In The Pricing Of Everything, we took a bottom-up research-based approach to pricing, establishing a starting point with cost-plus, market-levels, and then establishing different ways of putting either a premium or discount on the item.
That’s a good start, but the numbers in your price convey many things to your customer, and it’s important to think about this deeply, what the impact your price might have on your customer at an emotional or psychological level.
1) The Magic Number is 9 or 99.
It’s one of the oldest tricks in the book, to the point where it can sometimes appear to be a little too cliched, but in essence it still works. $199 does seem, at first glance, a lot cheaper than $201, even though it’s less than 1% difference.
Whatever you do, if you have a number that’s a shade above a big round number, try to shave the number to a little bit lower, finishing at 99 if you can.
2) Lucky Numbers.
Some people respond well to lucky numbers. In China, the sound of the number 8 can mean money, and 88 sounds a bit like “make more money”, while the shape of 88 can be seen in the character for happiness. Not surprisingly, prices end in 88 rather than 99 in much of Asia, and it’s 11% cheaper, which also might help!
If you have a lucky number, or you think your customers do, then why not use it. Another great example was a Filipino pizza company that employed a New Year promotion at PHP2017 in 2017 and at PHP2018 in 2018. That way, the new year itself reminded everyone of their promotion.
3) Be Accurate
Accurate numbers are also kind of useful, particularly in expensive, tricky items. Accurate makes it hard to question, because it looks like there’s some science behind it: $4,356 is a hard number to argue with, it looks like it came straight from a calculator. Combine all three for $4,988? We’re nicely below $5,000, a big round number, we’re incorporating some lucky numbers and it sounds kind of accurate too.
4) Bundle it
Put more than one product together, and you’ve got a bundle. If they add up to a lot of value, then perhaps you should charge a lot for them. It might be tempting, but considering that it’s cost you money to get your customer to think about buying (in time and advertising at least), you don’t want to confuse them into thinking they’re getting over-charged. You want to confuse them into thinking they’re being under-charged for a bundle that they might not really have wanted that much in the first place.
5) Goldilocks pricing.
If you have a range of similar products you sell, with more value added at each level, it can be tempting to make the steps logical, with each additional step a clear amount extra. But before you do that, decide which level it is you really want to sell, where you will make the most money, and ensure that the steps around it frame that choice to make it look best value.
- Your cheapest option could have low functionality, and really be only an introductory product.
- Your top option could be crazy expensive, and perhaps contain an amazing product that you don’t actually, really want to sell, like an hour of personal consultation.
- In the middle could be the perfect option, which now, because of the crazy expensive top option above and the bare minimum below could look like really good value to your customers.
This is often called “framing”, as it gives the customer an idea of what something more expensive and less expensive might look like, creating a frame around the thing you really want to sell.
6) Optional extras?
“Do you want fries with that?”
“This model can also come with…”
Optional extras are a great way of adding value to a sale. Once a customer has decided to buy, they are likely to continue adding things, because of their positive momentum. That means they will sometimes add some higher margin products to their basket.
However, even if they add lower margin items, it will all add to your total profitability. After the time, care and advertising budget it took to get your customer buying, raising that profit per customer is better than assuming they don’t want more.
7) For A Limited Time Only…
If you can put some time pressure on your special psychological price, it will create a sense of urgency, reducing the likelihood that your customer is going to go away and think twice (ie, forget!)
“So, while you might be tempted to buy our beginner email course for $4.99, or our personal counselling classes at $2,022 per month, we think our our $19.88 web course is just right for you. Sign up today, and get the email course for free, and a month of counselling for just an additional price of $9.99, a total value of $2,046.87 for just $29.87, a discount of 98.5%!”
Note. If you feel bad about using any of these techniques, thinking they might be a bit sneaky, think again.
If you are offering a service or product that you are really proud of, and that you know your customers will enjoy and benefit from, you’re doing them a favour to encourage them to use it. And to encourage more of them to use more of it.
Use whatever tools you can to ensure your customers get the maximum value from you – and that you capture the optimum value in return, so you can continue to do more of it in the future.
Once you have answered the questions above, we can see how some of those strategies extend into indirect value capture.