Adopting appropriate pricing strategies for the product is a fundamental requirement to have a successful business. After all, although several factors can affect your company’s revenue, one of the most important is the profit margin. But when you set prices, you should not only consider competitive bidding, your target audience, and production and distribution costs. Strategies that are based on the behavioral sciences are extremely effective and can serve as inspiration when defining the value of selling the products of your e-commerce. A good example of this is mental triggers.
Know below powerful tactics that you can implement in your virtual store:
Finishing your price with 9, 99 or 95 is a tactic called charm price, also known as psychological price. So instead of selling an item for $40.00, many traders choose to lower a penny and bid for $39.99. Often people credit the number 9 for increased sales after using this feature, but there is another responsible for this feat: the left digit. The difference of a penny between $3.80 and $3.79 will not matter much, however, changing a penny between $3.00 and $2.99 will make a huge difference. This is what the psychological price is about.
The explanation for the success of this tactic is the way our brain encodes the reading process, from left to right, and thus perceives the size of the numbers before we finish reading them, in an extremely rapid and unconscious process. Although we read three separate digits at $2.99, these digits would be represented as an analog quantity on the internal scale.
Note that this size difference is on the grounds that the dollar target value digit changes from $3 to $2 and not on account of a penny value difference. We do not anticipate a discernible change in the perception of magnitude if the target price changes from $3.60 to $3.59 because in that case, the left-most digit remains the same. Thus, a price, for example, of $2.99, tends to be read as “two and a little”, with no approximation to the upper whole number. This strategy is more effective for new items than for products that have been sold before and has even more effect when customers have limited information, which can in turn help explain why retailers do not use “9” at the end of the price of all their items.
By including a price comparison on your site, you give a price reference to people and thus can influence them considerably. But much more than simply putting a value close to the other, you can use visuals that will make your product even more attractive. By increasing font size, highlighting with another color, or choosing a different font, you automatically trigger a trigger that makes people more likely to buy the item cheaper.
Rule of 100
Have you ever stopped to think of the most effective way to advertise a promotion: advertise 20% off or $8 OFF? These two forms refer to the same value. Offering 20% or $8 off in a short that cost $40.00, for example, makes the customer pay the same price for the product. However, both features do not have the same effect on the client.
Instead of a $40.00 short, we’ll think of a more expensive product, like an iPad that costs $2,600. What attracts more attention, $390,00 off or 20% OFF? To use the 100 rule in your pricing strategies, just take this little tip into consideration:
- Discounts less than $100.00: using the discount percentage calls for more attention than the absolute value.
- Discounts greater than $100.00: the absolute value is more attractive than the discount percentage.
This pricing strategy is based on the same practice used in a negotiation: start with a high bid to gradually lower the value. In e-commerce this tactic is used by placing another product with a higher price on your sales page, which makes customers more likely to buy the product cheaper. This is due to a cognitive bias called “anchoring,” a term that refers to the tendency to rely heavily on the first information offered to make decisions. To use the anchor price strategy, simply put your premium products close to common options. This simple action can help create a clearer sense of value for potential customers, who will realize the cheaper options as a bargain compared to the higher ones.
There are several price strategies to improve the sales of your business. But you need to know how to put them into practice to optimize results and draw more consumer attention. If applying the tactics above does not work, it is worth reconsidering the prices of your products. Perhaps the value is much higher than in the competition or in the perception of cost of the consumers. It’s time to reevaluate.
The real value should be determined considering not only the material variables that make up its product but also the subjective attributes. As an entrepreneur or manager of a business, the important thing is to keep Perceived Value and Real Value in balance constantly. This exercise is dynamic and, for this reason, the pricing of your product cannot be static.
Sarah Feldman is an experienced Digital Marketer at Digital Express a Digital Agency in Dubai. She loves to write about latest Internet Marketing trends, news, and tips.