricing right are ultimately successful. Of course, many factors affect pricing, from supply and demand to brand image. But there are a few factors that purely affect decision-making in a very subtle, psychological manner. In this post, we are going to introduce you to some very interesting pricing strategies that might help you in your online sales.
4 Mind Boggling Pricing Strategies
that can Improve Your Sales
1. Is it 99 cents or is it a dollar?
This is the mother of all pricing strategies. The genius who came up with the idea of selling a product just short of a round figure thought this – because we read from left to right, the first figure that we see hits us the most. So, instead of pricing a product for say, Rs.100, when you price it at Rs.99, you’re still in the nineties. This small psychological kink impacts sales so much that now it is a rarity to see products prices not ending with a 9!
2. Similar items, similar prices?
It makes sense to price similar items similarly, right. For example, if you are selling a round neck t-shirt and a v neck t-shirt, same color, size and fabric, you wouldn’t think twice to put the same price tag on them too. But look at this research from Yale University about pricing similar items and you’ll be surprised. Researchers found that, when presented with two similar products with exactly the same prices, more than half the customers deferred from buying. While, even slightly changing the prices resulted in 76% of the customers buying one or the other product.
You will find this sales tactic most commonly in the bustling flea markets and thrift stores around you. Anchoring is a cognitive bias that results from the human tendency to heavily rely on the first piece of information that it receives and make their subsequent judgement based on it. So when a street vendor quotes an exorbitant price and then bargains it down to something that seems reasonable, it only seems reasonable because your brain is anchored to the initial unbelievably high price. But we are not asking you to bargain with your customers online. But by simply showcasing a very expensive product next to a normally priced one, you can make the latter seem really cheap. Restaurants use this technique in their menus all the time.
4. Use your words carefully
A Carnegie Mellon University study showed a very interesting phenomenon that highlights how important even the smallest details are in the way you present your price. Sales for a DVD subscription rose 20% when the content was changed from “a $5 fee” to “a small $5 fee.” That simple. Another research paper argues that even a comma can change the way a customer feels about a price. As you can see, you really need to use your characters carefully.
For more interesting pricing strategies and other queries, get in touch with Browntape. We are India’s leading multi-channel inventory management solution providers and we are always happy to help!