42 kinds of pricing routines, marketers who don’t understand psychology are not good salespeople

A few days ago, I saw an article written by a foreign author Nick Kolenda about using psychological principles to price. I found it very useful, so I asked my students to help translate it. NICK is also the author of the book "Methods of Persuasion", which mainly talks about how to use psychological techniques to influence people's behavior. Unfortunately, there is no Chinese version. If you are interested, you can buy the English version on Amazon .

This article has more than 10,000 words, which may be too long for many people, but it is very useful. If you don’t finish reading it at once, it is recommended that you save it for future reference, or forward it to a friend in need. The following is the main text.

A super list of pricing psychology tips

Whether you're promoting a new product, selling items on eBay, or negotiating a deal on your house, here are 42 tactics you can use to lower your price perceptions.

Step 1: Influence consumer perception

“All knowledge comes from our perception”

--da Vinci

Nothing in this world has inherent meaning. In the end, price is nothing more than a perception.

In this section, I will introduce several tips that can make consumers think your prices are relatively low without changing the essence of the price.

Strategy 1: Use smaller scale to guide

People's memory of prices can be influenced. This tactic can help you achieve a lower perceived price when consumers are comparing prices.

The fuzziness of your brain allows you to do small things to create a lower price perception. How to do it specifically? Here are some helpful tactics.

Tip 1: Subtract 1 from the number to the left of the decimal point

For decades, marketers have been using psychological pricing — ending prices with 9, 99, or 95.

Facts speak louder than words. Let's look at the sales volume corresponding to different pricing of "Gumroad's sales"

Source: Gumroad

At a glance at this table, many people would think that the credit lies with the number 9 in the price. In fact, there is another factor that plays a vital role: the numbers to the left of the decimal point (hereinafter referred to as the left numbers).

In fact, psychological pricing strategy is most effective when the left number changes. A 1-cent price change to the right of the decimal point, such as from $3.80 to $3.79, is insignificant, but a 1-cent change to the left, such as from $3.00 to $2.99, makes a complete difference in the perception of the price.

Why are left digits so important? Because it anchors the perceived magnitude.

The process by which our brains convert numbers is rapid and unconscious, and occurs before we even finish reading the price. Scholars Thomas and Morwitz (2005) explained it this way:

“…when our eyes see the number ‘2’, our brain has already begun to interpret the number ‘2.99’. In this process, 2.99, which is positioned by the left digit 2, looks much lower than 3.00, which is positioned by the left digit 3” (pp. 55).

Advanced tip: You can emphasize the new base (left digits) by visually minimizing the number of digits to the right after the decimal point.

Tip 2: Choose a price with fewer syllables

When encountering stimuli with many syllables, the brain requires more computing resources to process these stimuli. The same principle applies to numbers. If we expend a lot of processing resources trying to understand a number, our brain will mistakenly infer that the number is larger.

You might say, I didn’t read the price out loud when I saw it, I just read it silently to myself.

The result is the same. When you silently read a price in writing, your brain is unconsciously performing the vocalization process (Dehaene, 1992). You don't have to consciously say it aloud - your brain does it in the background.

Still don’t understand?

Coulter found a positive correlation between syllable length and perceived magnitude. Even if two prices have the same number of digits (e.g. $27.82 vs. $28.16), people will perceive the former, which is more difficult to read, as being larger in magnitude than the latter. (Note: This may only apply to the English world, the length of Chinese numeral pronunciation is the same)

Tip 3: Use a smaller font size to indicate the price

Your brain has a general sense of size. Therefore, there is a fuzzy area between a larger visual area and a larger numerical magnitude.

Therefore, when faced with the same price, consumers will think that the one with smaller font is cheaper. (Coulter & Coulter, 2005).

When designing and producing, placing larger elements around the price can further reduce the visual area occupied by the price number through contrast, creating the perception of a lower price.

This principle applies in reverse to discounts. When you want to make a discount number stand out, the bigger the font, the better.

Tip 4: Remove the thousands sign

Research has also found that prices appear lower when thousands separators are removed (eg, $1,499 vs. $1499) (Coulter, Choi, and Monroe, 2012).

How does this work? Although the length is indeed reduced a bit, there is another principle at work. I mentioned it in the previous article, do you remember it?

When the thousands sign is removed, the number of syllables in the pronunciation of the price is also reduced (Note: in the Chinese context, thousands of digits that require cultural conversion are indeed more difficult to recognize than tens, hundreds, thousands, and millions in Chinese)

$1,499: One-thousand four hundred and ninety-nine (10 syllables)

$1499: Fourteen ninety-nine (5 syllables)

Tip 5: Use smaller-scale copy

Be careful when choosing the copy next to the price. Some words can be counterproductive when it comes to price perception.

In this area, Coulter and Coulter (2005) conducted an experiment to test different descriptions of roller skates, some of which emphasized the selling point of low friction and some of which emphasized the selling point of high performance .

Although participants voted the two buy points as equally weighted, they preferred the combination containing “low friction” at the pricing level.

Therefore, if you want to put text around the price number, it is recommended to choose a description that expresses less/smaller amounts. (Low, small, micro, etc.)

Tip 6: Separate Shipping and Handling Fees

For e-commerce , it is recommended to separate shipping costs and handling fees when pricing.

Use “fractional pricing” (i.e. splitting the price into its components) and use the base price rather than the package price to anchor consumers’ price perception, guiding them to compare your base price with the reference price.

