Pricing strategy is difficult, complicated, and there are no shortcuts. The fact of the matter is that you will generate a substantial amount of revenue if you optimize your pricing approach and do not just rely on intuition and armchair analysis. This may seem self-evident, yet organizations seldom devote significant resources to determining the appropriate pricing strategy.
This article will give you the tips you need to create a sound pricing plan for your company.
Anchoring the Price
As the adage goes, the fastest way to sell a $4,000 watch is to place it next to an $8,000 watch. But why is that? Anchoring is a typical psychological phenomenon that is to blame. When making judgments, putting premium items and services alongside regular choices may help potential clients see the value more clearly, since the less expensive options may appear to be a bargain in contrast.
One of the ancient strategies is to end the price with the digit nine, and it works like a wonder. For instance, suppose the customers were offered the following options.
- “It was $60 before, but now it is only $64!”
- “It was $60 before, but now it is only $69!”
Although it was more costly, the product with the price tag ending in nine outsold the one ending in four. Pricing with nines appears to be an old trick, but it still works.
When done incorrectly, boasting about low costs might translate into low sales. Competitive pricing might have unforeseen consequences if there is no explanation for why prices should be compared. Customers may lose faith in your advertising if you ask them to make explicit pricing comparisons between your product and a competitor’s. The very fact that we invited them to draw a comparison will make them suspicious and they might feel they are being misled.
Keep It Simple
Prices with more digits appear to customers to be much higher. For example, can you make out the difference of perception in price tags mentioned below?
The top price appeared to be significantly more expensive than the second. This impact occurs even when the number is internally assessed or not uttered loudly. As odd as it may appear, the inference is comparable to editing prose — avoid any needless embellishments and choose the most uncomplicated style possible.
For a successful marketing and financial strategy, managers can opt to take courses to help them develop the techniques and roadmap to execute a successful pricing strategy.
The bottom line is that there should be a purpose behind the pricing of your products and services. Pricing should be ever-evolving and should be influenced by discussion, scrutiny, and, most importantly, customer input. That is precisely what we should be targeting while designing our pricing strategy.