When it comes to assigning value to a service or product (A.K.A. pricing), it can get pretty tough to stay objective. You want to see something concrete from all of your hard work – after all, it’s hard to keep a business afloat without money coming in. However, overpricing can cause just as many issues as underpricing.
So how do you find that golden number? There are some basic strategies to get you thinking in the right direction, but remember that knowing your audience is just as crucial as the tips we’ve got for you here today. No trick is going to be the answer on its own, and different industries have different standards for what is reasonable in terms of pricing – and what is not.
If you haven’t taken a look at our blog on Target Audiences, go ahead and look it over now, then come back to these tips for finding your own golden number for your service or product!
Use Pricing Psychology to Your Advantage
The value of your offering is essential, and you never want your audience to feel tricked into an offer that lacks substance, but there are strategies that tap into consumer tendencies based on psychological responses that can encourage a consumer on the fence into swinging into a sale.
Avoid whole numbers
There is an interesting phenomenon when it comes to consumers and pricing acceptance. Whole numbers, like $80 or $60 are harder for consumers to accept versus $79.95 etc. Rationally, we can all look at this number, and recognize that it is an insubstantial savings, but the effect that these nominal discounts have on consumer perceptions is documentable. Therefore, setting your prices off by even a single cent can help to push consumers to a sale.
This is a common principle of psychological pricing. Other common tenets are: time constraints, innumeracy, and visual appearances.
Time Constraints
Time constraints give you the benefit of creating a sense of urgency, which in turn moves people from the fence into a buying mode. People don’t want to miss out – especially if it feels valuable and privy to something exclusive.
With Social platforms like Facebook and Instagram, there are even tools you can use to showcase these time limits effectively. If you want to try this out, read up on creating countdown sticker effects with Instagram here.
Innumeracy
Innumeracy is a fun one. This refers to the perception that one ‘deal’ is better than another – even if they’re the same. For example, which is the better deal: Buy one, get one free, or 50% off two items?
According to a study conducted by the University of Minnesota, people predominantly prefer the buy one, get one free offer – even though the two options result in the same savings.
Appearances Matter in Pricing
It is astounding how the visual layout of a number can actually encourage – or discourage – a consumer. But it’s true! Psychologically speaking, visually longer numbers are perceived as being more – regardless of the reality of it. For instance, $19.00 feels larger than 19.
When using the aforementioned 99 or 95 ending versus whole numbers, set the cents smaller than the primary number to give it a visually smaller appearance.
Keep Your Pricing Simple
Listing a series of different prices for various options can put a consumer off or become confusing. Why is this one offered for less? Why is this one more? Instead of offering multiple prices for multiple parts, offer a specific discount code for single-part participants to attend other workshops. Essentially you achieve the same thing, but this way you keep it simple on the user end.
Absorb the Processing Fees
People can be put off by an additional charge versus a flat fee. Often the additional fee isn’t obvious until you’re further into the purchasing process, and seeing a fee pop up at that point can be terribly off-putting – even if the fee is a small amount.
Often prices are bumped up a tad to account for the fee so that the consumer maintains that flat rate payment. This also avoids what is known as goodwill dilution, where the final price differs from the understood offer, and ties back into using psychological pricing techniques to your advantage.
Always Have an Incentive for Next Time
Encouraging consumers to join in on additional offerings and future engagements is an important part of most business models. And there are tried and true ways of helping to ensure that people return -aside from the quality of your offering.
Incentives.
A completion certificate for courses, an opportunity to apply participation to job requirements, an exclusive offer for an additional product or service, etc. are all excellent ways to ensure that your offering is of value to your consumers. In addition, offering discounts for future opportunities is a great way to encourage your base to stay involved, and show that you value their continued support.
Pricing Keynotes
If you are a leader in your industry, offering workshops, or other presentation-based services, offer a free Keynote with incentives for attending the workshops that will follow. It is an opportunity to dangle the carrot, so to speak, and get people interested in what you have to offer without the hurdle of having to pay for something right out of the gate.
No matter the industry, these tips can help guide you down the path of growing your business with some thought and deliberate planning. But there are no shortcuts to the work you have to put in to see results. Quality is always going to be essential right alongside consistency. But finding your audience and then marketing appropriately to them, will make a marked difference in your success rate.
And you don’t have to do it all yourself.
Reach out today and find out how KSR Consulting Group can help.
