The prices you establish for your products and services significantly impact your competitiveness, profitability, and, ultimately, your success. If you charge too little, you won’t make enough money to cover production costs and overhead such as rent and insurance. If you charge too much, people might buy a similar product from a competitor instead of buying from you. After research, quantitative analysis, and even some trial and error, you will eventually reach a point where you have stable prices that you will attach to each product.
While you can attach a price to a product using a sign or price tag, it’s important to recognize that how you display the price of a product can influence customer buying behavior. Psychologists have conducted a tremendous amount of research on how customers perceive and interpret prices based on how they are displayed and communicated. You can use the results of their research to ensure you’re communicating prices in a way that will maximize sales. Here are 11 research-based pricing tricks you can implement today to increase sales.
1. Use Charm Pricing
You might be aware of “charm pricing,” which is pricing a product at $2.99 instead of $3.00 or $49.99 instead of $50.00. Researchers tell us that when we read a price, we read from left to right. If a price is $2.99, the first digit we read is a “2.” Even though we immediately see “99,” our brains have already associated the price with a “2.” And although we know it’s a trick and that $2.99 and $3.00 are essentially the same price, somehow $2.99 seems less expensive than $3.00, doesn’t it?
2. Reduce the Font Size
While you probably want to use a big sign with big print to advertise promotional prices, consider doing the opposite for products that aren’t on sale. A big font might actually suggest a big price to a customer. To make your prices seem smaller, use a smaller font. Smaller-sized numbers can suggest a smaller price, too.
3. Use Words Close by That Convey ‘Small’ or ‘Low’
Pay attention to the words in a product or other description close to the price. If you can, use diminutive words like “low” or “small” to reinforce a message that your price is low and small.
4. Include Numbers That Multiply Out to the Price
This might be a bit of a stretch, but researchers say if you display numbers that multiply out to the price you’re charging near where you display the price, some customers might feel like your price makes sense and is reasonable. For example, if the price of a product is $15, you might state that it comes in five different colors and three different sizes. Since 5 X 3 = 15, that can lend validity to the price.
5. Drop the Currency Symbol
Take them out if you’re using dollar signs or other currency symbols in your price displays. Customers on the fence about making a purchase might reconsider when reminded by a dollar sign that they are spending real money to make the purchase.
6. Drop the Commas, Too
If you see a product with a price tag of 2,399, you will read this silently to yourself as “two thousand three hundred ninety-nine.” Without the comma, you might read 2399 as “twenty-three ninety-nine.” Which version sounds lower? Probably the one with fewer words and fewer syllables.
7. Create a Higher-Priced Version
If you’re afraid that a specific product’s price might seem a little high, try creating an upgraded version of the product and putting an even more expensive price on it. Your original product’s price might look more reasonable now when compared to the higher-priced version,
8. Use Exact Prices for Big-Ticket Items
Research suggests that people prefer specific prices over round numbers when you’re selling big-ticket items like houses or cars. That means a car priced at $37,835.34 might sell faster than a car priced at $38,000. The more exact price suggests that there was a thought process that went into determining it, which can make it seem more justified and accurate. A round number might be interpreted as a haphazard price — a guess — that’s not based on any logic.
9. Make ‘On Sale’ Numbers Lower
When you put a product on sale, you’re lowering the price. Keep this in mind when you label it. Put the sale price lower or underneath the regular price to emphasize that message. If you can, make each digit in the sales price lower than its counterpart in the regular price. For example, if you have a product that’s 385, make the sales price 274 so that each digit is smaller. Even if you can’t reduce the first digit, try to lower the remaining digits.
10. Express Your Price in Units
Which sounds like a better deal: a gym membership that costs $30 per month or one that only costs $1 a day? Even though nobody is going to use the gym membership every day each month, $1 per day still sounds like a better deal. Where it makes sense, try expressing a price in units such as a “per-day” price.
11. Convert Customer Money to Credits
When you purchase stock photos online, the price of a photo is often shown in “download credits.” If each download credit is worth $2, a photo that costs two download credits might appear less expensive than one that costs $4. If your products lend themselves to this conversion, test out the theory. An extra bonus is the income you might earn from expired download credits — it’s pure profit.
These 11 tricks can help you display and communicate your prices to customers in a way that suggests they are low, valid, and reasonable. When you implement any of these tricks, note when you made the change. Keep track of sales and compare “before” and “after” results to help determine which changes seem to really make a difference to your customers.