Getting your pricing right is paramount when setting up a business. You can do all you want to attract a customer to your store or website but if they see a product, love it, they could easily be turned off by the price.
Pricing your products correctly is not rocket science. Use this guide on the psychology of pricing and you will soon be a successful, self-sufficient business.
Charm pricing usually involves dropping the price of an item by one cent from say $3 to $2.99. It is not effective if you drop the price from say $2.90 to $2.89. It is not losing the cent that counts but changing the first figure we read when reading left to right. At $3.00, the first figure is “3,” whereas, at $2.99, the first figure is “2”. Sure, people know that there is only “1” cent difference in price, but our thinking seems to stop at the first figure, and 2 is cheaper than 3. When considering prices, do not discount charm pricing. It has been around for ages for a reason.
Position of the price on the price ticket
On a price ticket, where you place the price can affect the customer’s perception of how low or high the price is. Place prices to the left of the ticket, and they will be perceived as more economical.
Size of print
The next factor to consider when looking at a price label is the size the price is displayed. How big are the numbers that show the amount? Unbelievably our brain will associate a big number to equal a high price. If we write the number in the big text, it is perceived to be more expensive than a similar item with a small text price. An extension of this is to drop the comma to reduce the physical size of the number $1556 looks a lot cheaper than $1,556.
When it comes to price tags that show discounts, you reverse the process and write those numbers in big letters and put the comma back. The bigger discount price physically will seem like a much more significant discount.
The inaudible & audible sound of a number
When you look at a number on a price ticket, you will either speak it or say it to yourself in your head. The number of syllables in the price is important. The price of $1299 is expressed as One-thousand-two-hundred-and-ninety-nine-dollars is ten syllables. You want to reduce the number of syllables, so use 1299 as this is pronounced twelve-ninety-nine, which is four syllables. Its the same whether you speak this in your head or say it. Once again, for discounts, do the reverse. Offer Payments in Instalments on the ticket
If you have one ticket priced at $499 and the other ticket priced at five payments of $99, the installment price will be stuck in people’s minds, and it has brought the cost down to a figure that will sound more manageable. When they compare your product with competitors that offer just a single price ($500), the idea of $99 will still be stuck in the customer’s mind.
Multiples of your price
Two tickets: The first state $5 with unlimited refills. The second states $5 with up to 8 refills. Since the customer is not likely to have eight refills, it has no cost difference between the two tickets. Still, surprisingly, psychologists have proved that stating eight refills sound more appealing than unlimited refills. There is no logic to that, but that’s the way we think.
Use specific prices with larger prices
When do you usually use a very specific price? Answer: When dealing with very low prices (between $1 – $3). So if you use a very specific price, you are making people associate your price with lower values.