There are a lot of reasons to be in business. For some it is about autonomy and freedom. Others talk about having a passion for their business area.
But for the majority money plays a part.
So finding ways to optimise the money element of the business seems to make sense for the majority. That being so I’m always amazed that so few have investigated pricing strategies and the psychology behind how people perceive value and what they are prepared to pay.
For example, did you know that people, given a choice of two prices, for exactly the same item will often choose the more expensive?
And why do you think some switched on restaurants don’t use a denomination symbol in from of the price. Or why they round prices up to a full amount with no? For some a price of 15 is far better than 14.95 as they sell more dishes priced 15 than at 14.95. And if they can print the price quite small they sell even more.
And why is it that customers judge a dessert served in a heavy glass dish as tastier than the same one served in a lighter dish?
It seems that customers are perverse and don’t follow the logic we’d often expect.
Research on Price Psychology
A lot is talked about when it comes to pricing strategy. But I hear few facts .. only opinions.
So, I’ve spent some time looking at the research. Search hard enough and there is credible research on most topics.
And to add a twist to this article I’ve turned several pieces of price psychology research into short videos.
I’ll explain something even more interesting about this at the end of this article.
What the font is happening to prices!
Let’s look at why the size of the font used makes a difference. Coulter & Coulter researched this in 2005. Their findings still hold true today.
Why you should partition your prices
Splitting the cost of an item also makes sense in many cases. For example, Amazon displays the item price and then adds the delivery price at the checkout.
This strategy was researched by Moritz, Greenleaf and Johnson. They talk about “partitioned prices” but for most of us that means splitting product and delivery costs.
Have a look at their ideas and see if they could be applied to your business.
Why 2+2 adds up to big profits
We have King and Janiszewski to thank for this one.
It seems that the fact that your customers know that 2+2 =4 means you can persuade them to spend more money with you. The “number facts” allow you to tap into your customers unconscious and nudge them into a purchase.
The rationale for this is in the following video.
Who made the videos?
Earlier in this article I indicated I was keeping something back until the end.
I have a confession to make. I didn’t actually make the videos in this article.
The videos were made by an automated business processing system ….. what most people call a bot.
I’ve been working on ways that businesses can automate necessary, but time consuming and expensive admin tasks, for a while. I’ve come up with a huge number of incredible systems that I’ll talk about in another article. But the most amazing one is this system that uses Artificial Intelligence to produce videos.
More on that another day ... and maybe a few more pricing strategies.