Creating a price for a product is a science. It’s much more than putting a margin on the costs.
Pricing includes in-depth market and competitor research, monitoring trends and using all the advantages of psychological pricing.
Influencing a buyer’s mind to complete the much-wanted purchase works almost the same in-store as it does in the virtual world.
With a “slight” difference.
Ecommerce vendors don’t have the possibility of influencing with taste, scent or persuasion/ suggestion of a salesman; along with the pricing.
There’s no perfume spraying online, or the feel of watching a game on the newest HD resolution, as seen in the store.
To fill that gap, Ecommerce store owners have to work the best they can to create the best product descriptions and focus on every possible psychological tool to create the right pricing, to grasp all of the advantages of psychological pricing available.
What is psychological pricing?
Psychological pricing is the marketing strategy of pricing your products in a way that has a psychological impact on your customers and pushes them towards converting. It’s not about tricks, just about persuasion.
There are many everyday examples that will be familiar to you and most of them can easily be applied to online sales and work just as well as they do in physical stores.
Examples of psychological pricing
The charm pricing model
The most common everyday example is the 99p model, sometimes called the charm model. This is – where retailers price an item at a slightly reduced price such as £4.99 instead of £5, the thinking being that people will see the four first and mentally round the price down to £4 instead of the more accurate price of £5.
You also see this model being used for bigger ticket items. For example, cars being advertised at prices like £5990 instead of £6000.
Even though consumers know about this simple trick, it still works. Works like a charm to be precise.
Limited time offers
Limited time offer is easy enough to organise and it’s a tried and tested marketing strategy. Sometimes referred to as flash sales, the concept here is simple; run an extremely limited time offer and make sure as many people as possible find out about it.
You see this being done a lot on big retail days like Black Friday and it’s a great way to draw the attention of new customers to your business. The psychological aspect is that your customers are made to feel like they have to buy now or risk missing out.
Buy one, get one free
This model offers customers great value and is an excellent way to encourage your customers to try new products in your range.
The psychological aspect is simple; you offer them a great deal in exchange for them trying out the new product. If they like it, they should be happy to pay the total price for it when the deal expires, and you will have found a bunch of new customers for that part of your business. Of course, this model is a great all-around promotion tool and can be applied to any product.
This technique oozes confidence by issuing one simple, bold claim, ‘if you find a lower price, we will match it’.
Before you make this claim, it’s a wise idea to do some market research to make sure your prices are competitive. Still, the beauty of this technique is that it helps create trust between you and your customers as you’re saying, ‘we are so confident that we are offering you the best price that we dare you to find better’, and customers respond well to this. You see this being done increasingly more in supermarkets, as the big traditional names begin to lose out to the cheaper European stores, but it’s a technique that’s been around for years.
Bundle deals are a great way to boost conversions and encourage higher spend values whilst genuinely offering great value to your customers.
The concept is simple; you promote deals on your site that only apply when customers have purchased a certain number of items or hit a spending target. For example, you could offer your customers 10% off when they spend £50 or more or offer them a fifth item for free when they purchase four.
This piece of psychological pricing encourages customers to spend more for greater returns and encourages them to purchase those items they might be on the fence about.
This is another confidence based psychological pricing technique and the complete opposite of the charm model. Prestige pricing is the practice of selling your products at round numbers such as £20 or £100.
Psychological studies have shown that this can encourage customers to convert as round numbers are easier to process, and the confidence shown by pricing your products in this way is a great way to build trust in your brand. You see this when you look at the big, high-end luxury brands. After all, you wouldn’t see a Ferrari on sale for £99,999.
Free delivery and returns
Again, this technique is all about using psychology to build trust. Customers will feel that they are in safe hands if they know that there will be no nasty hidden P&P charges and that they can easily send it back if they’re unhappy.
Some courier companies also offer special deals to businesses that regularly post large quantities of items, so a deal like this doesn’t always have to have a massive impact on your bottom lines.
The beauty of this deal is that it can easily be combined with any of the other psychological pricing techniques we’ve mentioned but, on its own, can still encourage customers to convert.
Advantages of psychological pricing
One of the beauties of psychological pricing is that it doesn’t require any additional technical skills, unlike other conversion rate optimisation techniques. Just make sure you start with a simple goal in mind and use it as a barometer of success going forward.
Easy to promote
Most psychological pricing techniques are elementary and this makes them easy to promote. Nothing catches the eye like a good deal, and in many cases, the psychological pricing will do the marketing for you, which saves you time and effort that you can channel into other things. This also benefits from drawing more attention to specific items in your range.
Everybody loves a good bargain, and good psychological pricing can encourage people to spend more and more frequently. Employing techniques for a limited time is also a great way to see an instant uptick in sales.
Encourages impulse buying
A good deal could be that little bit of encouragement needed to make your customers think ‘oh why not?’ Impulse buying doesn’t have to be a one-off thing either. Convincing a customer to purchase something just once could introduce them to something that becomes a mainstay of their lives and will keep them coming back to your store again and again.
Taking control over pricing
The benefits really do extend to more than just sales. Psychological pricing can add a whole new dimension to your eCommerce business. For example, by taking control of your pricing in this way you can ensure that your items appear further up price comparison lists, on third party websites that promote deals and ensure that you stand above the competition.
The only thing you need to do now is use all the advantages of psychological pricing and start testing it on your Ecommerce website