Hossain and Morgan tested this theory using eBay auction functionality. The experiment used different bid-sub-pricing combinations of the same CD split:

Some are set with a low starting price that includes shipping costs (eg, starting price $0.01 with shipping costs of $3.99), while others are set with a high starting price that includes free shipping (eg, $4 for free shipping). As a result, the former attracted more bidders and ultimately contributed more profits. Another group of researchers, Clark and Ward (2002), also confirmed this using the Digimon card auction method.

Tip 7: Offer installment payments

Likewise, multiple small installments are more likely to create a perception of a low price than offering a one-time full payment.

Suppose you have an online course that costs $499, you can improve your price competitiveness by paying in installments (5 installments, $99 each). When making decisions, consumers are more inclined to compare the installment amount with the full price of their competitors - this way your price will be quite attractive.

But don't get me wrong, consumers are not stupid, they know that comparing 99 with 500 is not correct.

Fortunately, this doesn't matter. Consumers often compare prices subconsciously. (Muzumdar & Sinha, 2005) So installment payment is still very attractive.

Tip 8: Come up with a daily equivalent price

Continuing with the previous tip, you can convert the price into a daily equivalent (e.g., $0.87/day). This calculation will also make consumers perceive the total price as lower.

Of course, your focus should still be on regular pricing. The daily equivalent price is only supplementary information and serves to guide the perception of lower prices.

Is it a bit difficult to convert your product prices into daily equivalent prices? It doesn't matter. You can use the same principle to convert prices into other common small equivalents, such as a cup of coffee.

Tip 9: High-value prices must be accurate

Thomas, Simon, and Kadiyali analyzed a sample of 27,000 real estate transactions and came up with the following insights:

When prices are more accurate, buyers are willing to pay more. (e.g., $362,978 vs. $350,000).

Is this a negotiation factor? When the seller gives a precise price, the buyer feels that there is less room for bargaining.

This is my guess, but it is not actually the case. The researchers found the real reason: because a smaller magnitude was used as a guide.

Under what circumstances would people use more precise prices? The answer is: when you are dealing with small numbers.

Based on this usage context habit, more precise numbers stimulate their association with small-magnitude values, which in turn affects people's price perception.

Strategy 2: Improve pricing fluency

When choosing a specific price number, cognitive fluency is also a factor that must be taken into consideration.

Cognitive fluency – how easily and quickly we process information.

When information is processed more smoothly, people feel happier. Our brains attribute this pleasant feeling to the information we receive.

Based on this principle, it is also important to improve the fluency of price numbers.

Tip 10: Put low prices on the left

When designing, it is recommended that you place the price to the left (Coulter, 2002).

Sound weird? Let us add some additional explanation.

Research shows that directional indicators are associated with specific concepts. For example, the concept of space "up" often implies good qualities:

Due to the strong association between "up" and "good" in the human context, the concept of "up" in space is designed to stimulate the association of "good". Meier and Robinson (2004) also found that people read positive words at the top of the screen faster and negative words at the bottom of the screen faster.

The same principle applies to numbers. Dehaene, Bossini and Giraux (1991) found that people conceptualize numbers as imaginary horizontal lines, with numbers increasing in size from left to right.

Since the human brain tends to rank smaller numbers to the left, placing the price number further to the left of the artifact can activate the brain to produce a lower price perception. (Coulter, 2002).

But don't rush, and never put all the prices on the left. Only put the prices that match the rules of your brain (for example, lower prices on the left).

On the contrary, higher prices are better placed on the right, which conforms to the brain's implicit rule that the values ​​are larger the further to the right, thus improving the fluency of information .

Finally, we need to pay attention to the direction of this imaginary horizontal line. But we should also note that the numbers also have a vertical direction - the numbers get smaller as they go down. And so on, lower prices can be placed below.

Tip 11: Show customers your price in round numbers

This is a very clever trick. King and Janiszewski (2011) showed volunteers the following pizza posters. The first two offered unlimited toppings—very affordable. However, the survey results showed that people preferred the other two posters.

Why? Because the selected ad shows 2 numbers that multiply to equal the price.

Seems ridiculous, right? Don't worry, this has a psychological basis.

In the network of associations in our brain, there is something called a common algorithmic association:

“…children have long been trained to remember the different associations between common operations and their results. These hard-wired associations are called ‘number facts’ (Baroody 1985). They help children solve simple operations effortlessly as adults.” (King & Janiszewski 2011, pp. 328)

Because of this connection, people can easily find the sum and product when they see two numbers.

When two divisors of the final price appear in an advertisement, consumers can easily calculate the product - the true price. The correctness of this price is confirmed by the brain. This pleasure of having a correct calculation can be confused for a tendency to agree with the price.

Apply this discovery to your product. Wherever the price is displayed, break it down into 2 divisors:

$15: Promotional price of $5, only for 3 days

$120: 4 weekly lessons, 30 minutes each

$500: Get 5 free e-books worth $100

1 Warning: Please use 2, no more, no less, an approximate number of 2. If your price is 12, more divisors will reduce the smoothness of the calculation. The correct solution is to break it down into the sum of two numbers or the product of two numbers.

Tip 12: Use the right amount of “round numbers”

What price is more rounded? For example, the visually more rounded number $100 is more easily perceived in the brain than the less rounded number $98.76.

Can such an option really boost sales? Scholars agree.

Wadhwa and Zhang (2015) found in their study that rounded prices are more effective in impulse purchases because the cognitive process is more fluid. When consumers can understand a price more smoothly, they will think that the price is better.

