Before anything, here are some facts and stats that help explain why pricing could be the single biggest success enabler for your e-store sales.
- Price is considered the most important factor impacting purchasing decisions in 60% e-commerce sales worldwide, whether it’s smartphones sales, eBooks, or digital marketing and SEO service sales.
- The number is even higher for emerging e-commerce markets.
- Almost 20% of e-commerce traffic is via referrals from price comparison websites.
Is it any wonder, then, that e-store managers are always looking to pick up tricks and hacks that can help them price their products in a manner that psychologically influences shoppers and make them press the ‘add to cart’ button! In this guide, I’ll discuss some psychological pricing practices.
Intelligent Pseudo Price Points
The different pricing points you decide will have a massive impact on the perceived value of your product bundles, and the way in which buyers persuade themselves to go ahead with the purchase.
‘The Economist’ once has a 3 tier offer, offering the Internet only subscription at $59, print only subscription at $125, and a bundle of the two at again $125.
Mathematically, the middle option seems ridiculous. However, the new giant noticed that removing the middle option reduced the number of purchases of the combo product. That’s because the middle option gave a sense of ‘value’ to the combo product, driving sales, and psychologically nudging consumers to become value seekers from bargain hunters.
So, setting up dummy price points in your pricing structure helps bring customers who’re sitting on the fence into the playfield. You might want to watch this YouTube video to learn more about this experiment.
For your e-store, this strategy is useful if you’re dealing with digital products because creating multiple product versions with seemingly incremental value is easy. However, with physical products, you need to think about the increase in SKUs, and that you will have limited control on how you demonstrate the comparative price points for the augmented versions of the base product.
Prices That End With 9
The idea of ‘charm’ pricing is not new, but it works as good as new. And pricing your products at figures that end with a 9 is arguably the most well-known tricks of improving sales by psychological pricing. The applications of this trick are two-folds:
- Pricing at $99 instead of $100 gives a ‘routine’ appeal to the idea of purchase.
- The ‘impression’ of the price can be reduced by a lot more than $1 if the discounted price ends with $1; that’s because viewers see price from left to right, and tend to leave out the last digit, reducing the perception of the value.
In a collaborative experiment conducted by researchers from University of Chicago and MIT, it was found that when the same women’s dress was offered at $34, $39, and $44, most sales were done at the $39 price point.
You might want to read William Poundstone’s Priceless, a book where he analyzed several researched done to quantify the effect of prices that end with a 9. After all the number crunching, he concluded that sales stood to gain by 24% (as compared to pricing at the nearest rounded value) because of this ‘charm’ price.
Weber’s Law Of ‘Noticeable Differences’ Applied To Pricing
Weber’s law, when applied to pricing, states that the ‘just noticeable’ difference between the pricing of two products is directly proportional to the original pricing of the products. So, for a high original price, users are likely to ignore a greater increase as compared to an originally cheaper priced item. Weber has, thankfully, done the number crunching and suggests that 10% is roughly the threshold after which consumers start to respond to the price change. So, if you’re looking to increase the prices of some items, trust the Weber’s law, and:
- Look for originally expensive products for the price increase
- Don’t increase the price by more than 10%
Price anchoring is the psychological phenomena where a buyer depends on an initial price related stimulus to formulate subsequent judgments on the fair value of a product. For instance, you could sell a cool smart-watch with a couple of additional replaceable straps at $249, and also list an inexpensive version with no additional straps, and price it at $199.
For any prospective shopper looking to buy the $199 watch, the deal will become irresistible because the initial perception of the value gets anchored at $249, and foregoing a couple of straps for a potential $50 saving makes customers grab the product priced lower.
Here’s the example we discussed, in actual play.
By foregoing a more premium looking strap, buyers perceive a $100 saving, which makes the Charcoal version of this watch a bestseller.
Start to implement these psychological pricing techniques in your pricing mix, and look to learn more about similar hacks as you go along.