Psychological Pricing Tips to Sell More Products, Services



Certainly to sell at a profit when pricing a product or service , you have to be skilled in the art of pricing.

Of course, you need to keep in mind that consumer attitudes are changing.

There are various ways you can use to decide if or when to charge either the lowest or highest price. And indeed sometimes it’s best to price between the low and the high.

What I don’t recall is whether one technique is actually discussed in textbooks.

That would be psychological pricing, which is based on emotional appeals to the prospective customer.

Fortunately, it is not always the lowest price.

Depending on your products or services, psychological pricing is based on the idea that certain prices are more appealing.

Keep in mind 18 percent of Americans will only buy at the cheapest price.

Except for loss-leader sales prices, unless you want to be your industry’s overall low-price leader, which is usually a mistake, the trick is to work around this obstacle.

So how can use psychological pricing to your advantage?

Here are six ways:

1. Show different pricing

If you believe your customers don’t have the time or the inclination to spend time on comparison shopping – usually inexpensive retail items under $10 – offer a sale with your previous price inserted next to the new one.

To bring quick attention to the item, change the color, font and size of the new price.

Your customers will readily see the new price as better for them.

2. Appeal to greed pricing

Obviously, in pricing appealing to a buyer’s greed, this is a case in which a customer will pay the full price for one product or service just to get another for free.

Because the strategy is widely used, consumers are accustomed to the tactic. So how do you enhance your chances?

Vary the technique by getting creative, such as “buy one and offer a 25-percent off the next purchase.”

3. Charisma pricing

Charisma pricing means charming your shoppers by convert zero ending numbers to nines – reducing the left number in your price point by one number and ending with 99 cents.

Yes, this works most effectively when the price ends in 99 cents. So, instead of $5.00, make the price $4.99.

Consumers rarely notice. Instead of a $5.00 price, they think it’s only $4.00.

By the way, use a smaller font size for the 99 cents.

4. Moderate pricing

When offering three different but comparable products or services, most Americans choose the middle price. This is true whether you’re selling B2B or B2C.

For instance, when the price choices are $100, $125 and $150, they’ll use choose the middle price — the $125 item.

5. Prestige pricing

This is one of my favorite techniques in a luxurious marketplace. It’s very effective when you and your business have a highly professional image.

For affluent buyers or wannabe affluent buyers, prestige pricing necessitates rounding up the price such as from $999.99 to $1,000.

Whether you’re selling clothing, champagne or cars, such buyers are more inclined to pay a higher price for prestige reasons. They love to brag about the purchase.

6. Comparable prestige pricing

This strategy is similar to No. 5 prestige pricing. But in this case it involves placing two products side-by-side. One is more expensive than the other.

It works best with fashionable brands. Over a shopper’s perception of quality, it appeals to the buyer who will buy the most expensive item over the other.

From the Coach’s Corner, to avoid discounting prices for low-price buyers — in using approaches No. 5 prestige pricing and No. 6 comparable prestige pricing — keep in mind the five value-motivating perceptions that influence why people will buy from you.

Here are the five value-motivating perceptions:

Employees, Spokespersons – 52 percent. The key characteristics are integrity, judgment, friendliness and knowledge. Remember, about 70 percent of your customers will buy elsewhere because they feel they’re being taken for granted by your employees. And customers normally will not tell you why they switched to your competitor. 

Image of Company – 15 percent. They are concerned about the image of your company in the community. Cause-related marketing is a big plus in forging a positive image. So is cleanliness and good organization. 

Quality of Product or Service Utility – 13 percent. The customer is asking the question – “What will this do for me?” 

Convenience –12 percent. Customers like easy accessibility to do business with you. That includes your Web site, telephoning you, and the convenience of patronizing your business.

Price – 8 percent. Price is important, but it’s the least concern among the five value-motivating perceptions.

Here are more tips on pricing:

Elevate Sales via 5 Best Practices in Pricing and HR Training — Sophistication in pricing by salespeople is an excellent driver to grow earnings rather than just looking for ways to cut costs. Instead of growing their profits with sophistication in pricing, many businesspeople miss growth opportunities when they mistakenly cut muscle – usually in human capital and branding. Here’s a better way.

For Stronger Profits, Avoid 11 Typical Pricing Mistakes — In general, how can you manage the sweet spot – between your price-optimization and costs? Here’s how.

To Cope with Rising Costs, Review your Pricing Strategy — Increased costs weigh heavily on the bottom line. If you’re being pressured by costs, it’s probably time to review your pricing strategy.