The opposite is also true. Because consumers need more brain processing to interpret the rounded prices, this type of pricing will be more effective among rational consumers .

In addition to the direct proof, I would like to make an additional explanation.

Even if your buying scenario is based on emotion, you should still avoid ranges with rounded corners (such as 100, 5000). People would consider such higher prices unnatural. (Janiszewski & Uy, 2008).

So under what circumstances can the rounded price be effective? The following principles may help you decide whether to round off or increase the bet

If the purchasing scenario for your product is emotional, zero it.

If your product purchase scenario is rational, add a few cents

Tip 13: Customize Prices Based on Name and Birthday

This tactic may sound strange, but there is incredible research behind it.

Coulter and Grewal (2014) found that consumers were more favorable to prices that contained the same letters (or pronunciation) as their names or birthdays:

“…consumers have a stronger sense of price recognition when the price of an item (fifty-five dollars) includes their initials (Fred) compared to an unrelated price. Similarly, consumers are more likely to recognize and purchase when the digits in the price match the buyer’s birthday (e.g., 49.15 vs. April 15th)”

Behind this is the psychological phenomenon of "implicit arrogance". We are born arrogant. People's positive feelings about themselves make them more favorable to things that are associated with that self - including price numbers that have names or birthdays implied in them.

Some researchers believe that many of people's important decisions are based on this phenomenon. For example, a person named Dennis is more likely to want to be a dentist, and a person named Louis is more likely to want to live on St. Louis Street (Pelham, Mirenberg, & Jones, 2002).

So, if you need a custom quote, put a little effort into including your client’s name or birthday in the price (just peek on your client’s Facebook page).

Tip 14: Display your prices at the right time

Question: Which do you think should be shown first, your product or your price?

To answer this question, Karmarkar, Shiv, and Knutson (2015) conducted an experiment. Each volunteer received $40 to spend on online shopping, and throughout the process the researchers used functional magnetic resonance imaging to analyze their brain activity.

The results showed that the order in which the products/prices appeared determined the criteria for the subjects to make purchasing decisions.

If the product appears first, participants will use product quality as a criterion for purchasing decisions.

When price comes first, consumers place more importance on price

If you are selling luxury goods, you want consumers to pay more attention to the quality of your product rather than the price. Therefore, for expensive items, display the product first and then the price.

Roger Dooley shows a piece of evidence of Tiffany's jewelry. On the official website of this luxury brand, the prices are shown after the jewelry is displayed. Even when the price appears, the area of ​​the price is visually very small - as if the price is not important at all.

Conversely, this tactic also applies to practical products (such as No. 5 batteries, USB drives, flashlights, etc.). When price appears first, consumers are more willing to buy. They are also more willing to use cost-effectiveness as a purchasing criterion.

Tip 15: Mark the price in red for men to see

P uc cinelli et al. (2013) found that men are more willing to buy goods marked with red prices.

“Men tend to be less willing to read advertisements in depth and use price color as a visual heuristic to judge store discounts” (Puccinelli et al., 2013, pp. 121)

Because men are more susceptible to the color of price numbers, when they encounter a red price, they are more likely to make judgments around that price (and only that price):

“…when prices in retail store ads are highlighted with color, people’s consideration of other factors (such as photos, product quality, etc.) is significantly reduced” (Puccinelli et al., 2013, pp. 121)

The red-marked price becomes the center of attention and the only source of information for men to make consumption decisions. More importantly, because men perceived the red price more as a savings, they relied more on that red information source.

Strategy 3: Maximize the consumer’s reference price

The above two strategies help you lower consumers’ perception of price. However, there is another tactic that works in a similar way: raising the price perception of your competitors.

This strategy also has some corresponding tactics.

Tip 16. Set a high and accurate negotiation “starting price”

Due to the price anchoring effect, a high base price can help merchants make profits during price negotiations. (Galinsky & Mussweiler, 2001) This higher base price sets an anchor point to which the final price is drawn.

The key point is that the starting price should not only be high, but also accurate. , Janiszewski and Uy (2008) used a method to test this conclusion:

They prepared three different price tags for a plasma TV ($4,998, $5,000, or $5,012.) and asked consumers to guess the cost price based on the randomly given price tag. When a more precise price is given, the cost guessed by consumers is closer to the pricing range; when the price is more general (5,000), the cost guessed by consumers is much lower than the pricing.

When a price anchor point is more precise, our price perception will not be too far off. Why? It's the imaginary horizon in our brain that's at work. Scholars Thomas and Morwitz (2002) answered this question:

"If price adjustments can be mapped to displacements on an imaginary horizontal line, then the distance along that line will inversely affect the direction of price adjustments. An adjustment of X units on a fine-resolution scale will cover less target distance than an adjustment of the same unit on a coarse-resolution scale." (pp. 121)

This tactic is particularly useful in eBay online auctions. When launching an auction, a relatively high reserve price can often bring higher profits - of course, the price still has a certain rationality. A higher reserve price will lead buyers to make relatively higher bids. (Kamins, Dreze, & Folkes, 2004).

Tip 17: Show consumers a higher “complementary price”

According to the previous tactic, can we increase consumers' perceived price as long as we show them a correspondingly higher price anchor point - even the price of an unrelated product? Would these people be willing to buy your product at a higher price?

Two scholars, Nunes and Boatwright (2004), conducted research on this hypothesis: Nunes and Boatwright (2004). They chose to sell music CDs on a pedestrian walkway in West Palm Beach, and every thirty minutes, they asked neighboring stores to adjust the price of sweatshirts in their windows, either to $10 or $80.

