I like to think I make rational choices. When I need something, I buy it. I don’t spend too much and I never buy things I don’t need. Never.
I also do not get suckered by silly ploys like: $99 (Hello! That’s $100), or “One-Day Only Sales.
Nevertheless, we humans are completely irrational beings. Even if I want to deny it, the persuasive power of selling is irrefutable. But you can leverage some of the zany, silly and downright crazy psychology behind how and why we spend money and put it to work for you (and your business).
Let’s dive in to three common pricing psychology tricks that are proven to make you more money.
1. Always show three choices
Imagine a quick visit to the drugstore because you ran out of shampoo. There’s a bottle of store brand shampoo that costs 99 cents, a bottle of fancy Frederic Fekkai shampoo for $16 and a bottle of good Garnier Fructis shampoo that costs $7.
Chances are you, like the Goldilocks you are, will pick the Garnier Fructis, a.k.a. the one in the middle.
This phenomenon of three choices — a low-priced option, a medium-priced option and a high-priced one — is a well-known psychological pricing trick. Once you look for it, you will start to see everywhere.
The idea is that budget shoppers will choose the lowest price option. Customers looking for top service will choose the most expensive option and the rest of us will choose…the middle option.
When you offer your customer or client three options, be sure to present them side by side. If you assume that the middle-priced option will be the most frequent purchase, you can even create a “bare bones” cheap option and a “white glove” expensive option (for example, by adding dedicated customer service) to easily create your range.
A quick review of some popular startup startup subscription services will show you that they are all hip to this game. There’s a free version, an expensive VIP version and a “most popular” middle-of-the-road option.
2. Cut the zeroes
Instead of quoting $3,000, try $2,999. Or even, $3,099.
Ever wondered why everything on the Wendy’s dollar menu is either 99 cents or $1.49? The one cent difference actually catalyzes significantly more sales. So dumb, right?
It turns out that customers perceive “odd prices” as significantly lower than they actually are. Moreover, consumers have been trained to think prices ending in nine are indicative of a discount, even when they’re not.
Look, if you can’t beat ‘em, join ‘em.
If you are pricing your services, even if you are a consultant or as a freelancer, you can take advantage of the humanoid aversion to zeroes. Instead of quoting $5,000 for a web design project, try calculating a project fee of a more specific odd number, such as $5,183.
By removing those ugly zeroes and choosing a number that appears carefully calculated (perhaps based on fancy, proprietary algorithm), you will better demonstrate to your potential client that your fee represents real value. As the Freelancers Union tells their members, by creating this type of custom quote, you are showing your client that you’ve taken the time to listen to the needs which indicates better service, and yes, primes your client to pay your new, higher rate.
3. Instead of a discount, give more
At Skillcrush, we used to give coupon codes out all the time. Everyone wants to buy something on sale, and it was a great way to convert people on the fence! But what we learned is that continually eating into your margin by discounting your product is not a winning business strategy. Plus, we worried that discounts were inadvertently causing our customers to devalue our product and take the discount for granted, instead of seeing it as a special benefit.
So, we tried something a little different: instead of discounting the cost of a class or program, we created bonuses, like a free e-book, to incentivize those people on the fence to buy.
The result? Fifty signups in a day!
Not convinced? Let me tell you about a test run by Kiss My Face, the cosmetics company.
The company presented two shampoo bottles of the same quantity: Option A had a label that read “33 percent off” and Option B read “50 percent more free.” Which are you more likely to buy?
Option B, with its 50 percent more free shampoo looks mighty tempting, no?
Before we talk about why it’s so appealing, allow me to confirm what you most likely already selected: both bottles are identical and being sold for the same price. Do the math and you will realize (like I did) that it’s actually exactly the same discount.
But we have a strong preference for getting more for our money, which was confirmed by Roger Dooley, the author of “Brainfluence” who ran the Kiss My Face study. He found a significant difference in preference: when people are presented with Option B, 50 percent more free product, sales increased by 71 percent!
The takeaway: giving more away for free beats a discount by a large margin.
So next time you are tempted to offer a discount, try to flip the paradigm. Instead, brainstorm ways that you can offer your customers more for their money. They get more and you keep your margins. Win-win.