We've talked about choosing the right template, improving conversions, and a dozen other topics, but not too much about the… much talked about pricing. There are strategies on how to choose the right price for your product that you should know about if you plan to succeed (or survive) in any competitive marketplace. Today I've picked 3 best practices (out of a rather impressive collection) about how to set your prices.
1. Too many options = demotivating
According to a research from Yale, if two or more similar items have the same price, consumers are MUCH less likely to buy one than if their prices are even SLIGHTLY different. So, identical price tags for multiple products might not work as smoothly as you hoped initially. For instance, in one experiment, the researchers noticed that 77% of users chose to buy a pack of gum when the prices were 62 and 64 cents. In another experiment, when both packs of gum were priced 63 cents, only 46% chose to buy a pack. QED. Of course, it doesn't mean you have to change all your prices now, it's just that you should keep in mind this aspect: when you have similar products but with different features, try changing the prices slightly. See if it works. Don't forget to let us know.
2. Weber's Law – the “just” noticeable pricing difference
It might sound a bit like… foreign languages, but the Weber’s law (or the Weber–Fechner law) is a principle often applied to marketing, that's why you should do a bit of research on it. Basically, it says that a change in “something” is affected by how big that “something” was beforehand. It's useful when it comes to price increases, where the magic number is somewhere around 10%. Apparently, consumers hardly notice this difference. Or if they notice it, they tend to accept it. Of course, there is also a minority that might complain. However, there are many other variables (supply/demand, reputation, etc.) that can affect pricing. But do take as closer look at Weber's law. Quite an interesting testing guideline.
3. Price anchoring
Anchoring (or focalism) is a common cognitive bias that describes the human tendency to rely too heavily on the first piece of information offered (the anchor) when making decisions. Imagine now a $400 product next to a $6000 product. The 400 looks like a bargain next to the other one. Thus, during decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. There are many places where this is popular (remember the last restaurant menu you browsed through?). In short: placing premium products near standard ones can create a rather clear sense of value.
Any other “favorite” pricing practices you'd like to share?