What are the results? As expected. Proximity prices can indeed influence people’s price perception. When the price of the sweatshirt is displayed as a higher 80 yuan, buyers are willing to pay a higher price for the CD.

So, if you buy something on eBay, you might as well casually display the prices of other items for sale, and of course, pick the most expensive ones.

Tip 18: Show consumers any higher number

The anchor principle doesn’t just apply to prices; it applies to any number.

Here is a very special example. Ariely, Loewenstein, and Prelec (2003) conducted an experiment in which they selected a bunch of different products, including wireless keyboards, red wine, chocolate, etc., and asked volunteers whether they were willing to pay the last two digits of their ID cards to buy these products.

After receiving a yes/no response, the researcher further asked about their intended price.

The experimenters found that the volunteers' desired price was positively correlated with the number of their own ID card. The following picture shows the experimental data of the wireless keyboard product:

How can you use this result? You can't just let consumers stare at a big number for a while.

The anchoring effect works subconsciously, and consumers don’t need to be forced to actually look at the numbers. In fact, Adaval and Monroe (2002) tried to make consumers unconsciously notice a higher price number before presenting a price number, and the result was that consumers actually perceived the subsequent price as lower.

To summarize, even if consumers are not aware of your anchor number, you just need to put them in it.

For example, if you run an online store, you can write the total number of buyers in the store before your price number. In this way, when people form their price perception, they will be influenced by the anchoring effect of this larger number, and they will be more willing to accept a higher price.

Tip 19: Increase the price of the previous product

If you were about to release the latest generation of a product, how would you price it relative to its predecessor?

Some companies reduce the price of their previous products so that they gradually fade out of the market. However, this is often a wrong choice.

Baker, Marn, and Zawada (2010) suggest increasing the price of the previous product. By doing this, you raise the reference price in the minds of consumers , thereby raising price expectations for the new generation of products, which also makes the sales performance of the new generation of products more objective.

If you choose to reduce the price of the previous generation product, you are actually taking the initiative to go downhill. Lower previous generation prices make your latest generation products more affordable first.

Tip 20: Sort by price in descending order

If products are displayed in descending order of price, consumers can be influenced to choose a relatively more expensive product.

Suk, Lee, and Lichtenstein (2012) tested this argument in a single bar over an 8-week period (with a sample of 1,195 beers) by randomly changing the order of the products. When they arranged the products in order of price from high to low, they achieved the highest operating profit.

By making this simple adjustment in order, the bar owner earned an average of an extra 0.24 yuan per beer.

But what is the principle?

Reason 1: Anchor Price/Reference Price

When consumers evaluate the prices of a range of items, they use the first price they see as their reference price.

If the initial price is relatively high, consumers will have a higher perception of the price. When consumers use this higher price as a reference, other options begin to look like better deals.

Reason 2: Loss Aversion

As humans, we focus on loss. When we make a choice, we give up the benefits of other choices, which makes us feel painful.

When your price ranking changes, consumers also feel different losses when looking at the product list.

When products are arranged in ascending order of price, every time consumers see a new product, they feel that they have lost the ability to buy the product at a lower price. Therefore, they tend to choose lower-priced products to reduce losses.

But, look at it the other way around. When goods are arranged in descending order of price, consumers feel the loss of better quality every time they see a new product, so they tend to reduce the loss with higher quality products .

But be aware: this assumes that consumers have already associated price with quality . If there is no such association, the effect fails.

Suk, Lee, and Lichtenstein (2012) conducted some follow-up studies (including an experimental study using pens as commodities) and reached the same conclusion. Therefore, this research result should be applicable to most products (such as e-commerce products).

For example, you might be able to increase revenue by sorting your price list from most expensive to least expensive, based on results from numerous A/B tests.

Tip 21: Place price to the right of larger quantities

Suppose you need to sell a set now, which of the following pricing is better?

l 29 yuan 70 pieces

l 70 pieces for 29 yuan

Studies have found that the latter is more effective. (Bagchi & Davis, 2012).

However, there are two prerequisites

Condition 1: The calculation of unit price must be complex

Because the unit price calculation is complicated, consumers must make purchasing decisions rationally. Among them, it is the initial information that guides decision-making.

If the first information is price, consumers will focus on cost

l If the first information is quantity, consumers will focus on benefits.

Condition 2: The quantity must be greater than the price

When the quantity figures are larger, the anchoring effect comes into play and consumers are anchored to the larger quantity and they mistakenly perceive the price as attractive.

Of course, you can only use this tactic when it benefits your product, and its discoverer also has this advice:

“… offering large quantities without understanding what consumers actually want is a risk you take at your own peril. Bigger is not always better. ” (Bagchi & Davis, 2012, pp. 71)

Strategy 4: Strengthen the differentiation from the reference price

The previous strategy is either to guide consumers to form a low perceived price or to increase the perceived price of the reference price.

The following strategy will help you widen the price perception gap between your product and the reference price.

Related information:

Getting Rid of Customer Comparison Shopping Once and for All — Chad Vanags

Pricing Hacks for Ecommerce Stores that Bring in the Dollars — Shane Jones

Tip 22: Add visual contrast to prices

When you actively compare your price to a higher price, consumers will subconsciously assume that their price comparison process has been successfully completed (Urbany, Bearden, & Weilbaker, 1988). They will no longer think about it.

But there's a better way to optimize this comparison.