8 Simple Strategies to Give You Pricing Power — If you’re struggling with pricing strategies, you’re not alone. Many big companies have struggled, too, according to a study. Here are pricing solutions.

Groupon Will Give You a Migraine for Ignoring Pricing Principles — Whether you’re an investor, small-business advertiser or even a customer, daily deal sites can give you a major headache. Continually, there are red flags about Groupon.

“The moment you make a mistake in pricing, you’re eating into your reputation or your profits.”

-Katharine Paine


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




For Stronger Profits, Avoid 11 Typical Pricing Mistakes



In general, how can you manage the sweet spot – between your price-optimization and costs?

Dennis Brown of the consulting firm, Atenga (www.atenga.com), says many companies make 11 pricing mistakes:

1. Companies base their prices on their costs, not their customers’ perceptions of value. “In certain circumstances, there are strategic reasons a company may decide to sell a product below its cost for a period of time, or to a certain market segment as a ‘loss leader,’ Brown writes. “However, when a price is set according to the perceived value of the product or service, sales are brisk, and profits are maximized.”

profits-618373_12802. Companies base their prices on the marketplace. Marketplace pricing is a resting place for companies that have given up, and where profits end up being razor thin,” he says. “Instead of giving up, these management teams must find ways to differentiate their products or services so as to create additional value for specific market segments.”

3. Companies attempt to achieve the same profit margin across different product lines. “Some financial strategies support a drive for uniformity, and companies try to achieve identical profit margins for disparate product lines,” he believes. “The iron law of pricing is that different customers will assign different values to identical products.”

4. Companies fail to segment their customers. “The value proposition for any product or service is different in different market segments, and the price strategy must reflect that difference,” he asserts. “Your price realization strategy should include options that tailor your product, packaging, delivery options, marketing message and your pricing structure to particular customer segments, in order to capture the additional value created for these segments.”

5. Companies hold prices at the same level for too long, ignoring changes in costs, competitive environment and in customers’ preferences. “It is important to recognize that the value proposition of your products changes along with changes in the marketplace, and you must adjust your pricing to reflect these changes,” Brown explains.

“The value proposition for any product or service is different in different market segments, and the price strategy must reflect that difference.”

6. Companies often incentivize their salespeople on revenue generated, rather than on profits. “Volume-based sales incentives create a drain on profits when salespeople are compensated to push volume at the lowest possible price,” he writes.

7. Companies change prices without forecasting competitors’ reactions. “Smart companies know enough about their competitors to forecast their reactions, and prepare for them,” he adds.

8. Companies spend insufficient resources managing their pricing practices. “In fact pricing is of outmost importance, and a key element of the marketing mix,” he says. “Good pricing strategies use hard data generated by modern methods such as Value Attribute Positioning, Conjoint Analysis or Van Westendorp’s Price Sensitivity Meter, to generate accurate hard data on the perceived value of a product or service, thereby enabling mangers to maximize their profits by optimizing their prices.”

9. Companies fail to establish internal procedures to optimize prices. “Price optimization data comes from focused research,” he points out.

10. Companies spend most of their time serving their least profitable customers. “While 80 percent of a company’s profits generally come from 20 percent of its customers, a careful review of the data often will show surprises, since a company’s largest customers are often only marginally profitable,” he says.

11. Companies rely on salespeople and other customer-facing staff for intelligence about the value perceptions of their customers. “Such people are an uncertain source, because their information gathering methodology is often haphazard, and the information obtained thereby can be purely anecdotal,” he explains.

Here’s a tip of the Biz Coach cap to the consultant’s philosophies. Mr. Brown’s points are valid.

You might also consider that many value-conscious customers would appreciate a cash discount in lieu of paying by credit card, which would also save you a credit-card processing fee.

From the Coach’s Corner, here are more profit-making tips:

Why Companies Are High Maintenance to Customers (but Don’t Know It) – Businesses are losing more than they know because they inconvenience customers. Such negative customer perceptions result in lost opportunities in revenue growth, tarnished branding and smaller profit margins, according to a study.

Classic Red Flags You’re about to Lose a Sale – How to Save It – You’re in the hunt for new business. You’ve done your research about a prospective anchor client. You’ve had some preliminary discussions. Now, you’re seated with the person and making your case. But will you seal the deal? Here are the red flags you’re about to lose the sale, and what to do about it.

