Ask any executive about their pricing policies, and you are likely to hear confident, well-reasoned responses that do not take into account how those prices influence consumption – the extent to which customers actually use their purchased goods.
Marketers looking to maximize recurring revenue must employ a pricing strategy that takes consumer psychology into account. This article will present seven psychological pricing strategies as a means of starting off successfully.
Target Market
Pricing decisions shouldn’t be taken lightly by businesses; rather, they require careful calculations, research, and strategy. Pricing has an immediate effect on sales so it’s vital that businesses consider how different price points may resonate with their target markets and potential sales leads.
For instance, if your audience tends to use coupons frequently, offering reduced prices could attract new customers and bring in new business. You could also segment your target market according to demographic or geographic preferences.
Psychological pricing tactics are strategies used to influence customer responses based on subconscious triggers. Charm pricing, for instance, involves taking one cent away from any round dollar price to make it appear cheaper (you may have seen this on many furniture store websites), or odd pricing like $3.99 instead of $4; either can make products appear cheaper. But it is important to remember that some customers may feel pressured into making these purchases so it is wise to test these techniques first before implementing them fully.
Competition
Value-based pricing is one of the most effective strategies for pricing psychology, as it considers customer perceptions over costs to produce your product or service.
Value-based pricing strategies often involve offering discounts or free trials in order to entice new customers. The aim is to craft irresistible offers that compel potential buyers to sign up for your recurring billing service.
Masking the price of your products or services with seasonal offers or advance purchase options is another effective method for value-based pricing; it has been shown to increase sales while decreasing no-shows and cancellations for subscription businesses.
Product or Service Value
Customer value analysis is an essential element in developing pricing strategy. It takes into account all costs associated with your product or service – both financial, time, energy and emotional.
Your product’s value will help determine the most appropriate strategy for offering discounts or loyalty programs. Discounts can increase demand while loyalty programs provide repeat business.
Psychological pricing involves using displays with prices ending in.99 as an attempt at psychological pricing and to encourage customers to view them as bargains. Belleze employs this strategy, offering all products with prices ending in this number as part of their sales tactics and increasing buyer perception that a purchase of that product was an outstanding value.
Dynamic pricing, a flexible method that takes into account supply and demand, can also help your small business. Uber implements it during rainstorms and rush hour – yet small businesses can utilize this strategy too!
Price Potential
In the business of selling products or services to customers, having an in-depth knowledge of how they respond to prices is of utmost importance. Psychological pricing strategies come into play here and may prove extremely valuable.
Psychological pricing techniques aim to induce an unconscious reaction in customers. Common examples include charm sizing (reducing the leftmost digit of a number), odd pricing strategies, bundles and discounts, ceiling prices, BOGO offers and more.
These psychological pricing tactics can be employed to increase sales, raise perceived value, create urgency for purchases, promote one-time sales and more. It’s important to keep in mind that psychological pricing strategies may change over time and should be adjusted as necessary to meet your business needs. This is especially relevant if your eCommerce platform allows instant modification of prices (like BlueCart Digital Storefront ). In this way, variations can quickly be tested out to see which ones bring about more conversions, with BlueCart’s dashboard offering real time feedback of their impact on your bottom line!
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