Prices and Psychology: Numerous studies examine people's behavior regarding pricing. Results that you can take advantage of in business. The following five price strategy tips will boost both your sales and your marketing.
Price Psychology – Psychological Pricing
Insights from behavioral economics prove that there is a connection between pricing and psychology. In so-called Behavioral Pricing, people's behavior regarding their perception and pricing decisions is explored. Potential buyers react to seemingly small aspects such as colors or spelling out the word "Euro" instead of using the Euro symbol, using price psychology.
Tip #1 for psychological pricing strategy: Low Numbers: % - High Numbers: €
This trick, known in price psychology as the "100s Rule," aims at whether you present your prices in percentages or in absolute numbers. For example: You discount a €9.90 product. What is more attractive to consumers: a 20% discount or a €2 saving? Although they are almost the same, 20% appears more interesting. However, for higher-priced products – the threshold is around €100, hence the name "100s Rule – €30 seems more enticing at a starting price of €160 than 20%.
Tip #2 for psychological pricing strategy: Start with the most expensive product!
Start sales conversations with the most expensive product, as significantly higher average prices are achieved when you start at the upper end of your customers' price range. The same principle works for price lists and drink or food menus. Through psychological pricing, the following happens: The customer reads the highest price first and thinks, "I don't need the most expensive glass of wine at €6.50, but I'll take the one at €4.80, that's not cheap but surely just as good." The likelihood of the customer working their way down to the cheaper wine prices decreases, positively impacting revenue. Therefore, place the cheaper products at the bottom and the expensive ones at the top.
Tip #3 for psychological pricing strategy: Expectations? Praise in advance!
This psychological pricing strategy is called the "Labeling Technique" and makes customers more receptive to higher prices. By praising in advance, you increase the likelihood of reinforcing the desired behavior. "Do you know what I appreciate about you? You value quality and don't always choose the cheapest price." With this tactic from price psychology, the customer is put on a pedestal from which it is difficult to be knocked down because it is known that one can hardly defend against praise. Consistently used, customers start negotiating prices less often and are more willing to pay accordingly for quality.
Tip #4 for psychological pricing strategy: Price Free Products and Services!
What costs nothing is worth nothing. When free products or services are simply given away, the appreciation decreases. From the perspective of psychological pricing, you should also price these items. Only then does appreciation come into play again. Specify both the actual price and the free product or service and differentiate them – the greater the difference, the better. This psychological pricing works for product or service packages as well.
Tip #5 for psychological pricing strategy: Products you (almost) never sell: Increased Revenue!
From the perspective of price psychology, listing products that you hardly or never sell increases your revenue. For example, if you offer a product for €60 and one for €95 and want to sell more of the €95 product, add a product for €145 to your assortment, and you will see, your customers compare prices. Now the €95 product is significantly cheaper and will be chosen more often. Even if you hardly sell the €145 product, listing it with the help of psychological pricing will lead to increased revenue. Good luck applying price psychology! Your Roman Kmenta
