As much as we buyers hate to admit it, we're emotional creatures, at least when it comes to decision making. We make a decision to buy based on emotional factors first, and afterwards seek rational justification for the decision we've essentially already made. This same principal applies to how we assess your brand's price points as well -- whether you sell products or services.
In developing your pricing strategy, be clear about your target audience and their motivations for buying from you first. Are your customers buying value or prestige when selecting your brand? If you're a value brand, consider selecting a product price point just below one of the most common mental price barriers, which are $10, $20, $50, $100 and $50 increments thereafter. If you're a luxury brand that makes consumers feel good about splurging, consider pricing right at or above these barrier levels.
Consumers tend to group prices according to the number of digits to the left of the decimal point. For example, most consumers see little if any difference between $16.50 and $19.50, and since both have two digits to the left of the decimal and fall beneath the $20 mental price barrier, why not charge the latter? Of course, they will see a difference between $16.50 and $66.50, so use good judgment.
The numbers to the right of the decimal also make an impression. Price points ending in 7 or 9 are seen as discount or limited-time offers. If all of your prices end in 7 or 9, you're seen as a discount brand. If you're not a bargain brand, use this strategy sparingly. Products or services with prices ending in 0 are perceived as higher quality or newer merchandise.
If you're a luxury brand concerned about diluting the integrity of your brand with a discount pricing strategy but are looking for a special offer to drive sales, consider giving something away for free instead (e.g., buy one get one or free shipping). It still makes customers feel as though they've gotten a special deal and will drive sales without devaluing your brand.
If you want customers to focus on the quality of what they're buying versus the money they're spending, remove the dollar signs from your prices and the cents (e.g., 24 versus $24.00). You may notice upscale restaurants or boutiques putting this technique into practice.
High-end brands looking to discount might consider showing buyers both the original and sale prices. Just make sure the difference is easy for consumers to calculate, and ideally position the original price over a mental price barrier and the discount price under it (e.g., Was $100, Now $80). Buyers can quickly calculate the $20 difference.
Leverage these simple psychology-based pricing strategies to drive sales while protecting your brand.
Lori Turner-Wilson is an award-winning columnist and CEO/Founder of RedRover Sales & Marketing in Memphis, TN, www.redrovercompany.com. You can follow RedRover on Twitter (@redrovercompany and @loriturner) and Facebook (facebook.com/redrovercompany).