The flow effect comes into play when you visually differentiate the reference price from your own price (e.g., using a different font color) . Consumers will convert visual distinctions into more significant numerical distinctions. (Coulter and Coulter, 2005).

Not only can font color stimulate the flow effect, but physical distance is also effective. When your price numbers are horizontally far away from the reference price, people perceive the difference as being larger. (Coulter & Norberg, 2009).

Also, don’t forget the font size. When small print is placed next to large print, the price looks lower. (Coulter & Coulter, 2005).

Tip 23: Set up a decoy option

Most of the time, consumers are using the prices of your other products as a reference price. To make this comparison process more effective, you might consider adding a “decoy option.”

There is a lesser-known study you may have heard of. In Predictably Irrational, Ariely (2008) gives the particular example of The Economist, which offers three subscription prices:

Web Only: $59

Magazine only subscription: $125

· Subscribe to the double edition of the online magazine: $125

My first reaction would be to think that the price for “magazine subscription only” was probably a typo. What fool would insist on buying a single magazine edition when he can get a double edition for the same price?

But Ariely spotted an underlying motive. He conducted further experiments to verify this hunch, and the results showed that the existence of the "subscribe to magazine version only" option played a crucial role.

Without this option, people have no way to make accurate comparisons. God knows how much a double-edition subscription to the online magazine costs. Most people choose to subscribe to the online version purely because it is cheaper.

However, the existence of the "magazine only" option forces consumers to do a serious comparison. People can clearly realize the value of the "subscribe to two versions" option. Because of this distraction, more consumers chose to subscribe to the double edition (a more expensive option), which increased the magazine's revenue by 43%.

When different versions of a product are offered, people naturally compare the different versions . You can refer to the example above and add a distractor to guide consumers to choose the more expensive version.

By adding a version of your product that is very similar but inferior to your more expensive product, you can influence the comparison process. Expensive products suddenly seem more attractive.

Step 2: Promote purchases

Even if consumers find your price attractive, they may still hold back and you will have to persuade them.

In this session, we’ll share some psychology tactics that can boost purchases.

You will learn 1) how to reduce the pain of payment for consumers and 2) how to use discounts appropriately.

References:

SaaS Pricing: Features that Make People Upgrade — Jason Shah

8 Psychological Triggers to Optimize Your Pricing Page — Talia Wolf

26 Pricing Page Examples and Best Practices — Talia Wolf

How to Use Urgency to Increase Conversions — David Rosenfeld

How to Increase eCommerce Conversion Rate With Persona lization — Ryan BeMiller

Strategy 5: Ease the pain of payment

We feel that pain every time we buy something. Specifically, this pain is affected by two factors:

The salience of the payment behavior: For example, watching money being taken from your hand is more painful than swiping a card

· Timing of payment behavior: It hurts more when you pay after consumption

Considering the above two points, you can understand why Uber has changed the entire taxi industry.

When taking a traditional taxi, the act of paying is very significant, the meter keeps jumping numbers, adding new pain every minute. When you get off the car, the driver will ask you to pay with cash or card, which is particularly painful.

Uber is different. You can’t see the meter and there is no physical payment. All fees are automatically deducted from your card, so the pain is much less.

Credit card payment is also a way to reduce the pain of payment, but it is not the only way.

Tip 24: Remove the currency symbol

The pain of paying is easily triggered. In fact, putting a dollar sign in front of your price number can remind consumers of the pain of payment and actually make them spend less. (Yang, Kimes, & Sessarego, 2009).

However, don’t go too far and consider the clarity and completeness of your price display before removing the currency symbol.

Most of the time, you need a currency symbol to remind consumers that the number is a price . In this case, don't risk removing it. Only take action when the consumer can clearly know that this is the price . (For example, numbers on a menu)

Tip 25: Charge before spending

If possible, let consumers pay before consumption. Prepayment benefits all participants.

First, you don’t deliver a product or service without compensation. You’re more likely to get paid. Very helpful.

Second, consumers feel happier when using a product or service. When people pay upfront, their attention is focused on the benefits they will enjoy, which reduces the pain of payment. If they’ve already enjoyed your product in advance, the pain of paying will be magnified . (Prelec & Lowenstein, 1998).

This insight is especially effective for monthly positioning. If you charge consumers a monthly fee, it is recommended that you place the monthly payment date at the beginning of the month . (and informed by more forward-looking information)

Avoid sending out statements at the end of the month or summarizing your total expenses for the previous month, as that would only rub salt in the wound.

Tip 26: Offer bundled discounts on indulgent products

To make payment less painful, you might consider doing a bundle discount. When you offer a product set, consumers cannot figure out the specific price of the individual items in the set.

References: Five Ways to Use Psychological Pricing — Arie Shpanya

Ideally, the products you bundle should be enjoyable rather than utilitarian. Because indulgent products can bring more guilt (Khan & Dhar, 2006), bundling discounts reduces that guilt , especially if you give a discount in addition to the purchase.

According to Khan and Dhar (2010):

“…offering discounts on indulgence products provides a more legitimate reason to buy them, with less guilt. However, since there is no guilt associated with buying utilitarian products, discounts are less effective.” (pg. 18)

If you have no choice but to bundle a utilitarian product, promote the enjoyment benefits of that product. Khan and Dhar (2010) found that blender + light bundles sold better when the blender’s use was described for enjoyment purposes (e.g., making cocktails) rather than when its functional use (e.g., making milkshakes) was emphasized.

Tip 27: Don’t associate cheap with expensive

Whenever possible, avoid bundling low-priced items with high-priced items. Because low-priced goods reduce the price perception of high-priced goods.