To Cope with Rising Costs, Review your Pricing Strategy – Increased costs weigh heavily on the bottom line. If you’re being pressured by costs, it’s probably time to review your pricing strategy.  You’re not alone. No business is immune from rising costs in fuel; rent or real estate; labor; health insurance and ObamaCare; marketing; and equipment.

“How I Love Lucy was born? We decided that instead of divorce lawyers profiting from our mistakes, we’d profit from them.”

-Lucille Ball


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




8 Simple Strategies to Give You Pricing Power for Profits



Often, companies mistakenly price products and services solely from their own perspectives as sellers.

There are 11 typical pricing mistakes that should be avoided.

Businesses should focus on the perspective of the customer about value – not solely on offering the lowest price in the marketplace.

Psychology for setting prices

A minority of customers focus solely on price – people who can’t afford not to save money, and people who want to save money.

My research continues to show at least 80 percent will base a buying decision on five psychological perceptions of value. Not all buying decisions are based on what you might automatically think is logical rationale.

Therefore, in the following order, you must know the answers to these questions: What does the customer think of you and your employees, your company’s image, product or service utility, price, and the convenience of doing business with you?

For more expensive items, perceptions about price often include the cost of payments in financing. That’s especially true when the purchaser pays and uses the product on a regular basis.

Specific numbers play a psychological role. That’s why you will often correctly see value-pricing for fast food end in the number, nine, such as $3.99.

For more luxury items, a psychology of quality is what counts. So quality pricing will often end in the number, zero.

Businesses should focus on the perspective of the customer about value – not solely on offering the lowest price in the marketplace.

My definition of marketing: The understanding of your customer for the cost-effective process of selling the right product or service at the right time and at the right price.

Therefore, it’s important to closely monitor your cost structure to generate profits, as well as your customers’ motivating perceptions and the approach of your competitors.

Eight Basic Pricing steps

1. Conduct a full-scale SWOT analysis of your strengths, weaknesses, opportunities and threats.

2. Analyze your marketing strategy, which includes an assessment of your marketplace, targeting and branding.

3. Determine your marketing mix by defining your channels of distribution and campaign maneuvers.

4. Forecast your demand curve by anticipating how your product quantity will fluctuate with the price. Not to oversimplify, consider whether an increase in price decreases your revenue or a decrease in price will increase your revenue.

5. Gauge all your costs – be sure to determine both your fixed and variable costs. Fixed costs, such as office rent payments that remain at the same amount. Variable costs, such as fuel for your vehicles, can change because of gas-station prices or if your vehicle mileage go up or down.

6. Anticipate your marketplace dynamics or environmental factors – whether they are competition or legal considerations, such as government regulations, or impacts from short-term or long-term strategies.

7. Slate your pricing goals. That can include maximizing your profits or stabilizing your prices.

8. Establish your prices, including your methods and structure. Determine the limits of what you’ll offer in discounts.

In addition to the psychology of pricing, you have other choices such as bundling to sell more products; penetration pricing, offering free or loss leaders to launch a new product; variation pricing, like the airlines that sell a flight’s first batch of tickets at the lowest fare; or geographical pricing where the location determines the price.

From the Coach’s Corner, here are related resource links: 

Groupon Will Give You a Migraine for Ignoring Pricing Principles — Whether you’re an investor, small-business advertiser or even a customer, daily deal sites can give you a major headache. Continually, there are red flags about Groupon.

Hottest Tactics to Beat Your Competitors — Effective uses of competitive intelligence are the hottest tactics to beat your competitors. A leading consultant and author, Seena Sharp, explains how.

Think 1930s for Business Success…Consumer Attitudes are Changing — Hyper-consumerism is history. Traditional values with a purpose are in vogue. Traditional values – old-fashioned, if you prefer – describe the new mindset of consumers and what they expect from business.

Case Study: Mistakes Companies Make When Losing Profits — In order to maximize profits, there are several precautions you must take, not just mistake-free pricing.

Secrets to Success in Recessions: Expand Marketing — Businesses are self-destructing when they cut back on marketing in downturns. If evaluated and implemented properly, marketing creates a return on investment in multiple ways. More on that later. Meantime, suffice to say downturns or not, a good marketing approach requires intensity and is based on thought leadership about every facet from social media to internal company communications. And marketing, of course, includes strong public relations.

“Incentives are not strategy, they are tactics. Defensive measures.”
-Carlos Ghosn


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry. 




Seattle business consultant Terry Corbell provides high-performance management services and strategies.