What’s the best price for your products?
Choosing the right price for your product can make you get a headache.
Pick a low price and you’ll earn too little from your sales, pick a high price and you’ll sell only a few products.
Well, to tell the truth, it’s even more complex than this.
For example, do you know that having a single price instead of a few pricing plans will make you lose money?
Do you know that having a free plan will make you lose money?
And more important, do you want to increase your income?
The following infographic will show you 7 of the best pricing strategies that will make your sales go up.
1. Decoy Pricing
The Economist was offering 3 types of subscription: web ($59), print ($125) and print+web ($125).
Dan Ariely was curious about this kind of pricing plan so he conducted a study offering these 3 plans to 100 MIT students.
It’s interesting to notice that 84% of the students took the print+web subscription and the remaining students took the web subscription; no one took the print only subscription.
Dan deleted the print only subscription and repeated the experiment with other 100 MIT students. This time the majority of the students took the web only subscription (68%).
The middle option was a decoy: it was a less attractive version of the last option (print+web) with the result of making people think the last option was a great deal.
When you add a less attractive version of one of your options, people will compare the two. Of course, if the two options have a similar prices (or the same price) people will consider the best option as a good deal.
You can hear Dan speaking about this concepts here in his TED talk (starting at 11:10, but all the speech deserve to be watched):
2. No Dollar Sign
A study was conducted at St. Andrews, the restaurant at the Culinary Institute of America, in Hyde Park, New York.
Researchers decided to test the price format on the menu.
They tested three formats: dollars and cents numerical format with a dollar sign ($00.00), numerical format without a dollar sign (00.), and scripted prices (zero dollars).
The scripted prices and the “normal” formats didn’t show significant differences while the number only format showed an increase in sales.
In other studies has been showed that payments trigger pain and the pain has been associated with the money signs over time too. It seems like removing the money sign can reduce the pain due to payments.
3. The Magic 9
In many studies has been showed that price ending in 9 can increase sales.
One of these experiments has been conducted by University of Chicago and MIT.
Three versions of a catalog were made. Each of the catalog included a different price for the same women’s clothing item: $34, $39 and $44.
The result was really interesting: more items were sold at the price of $39 than at either of the two other prices.
Some researchers explain this by the fact that prices ending in 9 has been part of discounted prices for a long time, so they have been included in the subconscious by people who currently see price ending in 9 as good deals at an irrational level.
4. Size Matters
Marketing professors at Clark University and University of Connecticut found that consumers perceive sale prices to be a better value when the price is written in a small font rather than in a large, bold typefaces.
The explanation is that in our minds, physical magnitude is related to numerical magnitude.
It’s the exact contrary of what many marketers do: they write discounted prices with a bigger typefaces than the original, while they should do the opposite thing.
William Poundstone, in his book Priceless: The Myth of Fair Value report an experiment in which researchers invited real estate experts and undergraduate students to appraise a home for sale.
Both students and real estate experts were divided in 4 groups. Each group received a different listed price for the house.
Both students and real estate experts made different evaluations based on the listed price: the higher was the listed price, the higher they appraised the house.
6. Delete Free Plan
Ruben Gamez, was offering both free and paid plan for his product.
Only 1% of the users was taking the paid plan and of the remaining 99%, only the 0,8% was upgrading.
He deleted the free plan and as a results he got a 8x increase in the number of paid users (which is a 800% increase!).
At the end of the month he even reached a 10x increase in the number of paid users.
Researchers run a few tests about beer pricing and they got some interesting results.
At first they gave people two options: a bargain beer at $1,80 and a premium beer at $2,50.
80% of the people took the premium beer.
Then researchers introduced a third beer a run another test offering: a super bargain beer ($1,60), the bargain beer at $1,80 and the premium beer at $2,50.
This time 80% of the people took the bargain beer, and the remaining people took the premium beer – no one took the super bargain beer.
In the end, they run another test replacing the super bargain beer with a super premium beer at $3,40. This time 85% of the people took the premium beer, 5% took the bargain beer and 10% took the super premium beer.
The conclusions were that:
- when you offer three options most of the people will take the middle one
- certain people will take the most expensive options, no matter the price
Be smart about your pricing strategies: they can seriously increase your sales.
Applying just one of these pricing strategies may have a big impact on your sales, so try to put them in action.
If you liked this post, feel free to embed the infographic on your website giving credits to this post as the original souce. Thank you!