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Psychology Principles in Pricing
It’s all about the numbers, right?
Well, today’s issue is for sure.
There is a lot to say when it comes to pricing. And plenty of literature when it comes to the psychology of pricing.
Today we’ll bring three principles to apply to pricing. Hopefully, by changing the numbers in your checkout pages—and everywhere else—the numbers of sales will increase. Good deal, no?
The best thing about testing different prices is that it’s usually very easy: You just have to change numbers on a screen.
But the impact on your margins can be massive.
Let’s get down to business.
Three Psychology Principles Applied to Pricing
1) Remove the currency symbol when possible
The currency symbol helps a customer understand when a number is, indeed, a price.
But in some cases, when it is obvious that you’re talking about dollars (or whatever currency you use), removing the currency symbol from the price can actually relax your potential buyer’s brain, and spike your conversion rate.
Indeed, in research conducted by Sybil S. Yanga, Sheryl E. Kimesb and Mauro M. Sessarego, when a restaurant didn’t show the currency symbol in the menu, the amount spent by customers was 8% higher.
2) Don’t bundle cheap and expensive items
All marketers rely on bundles today to boost average order value (AOV). However, this sometimes comes with a risk…
As demonstrated by at least one study, when you bundle an expensive item with a cheap item, the latter is going to decrease the perceived value of the former, because customers consider the average price of each.
So, if you have a $5 product, and bundle it with a $95 product and sell them both for $100, the perceived value of the $95 will be $50 (arithmetic average).
Aren’t you glad you know about this now?
3) Forget the .99
Do you want to boost your AOV, forget the “just below” pricing tactic.
You know, selling a hoodie for $79.95, a coffee for $2.95, or coaching for $1,999.
Instead, start using the “just above” price, or round numbers.
In a 2022 study, researchers sold coffee to college students. They priced the small coffee at $0.95 and the large one at $1.20.
With this pricing structure, 28.95% of customers were willing to upgrade from the small one to larger one.
Then, they increased both prices by $0.05. They sold the small coffee for $1.00 and the large one for $1.25. In this case, 55.56% of buyers were willing to upgrade.
That’s almost double the conversion rate on the upgrade.
And the reason is, once you go above the round number, upgrading feels cheaper.
So if you’re currently pricing something at $49,99 and want to increase the take rate of your upgraded version, test a $50 or $51 price for the basic product, and see if more people pick the upgrade.
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SEARCH: Google has once again thrown marketers for a loop with their March core and spam updates. Find out how you can adapt and get your content ranking on the first page of Google with a free link-building assessment.*
MARKETING DATA: Did you know that only half of all online traffic is human traffic? The rest are bots. Which means that a lot of traffic you pay for might not be real—among other things. Check this article out for more.
FACEBOOK: …was the most downloaded app in March. And no, it’s not 2012 again. Most of these downloads came after Facebook experienced a few-hour outage, which propelled web users to try and download the app and see if they could access it this way. Hmm…
CRO: Get the curves out. It appears that rounded CTA buttons on your website drive 17% to 64% more clicks than sharp-angled buttons. Apparently, we prefer curvy buttons because they seem more friendly. Interesting.
*This is a sponsored post.
ICYMI, last time we looked at the Conservatism Bias.
The “Pricey” Crew
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