Pricing Psychology: Don’t Make These Pricing Mistakes
All right, what the heck is pricing psychology? More importantly, why does it matter to your online business? I’m so dang glad you asked!
You should be using pricing psychology in your online business!
So I want you to think about the last time you went into a store to buy a shirt. Maybe it was Target or Kohl’s or Nordstrom or some crazy cute boutique in your neighborhood. No matter where you were shopping, odds are you saw things like:
- Buy One, Get One Free
- Was $35.00 now $20.98 (40% off)
- $19.99 (compare to $32.99)
So…did you just find good sales that day? Nope. Stores of every type, shape, and size use pricing psychology to encourage every person who visits their location to leave with a bag of merchandise in hand. And so should your online business.
Now when I started out, I didn’t nail how to price things right away. I mean, I knew that consumers view $9.95 as less than $10.00, right? But what I didn’t get was that to my customers, there was almost no difference in their minds between $9.95 and $9.99.
But I was pricing at $9.95.
Which meant I was essentially losing 4 cents on every single sale.
It’s okay to think that 4 cents aren’t exactly going to make or break my business—or yours. And if you sold one product, you’re completely correct: that 4 cents really isn’t anything to write home about.
But what if you sold 100 products?
What if you sold 1000?
What if you sold 10,000?
That 4 cents becomes $4. Then $40. Then $400.
And what if, on those same products, your shipping wasn’t $2.95…but $2.99.
Suddenly, those numbers double.
How do I know?
Because that’s exactly what happened to me. I learned the old adage is true: when you take care of the pennies, the dollars take care of themselves.
But getting BIGGER isn’t always the answer. SMALLER can also work wonders.
One thing I’m a fan of is showing the full retail price (MSRP) of a product that’s similar to what I’m selling and compare it to the price I’m selling it for.
Again, think about that shirt you were looking at buying in the scenario above. If you can get pretty much the exact same thing for $13 less…isn’t that the one you’re going to buy?
Well, pretty much everyone on my street would say “Heck yes! Give me the deal!”
I’m not talking about making up a price so that you can say yours is a crazy amount less. I mean showing an honest-to-goodness comparison AND showing how yours offers greater value.
Now, there are a lot of elements to pricing your products properly (that’s a heck of a lot of alliteration, right?) In other words, figuring out pricing psychology.
That’s why I put together my tried-and-true list of pricing psychology tips that can help you avoid pricing mistakes in your e-commerce business.
- Look for that .99 sweet spot. I mentioned earlier how much more revenue I made when I added 4 cents to a price, right? Well…you can also make more money by simply dropping 1 cent OFF a price. For example, you’ll get a way higher conversion rate if you sell a product for $2.99 instead of $3.00. Yes, it’s kinda nuts…BUT IT WORKS. Seriously. Write it down.
- Size matters. Font size, people! Font size. When you have a ginormous font on your website it often leads visitors to equate it with ginormous pricing. Use a smaller font to display your product price—especially if it’s something that is higher quality or that might be something a bit more expensive.
- Oh my word! Listen, the words you use in your product description build a picture in your customer’s mind. That’s why it’s so important to choose the right ones because they can inadvertently lead someone to think your product is more expensive than it actually is. Here’s what I mean: If I use the word “big” or “bigger” in my product description, no matter what price put on it, people are going to naturally think that the price is larger. It’s the way our brains think. BUT if I use words like “low maintenance” or similar phrases in my description, customers equate it to a lower price. Does it sound weird? Yes. But it works.
- BOGO buys. Seriously—people love getting free stuff. So when you offer a buy one, get one free deal they’re often likely to purchase something they might not have considered before. Our minds see it as a great deal, even if we have to pay a couple of dollars in shipping.
- “That’s about the cost of….” Have you ever heard ads that say something costs just 5 bucks a day or about the price of a cup of coffee? There is a REASON advertising people do it. Because it works. Someone may get all crazy at the idea of paying $19.99 for something, but when you say it’s just 66 cents a day? Oh heck yeah—they can afford that! It’s the same reason car companies don’t blast out that the SUV you’re eyeballing is $57,000. We’d all have heart attacks. But when they let us know we can have it for just $450 a month…well, where do we sign, Karen?
- Highlight quality. If you have a beautiful, high-quality item, show it off. Share why it’s amazing and why that quality is something your customers not only want—but NEED. Then talk price. BUT if you’re selling something super inexpensive, lead with the price first. It’s all about capturing attention for the right reason.
- Put a higher number closer to the price. This is practically a Jedi mind trick, so prepare yourself. Suppose you’re shopping for something online and you see a product that looks interesting. It’s priced at $9.99, but next to it there’s a big callout that says 150 happy reviews! Which number do you see first? The bigger one, right? And then you look at the price (way less than 150) and you think “wow—great deal!”
- Go for the strike. Display the MSRP (manufacturer’s suggested retail price) next to the price you’re offering the item for…but here’s the secret: put a line through it. It draws attention and demonstrates why they’re gonna want to snag your product at a great price.
- Do you use a percentage off or a dollar amount off? This is a huge question I get asked a lot, so I’m excited to share my answer. Here’s the scenario: you are selling a purse for $30 and as a special event you want to take 20% off. You can either say “get $6 off” or “save 20%” and the final price will be exactly the same. But in the mind of your customer, 20% seems like a way bigger discount. But what happens if that purse is $250? In that case, you’ll want to say “get $50 off” instead of “save 20%” because that fifty bucks looks a whole lot bigger. My rule is if it’s OVER $100, it’s all about the $$. If it’s UNDER $100, use the percentage.
Want to get a print out of my handy-dandy list of my pricing psychology tips? Just click the link and it will be delivered to you via Facebook Messenger. My pricing tips will be all yours. (And of course, it’s priced right at just FREE-99!)