Sales is the lifeline of small businesses, and pricing plays a huge role in how well your products sell. Fortunately, figuring out how to price your products doesn’t have to be tricky. Plenty of research has been done on pricing techniques. Here are 3 simple tips to help you.
Use an anchor price
When we hear a number, we immediately want a reference point to compare it to, to help us better understand what that number means. Price anchoring takes advantage of that psychological effect. How you place your products (in your store or on your website) makes a huge difference to how the prices are perceived. A $1,000 watch placed next to a $50,000 one feels like a great bargain. Placed next to a $50 watch, it feels really expensive. By anchoring your prices, you’ll be able to manipulate the perceived value of your product, and affect the likelihood of a potential purchase.
“Charm prices” are the use of prices ending with the number 9. You’ve probably seen this in lots of stores, because of how effective it is. In fact, in an experiment tested by MIT and the University of Chicago, the same item sold 24% better when priced at $39 than at $34.
This works even in discount situations. Offering a discount of “Normally costs $50, now on sale for $39” outsells a discount of “Normally costs $50, now on sale for $34”.
It’s a classic pricing technique, and one that seems illogical. But it’s effective, and should not be ignored
According to a study done by Stanford, directly comparing your price to those of your competitors may backfire on you. “The mere fact that we had asked them to make a comparison caused them to fear that they were being tricked in some way.”, says the lead researcher.
The study showed when users were explicitly asked to compare prices, fewer purchases were made – and the ones who did make them took longer to decide.
Instead of comparing prices to your competitors, you might be better off focusing on highlighting your strengths.