⌚ 4 min read
Let’s not sugarcoat things. You’re in business to make money. Yes, solving people’s problems and adding value to their lives is great, but you have to make money doing it.
Pricing is an art. There are many ways of deciding on that final dollar value, from picking a number out of thin air (obviously, we wouldn’t recommend that!) to calculating all your costs and finding your breakeven point. In our Intro to Business course, we cover exactly the steps you need to take to find the perfect pricing sweet spot for your product or service.
But today, we’re going to reveal some pricing strategies that act as icing on the cake. All you have to do is apply a little psychological pricing.
Psychological pricing is a strategy that theorizes that certain prices have a psychological impact on consumers, increasing their likelihood of making a purchase.
It’s not as complicated as it sounds and you can apply it to your business no matter what you’re selling. Here are five strategies entrepreneurs may want to try out:
Charm Pricing - Ever notice how prices of Apple products always end in a 9? Take a moment to think about whether $999 and $1000 feel the same. The one dollar increase makes a huge psychological difference. One of the most common pricing techniques is ending a dollar amount with .99 or 9 instead of rounding to the nearest dollar. The human mind processes $4.99 and $5.00 quite differently. Even though the difference is only one cent, in people’s minds $4.99 is actually $4 which is much cheaper than $5. In practical terms, reducing your prices by one cent or one dollar will signal a value in the customer’s mind and encourage them to snag such a deal.
Luxury Pricing - This is the complete opposite of charm pricing. Instead of ending a price in .99 or any other number combination, you round to the nearest whole digit. You will almost never see a high-end item priced at 99.79, it will be rounded to $100. Round numbers pull on people’s emotions more and signal a purchase that is being made based on feelings rather than logic. A bottle of wine that costs $50 feels “better” and more prestigious than one priced $49.75 and is more likely to encourage a purchase from a customer in that price range.
BOGO - Buy one, get one free. We’re all very familiar with this strategy, as it’s used EVERYWHERE. The psychological pull here is human greed. In most cases, people are willing to spend money to receive something for free. But like we mentioned, this technique is widely used so people are aware of it, but as a business there are a few variations you could try:
Feel free to get creative!
Comparative Pricing - Drumroll… this is the most effective psychological strategy. With this strategy you are placing more expensive and cheaper products next to standard ones in order to encourage people to buy the mid-range product. This strategy is best illustrated on websites offering subscription plans. Think of almost any website you’ve viewed plan pricing on and you’ll recall seeing three columns of basic, better, and best options. The middle option is often highlighted as the most popular one and it actually is! When presented with the choice most people will go for the middle of the road, thinking they’re getting exactly what they need for a good price. As a business, you want to present your true target price as the middle option to hit a sweet spot with your audience. Lower and higher priced options will serve any outlier customers you may have, so it’s a win all around.
Visually differentiate prices - When offering a sale on a product or service it’s imperative to visually highlight the price difference to drive increased sales, i.e. cross out the old one and accentuate the new one. Customers don’t have to research past pricing to know they’re getting a deal, making their purchase decision much more straightforward. Change the color, font, and size of the new price to increase the number of purchases.
There is a “right” price for every product and service that represents the best value for both the business and the customer. But sometimes a little “nudge” in the right direction can help customers make an easier decision to pull the trigger.