The price of your product represents the size of a risk someone is going to take by buying.
Even though we don't realise it we all have psychological triggers that influence our purchasing behaviour, whether we are spending £1 or £1000 so the way things are presented affects our decision-making on whether to buy.
This is why designing the best pricing page or displaying prices in a particular way is key to whether you make a sale.
Here are 6 pricing psychological triggers you can use for win new customers.
The decoy effect is a very powerful psychological pricing trigger that marketing departments use to take advantage of the loopholes in our brain.
Consumers have a noticeable change in preference according to the way choices are presented - when they are given two options, they tend to plump for the first option, even though both options could be virtually the same.
There are also times when using the third option guides them towards a specific choice - which is the option you most want them to purchase.
This is best exemplified by The Economist’s famous pricing page, which advertised $59 for the online version only, $125 for the print version only, and a third option costing $125 for both print and online versions.
According to the decoy effect, the first two options were a no-brainer while the third option presented an easy decision.
By using the decoy effect, companies push customers, who usually tend to buy the cheapest product, towards a more expensive product and by integrating a third (decoy) product, they can increase the preference for the dominating option.
Example: In a cinema, when the price of popcorn was advertised as:
Nearly every person bought the small. When asked why, they said they felt £7 was too expensive.
After employing the decoy effect, a median size “medium” was introduced (its sole purpose being a decoy). The revised prices were now:
Most people bought the large size because they felt it was a reasonable price at only 50p more than the medium.
People tend to rely on the first piece of information they receive so this can be used to good effect with your pricing. Showing, say, an older, higher price will give consumers a sense that they are getting a good deal with the new, lower price.
You could place a much higher priced (but similar) item next to the item that you wish to persuade customers to buy.
The easiest and best way to implement price anchoring is to create a tiered pricing strategy providing different versions of your product or service at different prices. This automatically builds in your anchor prices and allows you to take advantage of the multi-price mindset.
Essentially, you should surround the ideal option with a higher and a lower tier. The higher and lower tier on your pricing page or advertising display effectively function as anchor prices, which then push your customers toward purchasing the middle, desired tier.
Of course, the most price-sensitive customers may choose the cheapest tier and price insensitive customers will choose the higher tier, but letting your prospects know that you've covered all the bases pushes the main group of customers directly to your target tier.
If you don’t want to do that, another potential strategy is to show your competitors’ prices on your pricing page. This gives your customers a frame of reference from which they can evaluate your product, but could risk drawing in competitive options for them to choose from - hopefully you’ll be offering the best value amongst your competitors.
Influential label choices such as "most popular" or "pick of the day" act as pricing anchors – and are a powerful psychological pricing trigger.
People are highly motivated by the thought that they might lose out on something. The less there is of something the more valuable it is perceived to be. To use scarcity in your pricing, eliminate the possibility of future abundance in the minds of your customers.
Setting a time limit on pricing, an “invitation only” event, or a cap on the number of products is a great way to introduce scarcity into your pricing.
Expedia uses scarcity throughout their pricing pages. On the search results page, they display
- The number of people who recently viewed a hotel
- The last time it was booked
- The time left for the deal
This indicates that hotel rooms are selling fast and entices the user to book quickly before losing their "last" chance.
Seasonal or Limited Products are promoted for a short time period and act as a psychological pricing trigger, playing on customers' fear of missing out.
Some examples: A Pumpkin Spice Latte from Starbucks (for Halloween) or A Shamrock MilkShake from McDonald's to celebrate St. Patrick's Day.
Marketing departments use all kinds of psychological triggers to suggest that products (or low prices) might soon be gone, or that someone is trying to keep this product off the market.
They promote deadlines for sales and announce stock shortages to persuade buyers to make a purchase.
Our desire to avoid pain or loss is even stronger than our desire to pursue joy or gain. Studies have shown that losses are twice as powerful psychologically as gains.
This implies that a person who loses £100 suffers pain that is more intense than the joy the person experiences when he or she gains £100. You could use this pricing psychological trigger in your pricing by
- Offering Free Trials: the whole world of free trials is built on the basis of loss aversion. Once a person has been using a product for a while and has become dependent on it, paying for it is the next natural step in order to avoid the loss of the product.
- Messaging: you can focus a customer's attention on the loss they may suffer by not becoming a customer rather than on the gains they may achieve by becoming a customer.
- Timing: a limited time offer with an expiration date on it sets off the loss aversion trigger and converts customers quicker.
The principle of reciprocity means that when someone gives us something we feel compelled to give something back in return, another strong psychological trigger. So, how can you make reciprocity work for you with your pricing?
Offer a free gift
You might not be able to offer something in advance, but you can definitely offer something alongside a purchase. Clinique offers include: spend £40 and get a free gift, or you type in a code to receive a gift with your purchase.
A free spray of perfume in the beauty section of a department store may well encourage a purchase of that perfume later. Food and drink sampling in your local supermarket can have the same effect.
Even if you don’t advertise the gift in advance, slipping samples of other products into a shipped parcel can create the feeling of having received a gift that might earn you a second purchase. The same can be done for over the counter sales.
Content can be a good way for retailers to provide value to potential customers, which, in effect, is giving them a gift.
John Lewis has a style edit - you just type in your sizing and preferences and they suggest clothes that will suit you – with the hope that you will appreciate the advice, like what you see, and make a purchase
Whether it’s a free recipe, a make-up sample or an exclusive celebrity interview, use content as an ethical bribe that makes people feel grateful towards your business.
Commitment, Consistency and Trust
As a retailer, if you can get customers to make a small commitment to your brand (like signing up for your email newsletter), they are more likely to eventually purchase from you.
Another psychological pricing trigger is to attach a “Best Seller” or “Most Popular” label to your products which indicates others have committed, so why don't you? And, of course, offer ratings and reviews like Amazon & countless other retailers, to show proof that by purchasing your product or choosing your service they are in good company.
Pricing pages are also a great place to show testimonials – they indicate that people are happy, content, and satisfied with your products and are an effective way to increase conversions.
It all comes down to trust in the end. Customers need firm assurances that they can trust you before they hand over their credit cards.
Pricing for Profit by Peter Hill 2013
Get the Price Right by Sahaj Kothari, 2015