Brough and Chernev (2012) conducted an experiment where they put a multi-functional gym machine against a one-year gym membership fee. About 51% of people chose the multi-functional gym machine—a fairly even distribution of results.

But when they put the multifunctional fitness device with a free fitness DVD, only 35% of people choose the fitness device - because the DVD reduces the cognitive value of the fitness device.

Tip 28: Turn attention to time-related factors

When describing a product, do not compare it with money, but compare it with a more favorable factor - time.

Mogilner and Aaker (2009) conducted an experiment with a lemon soda stand. They made three billboards showing different points of interest

Time: Take a little time and drink C & D’s lemonade

· Money: Spend a little money and drink C & D’s lemonade

· Neutral: Drink C & D's lemonade

Participants can bid freely within a range of 1-3 based on the billboards they see in front of them.

The result is obvious, the time factor wins: the people who choose the time give twice the price of other prices.

“Because time turns attention to product experience, forcing consumers to establish their own relationship with the product, it stimulates attention and decision-making.” (Mogilner & Aaker, 2009, pg. 1)

When writing copy, please emphasize the good times when consumers use the product. This will not only make your product look more attractive, but it also transfers people's payment pain.

Tips 29: Create a payment medium

Question: What do casino chips and gift cards have in common?

Answer: They can all alleviate the pain of paying.

By creating an independent medium between consumers’ money and payment behavior, you successfully distort the perception of payment behavior . Consumers know they are consuming, but they won't be very painful.

Why? Research has found that with the existence of payment media, people are often too lazy to calculate the information about transaction volume. (Nunes & Park, 2003).

This has a good idea. If a consumer wants to open an account, you can ask him to pre-sale 10 yuan (used to purchase services), and the money can be refunded.

Since you can get a refund, consumers will not hesitate. More importantly, this payment medium will distort consumers' perception of this pre-deposit. Once you enter an independent payment medium, money is no longer like money (and is more willing to spend money)

Tip 30: Avoid money-related expressions

You can express money in other ways, such as "company name + balance" or any other word that can avoid directly suggesting currency.

When using this tactic, you can add a certain proportion at the same time. For example, if the consumer saves 10 yuan, you can get 10% more. (The consumer's account balance is worth 11 yuan)

There are two benefits of adding stored value:

First, and most obvious, you motivate consumers to deposit more money.

Second, you create an unbalanced conversion between the consumer’s money and the value of the account balance. Dreze and Nunes (2004) research proves that the more difficult the consumer calculates the value conversion, the more effective the payment medium is.

"In theory, by improving exposure and experience, even a second natural relationship between the consumer's money (including any currency) and the account balance can be created. In this case, the combined currency exchange rate will lose its effectiveness." (pp. 72)

Tips 31: Emphasize the inherent cost of the product

Consumers will care about the perceived cost in the price (high or low). But they also care whether the price is fair.

Even if the price is low, consumers can still consider it to be an unfair price. Similarly, consumers can also think that your price is high but fair, depending on some factors:

One of the factors is your pricing method. Consider the following two pricing:

· Cost-based pricing: Prices are mainly based on cost factors, such as the cost of raw materials.

· Market-based pricing: Prices are mainly based on supply and demand, such as the degree of competition.

Consumers believe that cost-based pricing is fairer than market-based pricing. (Xia, Monroe, & Cox, 2004). Therefore, you can enhance the sense of price fairness by emphasizing the inherent cost of the product .

“…Consumers don’t know the true cost and profit margins of sellers at all, so it would be of great benefit to properly transparent information about costs and quality. (Xia, Monroe, & Cox, 2004, pp. 9)

Emphasize the top-notch raw materials or other cost-based information that can inspire consumers to empathize with your price.

Tips 32: For similar products, the prices should be fine-tuned to distinguish them

You may have heard of the choice paradox, that is, when faced with more options, it is more difficult for people to choose.

Once a person chooses an option, it means that he loses the benefits provided in other options. And because he hates loss, they delay making a decision - especially in the face of numerous options.

This discovery points to another similar discovery: if the reference items are similar, people are more willing to make choices. (Sagi & Friedland, 2007). If the options are similar, people are willing to choose any option of the same value. This way, loss aversion is relatively low.

But we can ask questions.

In another study, Kim, Novemskey, and Dhar (2012)) selected two team participants to test whether they would buy a pack of gum, each with two options:

· Team 1: Show the same price, for example, they are all 63 points

· Team 2: Show different prices, such as 62 points or 64 points

Excluding some minor results, people are more inclined to choose to offer different prices of gum.

Why is this? Logically speaking, the prices of the first team are the closest, so they should be easier to make choices. not really.

When different chewing gums are set at the same price, consumers will think that chewing gums must be different. On the contrary, increasing the slight difference in prices has enhanced this homogeneous perception. A little weird? Listen to my explanation.

When the two products are priced the same, it is difficult for people to distinguish quickly and are forced to find different distinctions. Therefore, the difference in the product itself becomes more important.

However, when you make a slight distinction between prices, you reduce the consumer's need for further comparison and analysis, and they can intuitively distinguish them through prices. Moreover, because consumers no longer focus on finding the differences between the two products, they will be more homogeneous in their cognition, making it easier to make purchasing choices.

Skill 33: Frequent (small) price increase

The easiest way to control price perception is to show a definite detectable difference. (JND)

Just detect the difference - be able to find different minimum prices.

