When buying a product, what is the most important determinant of your purchasing decision? Is it quality? Features? Durability? Pricing strategy
For most customers (and because of that, marketers), the most important factor is pricing.
As marketers, it’s important for us to take a good look at all the factors that affect a customer’s purchasing decision — including the psychological factors behind it.
Why is it important you ask?
By understanding the reasoning behind a customer’s purchasing decision, we will be able to trick, or shall I say apply clever strategies that will appeal to the customer’s emotional — rather than rational — response to prices.
This will allow us to entice our customers to spend more money on our products, and make them feel good doing it. This clever and highly impactful “trick” is known as psychological pricing strategy.
Today, we’re going to discuss 5 different pricing strategies that you can apply to your own business so you can make more profit (and make your customers feel good while doing it!)
Odd-even Pricing
Ever seen a price tag ending with odd numbers like $1.99 or $99? Have you ever wondered why they don’t just round it up to $2 and $100?
This approach is called odd-even pricing. This strategy is based on how most people would read things from the left to the right. This means we will focus more on the first digit on the price tag, and will usually overlook the last few digits.
As a result, we will think that the price is cheaper than it really is. And that is how your favorite stores can “trick” you into buying their products. Clever, huh?
Decoy Pricing
When you ordered coffee at Starbucks, which cup size did you usually choose? And why? I’m asking you because their classic three-tiered cup size structure is the perfect example of our second psychological pricing strategy — the decoy pricing.
This strategy aims to change your perception between any 2 products by adding a third “decoy” product.
The decoy strategy will make the Tall and Grande option at Starbucks seem overpriced, therefore making the Venti option seem like the best deal. When in reality, this is simply the option that will profit Starbucks the most. Isn’t that brilliant?
So, which one do you think is the decoy product between these 3? (You can check whether your answer is correct by scrolling to the end of this article)
Limited-Time Offer
Are you familiar with the term FOMO (Fear of Missing Out)? This sense of urgency and unwillingness to be left out is something that many businesses like to play into — because it works!
The trick with this strategy is to mention a specific time limit to your offer. For example, “Last chance to save $20 on your next purchase”, or “50% off, today only!”
Black Friday is one of the best examples of how powerful this strategy is. The threat of limited time and supply makes customers go crazy with the desire to get their hands on whatever discounted products they can — even products that they don’t actually need at all.
Have you ever fallen prey to this ingenious strategy? (No need to feel ashamed, I’ve been there too!)
Buy One Get One (BOGO)
People LOVE getting freebies (me most of all). This is why the buy one get one pricing strategy works so well. It encourages us to purchase one product for a full price while receiving another for free. Isn’t that such as a steal?
The psychological strategy at work here is simply greed. Here, the consumers’ main focus is on what they are getting for free — not the product they have to pay for.
If you think that this strategy doesn’t profit the business owners, you’re sorely mistaken. This strategy benefits businesses by helping them get rid of less desirable inventory quicker, while still getting profit. Win-win!
Bundle Pricing
When you go to McDonald’s, do you prefer to purchase a bundled meal (Burger + Fries + Coke) or buy them separately? Yep, a bundled meal is what I’d choose too, and there’s a reason for that.
People tend to gravitate towards bundled products because it creates an enticing sense of value and simplifies their shopping experience.
What most people don’t realize is that — just like the Starbucks decoy pricing — this strategy tricks us into making a decision that benefits the company the most. Which I find really smart and beneficial as a marketer, but kinda annoying as a customer.
Now that you’re aware of the importance psychology plays in marketing and pricing strategy, it’s time to apply it to your own business. Need help creating compelling copy to promote your products? We can help! Reach out to us today!
P.S. If you guessed Grande, congratulations! Buy yourself a cup of coffee from Starbucks 😉
