Price Psychology and Online Marketing

Summary

In this video, the speaker explores five psychological pricing techniques that can make your prices more appealing. These include ego pricing, where prices are matched to customers' birthdays; the comma effect, where prices with commas seem higher; the relative size effect, suggesting smaller sale prices lead to greater purchase likelihood; consolidated surcharges, which recommend combining multiple fees into one; and the descending order effect, where listing higher prices first encourages customers to choose more expensive options. These strategies are backed by research and can help boost sales and marketing efforts.

Takeaways

• 😀 Ego pricing can increase purchase likelihood by matching product prices to a person's birthday. For example, a pasta dinner priced at $39.15 was 23% more likely to be purchased if it matched someone's birthday.
• 😀 The comma effect: Prices with commas (e.g., $1,342) are perceived as significantly higher (by about 11%) compared to the same price written without commas (e.g., $1342).
• 😀 The 'relative size effect' suggests that showing a sale price in smaller font makes it seem smaller in comparison to the original price, increasing purchase likelihood.
• 😀 Consolidating surcharges (such as taxes and shipping) into one lump sum instead of listing them separately can make the overall cost seem less intimidating.
• 😀 The descending order effect: When products (like beers) are listed from most to least expensive, consumers tend to choose more expensive options, leading to higher sales.
• 😀 People are influenced by price presentation. A higher initial price can nudge customers towards spending more when placed at the top of a list, even if they end up choosing cheaper options.
• 😀 Research shows that the way prices are presented in relative terms can significantly affect consumer decision-making and spending behavior.
• 😀 Price psychology strategies can be effectively applied to both physical and online retail settings to optimize pricing and increase sales.
• 😀 Small psychological tweaks in price presentation, such as font size and order, can have a big impact on perceived value and consumer decisions.
• 😀 Implementing these pricing strategies can be highly beneficial for marketers looking to enhance the effectiveness of their pricing techniques and increase conversions.

Q & A

What is Ego Pricing, and how does it work?

Ego pricing involves adjusting the price of a product to match a customer's birthday. A study found that when the price of a pasta dinner was slightly altered to match someone's birthday (e.g., $39.15 for someone born on April 15th), it increased the likelihood of purchasing by 23%. The idea is that when prices resonate personally with customers, they are more likely to make a purchase.

How does the presence of a comma in a price affect its perception?

The 'comma effect' refers to how people perceive prices differently depending on whether or not a comma is included. In a study, when prices like $1,342 were presented with commas, they were perceived as 11% larger compared to the same price without a comma. Therefore, to make prices seem smaller, it's advised to omit commas.

What is the Relative Size Effect in pricing, and how can it influence consumer behavior?

The Relative Size Effect refers to the way the size of a price presentation influences purchase likelihood. Research suggests that when a sale price is shown in a smaller font compared to the original price, people perceive it as a better deal. Therefore, displaying sale prices in small font can increase the likelihood of a customer purchasing a product.

How can surcharges be presented to make them more acceptable to consumers?

Instead of presenting surcharges separately (e.g., shipping and tax fees), consolidating them into one lump sum can make the overall cost seem less painful. Even if the total surcharge appears larger, customers are more likely to accept it when it’s presented as a single charge.

What is the Descending Order Effect, and how does it affect consumer purchasing?

The Descending Order Effect refers to the phenomenon where consumers tend to purchase more expensive items when prices are listed from the highest to the lowest. A study in a bar found that when beers were listed in descending order of price, people bought more expensive beers on average, spending about 24 cents more per beer. This effect shows that order influences purchasing decisions.

What can businesses learn from the 'comma effect' regarding price presentation?

Businesses should avoid using commas in prices if they want to make the price appear lower. The research shows that when prices are presented with commas, they are perceived as being larger, which could deter customers from purchasing. To create a perception of a better deal, prices should be presented without commas.

How does the Relative Size Effect relate to the way discounts should be presented?

The Relative Size Effect suggests that discounts should be presented in a smaller font relative to the original price to make the discount appear more significant. A smaller sale price, in comparison to a larger original price, makes the sale appear as a better deal, increasing the chances of a purchase.

Why is it beneficial for companies to use consolidated surcharges instead of separate ones?

Consolidated surcharges, which combine multiple fees (such as shipping and tax) into one charge, are perceived more favorably by consumers. Separating these fees could make them seem higher or more burdensome. By grouping them into one lump sum, companies can make the charges feel less overwhelming.

What insights can businesses gain from the study of the Descending Order Effect in a bar setting?

Businesses can apply the Descending Order Effect to encourage customers to purchase higher-priced items. By listing products (such as beers or other goods) from the most expensive to the least expensive, they can nudge consumers toward spending more. The psychological impact of seeing higher prices first can lead to increased average spending.

How can businesses use price psychology in marketing to enhance sales?

Price psychology techniques, such as Ego pricing, the comma effect, the Relative Size Effect, consolidated surcharges, and the Descending Order Effect, can be used strategically to influence consumer behavior. By presenting prices in ways that feel more personal, lower, or more valuable, businesses can increase the likelihood of purchases and boost overall sales.