For example, if your price is 11.99, 12.99 will not change significantly as much as 19.99.

In theory, this view is very intuitive, and people are more likely to notice larger price increases.

In practice, this principle is counterintuitive. When doing business, try to avoid price increases. That is the last move. If you can, you won’t increase.

However, if the price is really up, you will be extremely eager for profit and are unwilling to just increase a little, but will increase significantly.

So what should you do?

If you plan to raise prices in the end, it is recommended to use frequent and low-volume price increases, and don’t wait until the last moment.

By frequent price increases, you also avoid always emphasizing a fixed reference price. If your price has not changed over the years, people will fix your price perception in that range. Once the price increases, people will find out.

Tip 34: Reduce an element next to the price

There are other ways to remind you of changes in prices.

Food vendors know that consumers know prices well, so they often raise prices in disguise by reducing the volume of food.

After reducing the volume, manufacturers can reduce their costs and increase profits. More importantly, the price has been raised in disguise without consumers noticing it.

If you decide to shrink your product, remember to reduce the three dimensions in a comprehensive way - height, width, and length - equal ratio. This makes it more difficult for consumers to detect (Chandon & Ordabayeva, 2009).

Strategy 6: Appropriate use of discounts

Discounts are a very easy way to take off, and some people even suggest that you never give discounts.

This suggestion is too extreme, so of course you can use the discount, just use it right.

Where are error-prone? If the discount is too frequent or the discount is too large, the discount will in turn stimulate consumers to become more price-sensitive , and they will wait for the next discount.

Discounts will also reduce the reference price of your product, resulting in a decrease in future purchases (because your price seems expensive)

Just reduce the number and range of discounts. However, we will still provide some other pricing methods in this link.

References

· Reasonable discount, only three types of The Only 3 Acceptable Pricing Page Discounts — Lincoln Murphy

· Data shows SaaS Discounting Lowers Sales By Over 30 Percent — Patrick Campbell

· The Race You Can't Win — Tim Peter

Tips 35: Follow the “100 Principles”

In the first half, we talk about different contexts that will make consumers have different perceptions of the same price.

The same is true for discounts.

The original intention of providing discounts is to maximize consumers' cognitive prices, and thus make consumers feel very cost-effective.

Taking a mixer that costs 50 yuan as an example, which discount is better? 20% off or 10 yuan off immediately?

Just calculate it and you will know that the same amount has been reduced, but it does produce different perceptions.

So, how to choose a discount? Jonah Berger (2013) suggests that you follow the "100 Rules"

When your price is below 100, show the discount with percentage;

When the price is over 100, show the discount with the actual amount.

In fact, under these two options, you will choose the one with a larger number because the discount seems to be greater.

Tip 36: Find a reason for discounts

To maximize the effect of the discount, give you a reason to make a discount.

For example, the daily low-price store describes the price reduction of suppliers:

"When communicating price cuts, everyday low-priced stores like Walmart will say that we will directly give the supplier's price cut to customers, and in turn, we hope to minimize the negative impact of promotions" (Mazumdar, Raj, & Sinha, 2005, pp. 88)

By giving discount packaging a reason, you emphasize the temporary nature of promotion. Due to the unconventionality of prices, people will not tend to compare them.

Tips 37: Offer easy-to-calculate discounts

In the previous section, I explained why people form smaller perceived values ​​for precise numbers, and merchants can use this principle to enable consumers to form lower price perceptions for larger but precise prices. (Thomas, Simon, and Kadiyali, 2007).

However, when faced with discounts, you will want people to think that your discount is larger. Therefore, using a discount with precise numbers will cause some harm to you. These precise numbers will make your discount look smaller.

In fact, Thomas and Morwitz (2006) found that people think that price differences such as 4.96 and 3.96 would be smaller than price differences of 5 and 4 (just calculate it and they will know that their difference is the same)

To increase your awareness of discounts, it is better to use rounded prices. It's easier for consumers to count.

Tips 38: Promotion at the end of the month

Soster, Gershoff, and Bearden (2014) found evidence of the last dollar effect in the study.

The Last Dollar Effect – Our Payment Pain is positively correlated with a decrease in budget. The less money you have in your pocket, the more painful it is to spend it .

Suppose you have a total budget of 300 this month and buy a movie ticket for 10 yuan, it is the most painful time to spend it at the end of the month because the budget is about to bottom out.

This effect will affect your willingness to pay and your purchase satisfaction. (Soster, Gershoff, & Bearden, 2014). Often when you have a larger budget, you will be more likely to buy things and enjoy them more.

Use this discovery to plan your promotional rhythm. For example, discounts (or price-related promotions) work better at the end of the month - because your buyers are tight on budgets.

Similarly, you can offer a free trial at the beginning of the month – when consumers have a better budget.

“… When merchants want to develop new customers or stimulate reputation, satisfaction with the first trial is very important. Therefore, it is best to set the relevant promotions at the beginning of the month or when the consumer just receives a tax refund to ensure that the buyer has a sufficient budget.” (Soster, Gershoff, & Bearden, 2014, pp. 672-673)

It should be noted that this tactic is based on monthly salary consumers. You still need to consider your own target consumers (and their revenue structure):

“…Consumers will set different psychological budget allocations in different situations. For example, college administrators will be divided according to the academic year, teaching assistants will be divided according to the semester, and college students will be distributed according to the week.” (Soster, Gershoff, & Bearden, 2014, pp. 673)

Please plan your promotional rhythm according to the actual situation.

