Why would consumers view a $39 dress as a better deal than a $44 dress, or consider an e-book that costs $9 to be more expensive than an e-book priced at 9 dollars? The answer lies in pricing psychology. Basically, what the science of pricing tells us is that consumers don’t always follow the logical path of purchasing the best bargain on the market.
You can use the nuances of pricing psychology to your advantage when selling your own products, whether that be having the consumer buy a more expensive version of the product, or simply buy more (and more frequently). Here are five pricing experiments that reveal the intriguing and often irrational world of consumer purchasing behavior:
1. Feature the more expensive “bargain.”
How do you get consumers to buy your more expensive option? Make it look like a veritable bargain in comparison to all the other options.
Economist Dan Ariely reports that The Economist once offered its readers three subscription options:
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- a Web-only subscription to the magazine for $59
- a print-only subscription for $125
- a Web + print subscription for $125.
When Dan couldn’t get The Economist to explain why it was offering the seemingly useless print-only subscription option, he asked 100 students to pick the option they would buy.
Of Dan’s 100 students, 16% chose the Web-only subscription and a whopping 84% chose the Web and print subscription. No one wanted the print-only subscription.
When Dan removed the “useless” print-only subscription option and again asked his students to make a purchasing decision, 68% chose the Web-only subscription and 32% chose the Web and print subscription. If those 100 students had been consumers, that shift in purchasing would’ve resulted in a revenue loss of $11,444 – $8012 = $3,432, and based solely on removing an option no one wanted anyway.
2. Use the power of 9.
$39 is much, much cheaper than $34. Really.
In a published study by the University of Chicago and MIT, three similarly-sized consumer groups were sent catalogs that priced clothing items at three different prices. For example, in one case, a clothing item was priced at $39, $44 and $34. Interestingly, both the number of sales and average sales volume of the $39 item outpaced those of the $44 and $34 items.
In another experiment published by the same schools, clothing items were priced at different dollar increments ranging from $0 to $9. A $9.50 ending price point was also tested. Consumers (139 of them) overwhelmingly chose items that ended at the $9 price point. Even when the items were shuffled around or substituted with other like items (to control for simple product preference), the $9 price point was still preferred above all other prices.
So, if you’re going to sell anything, make sure its price ends in 9.
3. Don’t read the fine print.
If you want to make the price of your sale item seem like a good deal, make its sale price font as small as possible.
That’s the conclusion published by researchers at Clark University and University of Connecticut. These researchers tested different size price fonts on university test subjects; for example, a sale item was priced as follows:
Now only $10
When the font of the sale price was made smaller than its corresponding full price, test subjects viewed the reduced price favorably and noted that they would buy the item based on its bargain price.
The researchers then switched up the fonts to emphasize the sale price and used larger font for the bargain item, as follows:
Now only $10
When the fonts were reversed, study respondents were less likely to view the $10 price as a good deal. In other words, the font size of the price made a direct impact on perceived cost of the item.
4. Anchor your higher price.
People are much more likely to think a product is worth more if there is a higher base or ‘anchor’ price set on it.
A classic example of this is a University of Arizona study conducted on students as well as real estate agents who were asked to appraise real estate properties. In this case, the properties were assigned manipulated listing prices that ranged by as much as $30,000.
Both the students, and even the experts, appraised the properties listed at higher listing prices as being higher in final value. In some cases, the difference between the property listing price and appraised price was just a few thousand dollars.
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5. Lose the free lunch.
Ruben Gamez of Bidsketch has written extensively about how offering free products just doesn’t work. When Ruben first launched his software, he offered both free and paid versions of it on his website. The free version users were eventually offered the chance to upgrade to a paid version of the software.
Using this scenario, Ruben saw only 1% of users purchase his paid software plan and another 0.8% of his free user accounts upgrade to paid. In Ruben’s own words, “my user base was growing fast but the money was barely trickling in.”
Ruben decided to kill his free plan and see what happened. The result? Sales of Ruben’s paid software plan increased 8X or 800%. Throughout the first month of his no free plan strategy, Ruben saw a 10X increase in paid conversions of his software.
Making pricing psychology work for you
Setting a price on a product or service is as much a subjective exercise as a rational one. And there’s no reason why you shouldn’t use consumer purchasing nuances to your advantage when setting your prices. Doing so can help you make more revenue- and thus profit- per purchase. It can also help ‘nudge’ consumers towards the purchase that you want them to make.