Pricing psychology examples
7 Marketing Examples
Morning!
On time today. How about dem apples?
A little bit of housekeeping first.
You got a Substack or thinking about starting a Substack?
I can bring you anywhere from 400 - 1000 subscribers a month.
If you’re interested in a promo/recommendation and are trying to build your newsletter, just reply to this email.
Having a newsletter is the single best asset you can have in the business of expertise.
Alright, let’s get into today’s piece.
1. Pricing strategy is not the same as pricing.
Entrepreneurs tend to set a price without strategic thought. They look at what the competition does and copy that. Or they figure out the cost and add some margin.
But you have options when it comes to pricing.
E.g.
Payment plans make prices feel lower
Credit cards or delayed payments
Setting the price in relation to the value
Framing
2. Framing the price matters just as much as setting the price
To tie into that last point on framing, price is meaningless in the abstract. The customer needs a frame of reference. But here's the thing... you can play with that frame of reference.
Rolls-Royce cars are hella expensive right?? Well, that's exactly why they sell them at aircraft shows
If you've been looking at jets all afternoon, a £300,000 car is an impulse buy. It's like putting the sweets next to the counter.
- Rory Sutherland
3. Use language to soften a price
Don't say: $18
Do say: Only $18
Or: Just $18
4. Stress the price or the product
If it's cheap, talk about how good of a deal it is.
If it's expensive, talk about how the product is the greatest thing since sliced bread.
To tie this back to earlier tips, there's always context! If you don't actively frame it one way, the consumer will do it themselves and that'll rarely work out in your favor.
This is a crucial part of the job your positioning does in marketing.
5. Price is not just price, it's also a signal.
Have you ever purchased something you needed, say an appliance, and you didn't know which one to pick so you just grabbed the most expensive one?
Price is a heuristic for many things including quality for people.
A thought process for the consumer can be: "I don't wanna risk having to go back so let me just grab the most expensive one cuz that is least likely to suck."
In fact, this partly explains brand equity (the premium people are willing to pay for a brand over a generic version).
If I buy a Samsung TV it might not be the greatest but it probably won’t suck either. If I buy Tingtongtang, a new generic brand, it could go either way. But do I really wanna risk that… going to the store, buying it, transporting it, mounting it to the wall, discovering it’s trash, removing it, fixing the wall, putting it back in the box (if I still kept it), returning it to the store, waiting until someone can finally help me, request a refund.
The downside just isn’t worth the $200 I might save.
6. Have disparity in your pricing
When everything is priced the same, it can confuse the customer.
I consulted for a firm that sold two versions of a product at the same price. (Kinda like a pro and a standard version.)
When you do that, customers feel like there's something wrong with the more premium option, otherwise... why isn't it more expensive?
This goes back to point 5 of price being a signal.
Also, if you have a product suite where everything is $100 for example, you're asking the consumer to expend cognitive energy to compare and make sure they're getting a good deal.
If you have variation in your prices, for example: $90; $100; $120, now customers can make a decision faster.
"Let me just grab the middle option."
"The cheapest one is fine."
"I'll just take the most premium option."
7. Buyers do NOT understand how they derive value so try counterintuitive experiments!
There are always a few mouthbreathers that argue that they (nor anyone else) would fall for these gimmicks.
This is simply not true.
"...consumers are frequently unaware of how their price and value inferences are derived, and may typically be unable to articulate the exact reasons why some aspect of the comparative price presentation stimulus may translate into lower (or higher) perceived value." (Coulter & Coulter, 2005)