Tips 39: Put the promotional price to the right of the original price

If you want to put the promotional price next to the original price, it is recommended that you place the position more efficiently:

$25 $19

$19 $25

Which of the above two is more effective? The first one.

Biswas et al., (2013) study found that when the promotional price is located to the right of the original price, consumers feel the promotional range.

Why is this happening? Based on numerical cognition, we can easily calculate the difference value when the smaller number is placed on the right.

The researchers copied this difference effect

They also found that this effect changes perceptions of discounts. When the promotion price is on the right, the difference is easier to calculate - it also increases his perceived size.

But please note: the discount should be moderate. If your discount is particularly high or very low, it is better to put it on the left side of the original price.

“…If the discount price is too high or too low, merchants need to adjust their position to interfere with the difference calculation in the consumer’s mind. Because when consumers calculate, they either think you have an opportunistic tendency (the discount is too small), or they think that there must be something wrong with your product quality (the discount is too large)” (Biswas et al., 2013, pp. 63)

Tip 40: Give discounts only to low-priced products

Discounts are a double-edged sword. When the discount for your product is over, consumers may turn around and go to another house, or they may just wait and see you to give the discount.

But when did such negative effects occur?

The answer depends on your brand positioning – whether it is high quality or low quality (Wathieu, Muthukrishnan, & Bronnenberg, 2004).

When merchants reduce discounts on their premium products, consumer demand will shift to lower-priced products; if discounts on low-priced products are ended, demand will remain the same:

“…For better product quality, high-priced brands are more difficult to choose after discounts are cancelled; but low-quality and low-priced brands will still separate their original pricing from high-priced products after canceling discounts, and will not affect the base of their initial user base.” (Wathieu, Muthukrishnan, & Bronnenberg, 2004, pp. 652)

Price significance is the root cause

“The discount displayed by a brand that does not rely on price guidance (such as luxury goods) is likely to be considered abnormal, highlighting the price…directly leads to consumers’ attention to price information and increases the weight of price attributes in subsequent choices” (Wathieu, Muthukrishnan, & Bronnenberg, 2004, pp. 657)

In other words, if high-priced brands reduce discounts, consumers will still focus on price, and their purchasing decisions will consider more price factors. Because the product itself has been priced higher, consumers' cognitive prices will become higher.

To sum up, if you win by price, there is nothing wrong with using discounts. If you win by quality, you should avoid discounts (reduced cognitive prices) or focus on the quality and value of the product.

Tip 41: End the discount with a gradual decay

Merchants often use two pricing strategies: high/low price strategy and daily low price strategy (set the price below the normal price but higher than the price after its competitors are greatly discounted)

“…Managers often price TVs at 999, reduce prices to 799 during one week of promotion, and return to the original price after one week. Others use the daily low-price strategy to use 919 as a long-term price.” (Tsiros & Hardesty, 2010, pp. 60)

Tsiros and Hardesty (2010) found that another strategy has also worked: gradual reduction of discount strategies. That is, gradually adjusting the price will restore the original price instead of one-time recovery from the discount.

“Our results also support the gradual reduction of discount strategies, where we set the discount price for TVs at 799 and gradually reduce discounts such as 899 to 999.” (Tsiros & Hardesty, 2010, pp. 60)

Researchers found that this strategy favors:

· Better profit margins (Study 1)

· Higher willingness to buy (Study 2)

· Higher arrival rate (Study 2)

The scholars even conducted a live survey. Over 30 weeks, they tested three different strategies with a wine bottle jar worth $24.95 in a kitchenware store.

When using the gradual reduction discount strategy (SDD), consumers are developed to have a higher awareness of future prices and increase their expected regrets (regrets considered before decision making):

“The gradual reduction of discounts sends consumers a signal that prices will be higher in the future, inspiring them to buy now” (Tsiros & Hardesty, 2010, pp. 59)

No adverse effects on the store or brand were found in the study.

Tips 42: Reduce the right number in the promotional price

When the number on the left of your usual price and discount price is the same, the smaller the number on the right (within 5), the larger the discount looks.

The 50-yuan item is more attractive - compared to the 500-yuan item - although its discount net value is consistent. (Tversky & Kahneman, 1981).

The same process is the same when you compare smaller numbers (0-4) with larger numbers (6-10):

"The principle of Weber-Fisher's law is that people tend to compare different values ​​with relative value (promotional prices are also values). For example, 3 is 50% more than 2 and 8 is 14% more than 7, so the price difference between 2 and 3 will appear to be larger than the price difference between 7 and 8, even if the difference is exactly the same. (Coulter & Coulter, 2007, pp. 163)

Therefore, the perceived size of a small number is larger than that of a large number.

Coulter & Coulter, 2007 also conducted some experiments to prove the correctness of the above conclusions. Even though the discount net value is larger, consumers will still feel that it is small.

When the number on the left of your usual price and discount price is the same, the smaller the number on the right, the larger the discount looks.

The last pricing tactic

Finally, I don't want to reiterate the pricing strategy and let's put an end to it with an ultimate tactic, the most important of all.

If you still have a hard time pricing your product - even if you have tried all the tactics mentioned in this article - then you may not be facing a pricing issue, but a question of how to communicate the value of the product.

Rather than adjusting the price, adjust your value proposition. Improve the perceived value of a product or service.

· What is special about the product?

· What's better than competitors?

· Do consumers like it?

Often, you can solve pricing problems by conveying value more effectively.

With this ultimate tactic - and all the psychological pricing strategies mentioned in the previous article - now you can price products more easily and easily