Your pricing strategy is one of the most important decisions you'll make for your business. Learn 5 effective tips to grow your business.
Your pricing strategy is quite possibly one of the most important decisions you'll ever make for your business.
On one hand you need to be sure that the model you choose attracts plenty of customers. But on the other hand, your pricing strategy needs to leave you with a decent profit.
Go too high and you could turn people away. Go too low and you may not make any money.
So what should you do?
Take a look at these 5 effective pricing strategies that can help grow your business.
1. Price Anchoring
Many pricing strategies rely heavily on psychological tactics, and price anchoring is the perfect example. There are a couple of ways that you can use this method to take advantage of price anchoring.
A popular technique is including the list price, and then marking your price lower to show the savings that the customer could make. You'll see plenty of examples like this on Amazon:
Alternatively, you could feature one product next to a really expensive one. This tends to work better in retail stores.
For example, place a $500 camera next to a $2,000 camera and customers will naturally gravitate towards the lower priced product because it makes it appear like a bargain deal.
Related Article: Buyers and Sellers, Beware: Data Dangers of Ecommerce
2. The Price Bundle
This is a method that groups products together all for one price. For example, two products for the price of $10. This is great if you're trying to move a lot of stock, and it also encourages the customer to buy because they're getting a great value deal.
For example, Sephora bundles their products together and includes how much the products would be worth on their own in order to show how much value the customer would be getting.
3. The Magic Number Nine
This is a tactic used amongst many retailers and it works by cleverly pricing your products to look cheaper, so that consumers are more inclined to buy them.
The most common one is using $9, rather than rounding the price up to the nearest $10. So for example, you could have a t-shirt priced at $9.99 rather than $10.00.
A retailer that regularly uses this strategy is Apple. Take a look at their store and you'll see that all of their products center around the number 9.
And does this work? Well yes, studies have shown that we gravitate towards the $9, presumably because we think we are getting a better deal, even though it's only one cent less.
Related Article: The Game of Pricing: How The Number 9 Affects Purchase Behavior
4. The Price Comparison
Have you ever considered including a price comparison? This tends to be a popular option for those offering a service, subscription or software.
The idea is that you feature each of your packages next to each other, and show what's included in each. The key to making this work is by making the best package stand out. And the best package doesn't necessarily mean the cheapest one.
For example, on the Survey Monkey pricing page, they have separated their packages by color, and highlighted the most popular package so that it stands out ahead of the others on the page.
Price comparison is also a tactic commonly used amongst supermarkets, but because it involves calling out your competitors, it's a little more cut throat than comparing your own products.
The big stores are well known for providing a price comparison that shows which store is offering the lowest price on like-for-like groceries.
If you feel confident that you can offer your product lower than your competitors without losing out on profit, then it's certainly worth highlighting as it'll drive more customers to your brand.
5. Promotional Pricing
Running a sales promotion is the oldest trick in the book because everyone loves a discount deal.
Whether it's a flash sale, loyalty points, or 10 percent off, a sales promotion is a great way to attract more people to your store.
The key to this tactic is to make sure you don't have a constant promotion as this is a strategy that can lose its effectiveness, if it's overcooked. Put a limited time on your promotion so that you create a sense of urgency for your customers.
There isn’t one set rule on what you should be offering for your pricing strategy as it all depends on what your audience likes. Test different options and see which one works best for your store, and your profits. Good luck!