Pricing is one of the simplest and one of the most complex tasks that business leaders face. To drive consumer engagement and increase sales, leaders need to be careful to price their goods and services perfectly — not too high and not too low. When pricing is not just right, businesses could underperform and struggle to compete in their markets.
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Business leaders can take all manner of courses to learn more about the cutting-edge strategies employed in strategic pricing. Digital marketing courses that equip leaders with the knowledge and skills necessary to understand data and improve ROI may ultimately help leaders make smarter pricing decisions. In the meantime, the following quick and simple pricing tricks might help leaders improve sales performance and keep businesses afloat:
Anchor Prices Against Undesirable Option
The anchoring bias is a tricky tool to use in pricing, but when employed properly, it can effectively drive sales. People affected by the anchoring bias rely heavily on the first information they encounter. For example, a car buyer seeing a particular vehicle available for $40,000 is unlikely to accept any price higher than that in the final offer.
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Fortunately, businesses can use the anchoring bias to their advantage. Leaders hoping to drive sales to a popular product might place the price of that product adjacent to the higher price of an inferior option. Then, consumers will frame their buying decision against information about an undesirable purchase.
Remove the Currency Symbol
In instances when it is clear that a number represents a price, businesses might opt to remove the currency symbol. Some business experts suggest that the brain associates currency symbols with stress, even pain, and though clear evidence of this relationship is lacking, leaders might consider dropping the currency symbols on their pricing, just in case.
Eliminate Unnecessary Characters
The human brain can easily become overwhelmed with information, and when most people feel overwhelmed during shopping, they will give up without completing a sale. Business leaders should strive to reduce information inputs during the buying process, which will make consumer decision-making faster and easier. Some information that is easy to eliminate in prices include punctuation and unnecessary digits — consider: $2,000.00 vs $2000.
Keep Price Positions Low
Keeping prices low may or may not be an effective pricing strategy for a business, but keeping those prices physically lower in location on a price tag may be a useful technique to drive sales. Many aspects of a product’s location can impact how consumers perceive its value, and some pricing experts suggest that prices placed lower appear less significant to buyers.
Make Prices Look Small
In addition to the location of the price, business leaders should consider the physical size of the price. When the price of a product appears large and dominant on a tag, many consumers will unconsciously assume that the price is too much. By relegating the price to an insignificant position on the tag and by shrinking the size of the price, businesses are sending the message that consumers do not need to worry about such a small figure.
Consider the First Digit
One of the most interesting and most well-known studies on pricing found that the left-most digit plays a critical role in informing consumers of prices. In the study, researchers offered participants a choice between two pens; one group could choose between a $1.99 pen and a $4 pen, while the other group chose between a $2 pen and a $3.99 pen. In the first group, only 18 percent of participants chose the higher-priced pen, but in the second group, nearly half of participants opted for the more expensive pen. Even though the true difference between the prices was negligible, the leading left digit affected how buyers understood the prices. Therefore, leaders might consider reducing the price slightly to make that leading left digit smaller.
Divide Prices Into Smaller Amounts
When prices are high, businesses might see greater sales success by dividing those prices into smaller, more manageable amounts. By offering some form of financing or subscription model, businesses can reduce the appearance of the cost. When prices seem lower, more consumers are likely to convert.
Show Options in Decreasing Order
Some companies offer different tiers of products or services, giving customers greater flexibility in which features they can take advantage of and in how much they expect to pay. However, businesses should be careful in how they present the prices of different tiers. Generally, experts advise placing options in decreasing order of price, which helps anchor their perspective against the most valuable option instead of the least valuable one. Consumers will be less likely to balk the price of the highest tier when they encounter it first.
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Leaders should constantly be on the hunt for new strategies to improve pricing. Through formal education as well as trial and error, business leaders can identify the best pricing strategies for their business.