Pricing your products and services is a critical element of a well-conceived marketing plan, and proper pricing is an integral part of building a successful business venture. The burgeoning field of behavioral economics reveals why certain pricing tactics work and how you can incorporate some of them into your pricing strategy.
Have an anchor baby
Your “anchor baby” can result in a positive outcome for sales and billable hours. A cognitive bias called anchorage can cause us to perceive the price of an item as reasonable when viewed after having seen a more expensive version of a similar item. In other words, a $2,000 item may be perceived as a relative bargain after one has seen a similar version priced at $5,000, and a prospect might see themselves buying that $2,000 item.
Placing higher-priced products and services near similar, lower-priced offerings you hope to sell can lead potential customers to perceive lower-priced items as providing real value, once they know that functionally similar items may be more expensive. .
zero death sales
In retail sales, it is standard practice for merchants to list prices ending in .99, .98, or .95, but never .00. The reasoning behind that quirky little tactic is that prices ending in zeros are often perceived by customers to be comparatively expensive, according to a 2003 study that appeared in the Journal of Quantitative Marketing and Economics. According to the study, most buyers feel that $5.99 is substantially cheaper than $6.00.
A 2011 study by the Society for Consumer Psychology suggests that when pricing B2B services for a client proposal, it’s best to avoid listing a price of $3,000.00 or even $2,995.00, for example, because would include too many zeros. Apparently, potential customers will feel more comfortable with your price when it is stated at $2995.
Be a Lexus and not just a Toyota
A Vanderbilt University study found that customers are willing to pay more for a Budweiser beer at a fancy hotel bar than for the same Budweiser at a dive bar. Why? University of Chicago economist Richard Thaler explains that the power of perceived prestige allows luxury to get away with charging higher prices.
According to that line of reasoning, Solopreneur consultants (much more elegant and accommodating than a simple Freelancer, right?) are advised to present signals that justify charging higher prices that improve profits in various ways. Let the value you bring be known by those who matter. Teaching at the university level, speaking at respected trade associations, producing long-form content that appears in notable print or online publications, or publishing a newsletter or blog that attracts several thousand subscribers will show you as a thought leader and authority and will It will allow you to reflect that experience in your pricing structure.
how to raise prices
Weber’s Law (1834) states that your customers will likely accept a 10% increase in the price of products or services they buy from you and some may not notice the change. He already knows that several factors can affect his ability to raise prices, including the urgency of the customer’s need for his product or service, the presence of competitors, and the perceived value of his brand.
Thank you for reading,
kim
