The Science Of Pricing
#1 Decoy pricing
- Dan Ariely (behavioural Economist) conducted a study offering 3 types of subscription for The Economist Magazine to 100 MIT students: 1) Web ($59) - 16%; 2) Print ($125) - 0%; 3) Print + web ($125) - 84%.
- No-one was taking the print-only subscription, so it was removed and the experiment repeated - with the result of selling less print+web subscriptions: 1) Web ($59) - 68%; 2) Print + web ($125) - 32%.
- Takeaway: Often different options with similar (or almost equal) prices for two of them. Of the two, one is a decoy, and the other is the more attractive choice you wish for the consumer to make.
#2 No dollar sign
- A study by St. Andrew's Restaurant in New York showed an increase in sales for menus without the dollar sign.
- Dishes with a number-only price were perceived as less expensive by customers.
- Takeaway: Remove the dollar sign from your products.
#3 The magic 9
- The University of Chicago and MIT tested 3 prices for a women's clothing item: 1) $34; 2) $39; 3) $44.
- There were more sales at the price of $39 than at either of the other prices.
- Takeaway: Make the price of your products end in 9.
#4 Size matters
- Marketing professors at Clark University and University of Connecticut found that consumers sale prices to be a better value when the price is written in a small font rather a large, bold typeface.
- Takeaway: Write your price using small fonts. When you make an offer, write the discounted price smaller than the original one.
- Researchers invited real estate and undergraduate students to appraise a home for sale. The seller listed his house at different prices and as result both students and experts ,ade different evaluations: 1) Listed: $119.900; Appraised (by
the experts): $111.454; 2) Listed: $129.900; Appraised (by the experts): $123.209; 3) Listed: $139.900; Appraised (by the experts): $124.653; 4) Listed: $149.900; Appraised (by the experts): $127.318.
- Takeaway: Start high in negotiations. Put very expensive products (or plans) near the product (or plan) that you want to sell.
#6 Delete free plan
- Ruben Gamez offered both free and paid plans for his product, but most people were just taking advantage of the free one: 1) Free (upgrade - 0.8%) - 99%; 2) Paid - 1%.
- Paid: 8x previous customers (800% increase!). When he closed the free plan, he increased his customers by 800%.
- Takeaway: Delete your free plan if you have one.
- Tests showed that: between a premium beer ($2.50) and a bargain beer ($1.80) people preferred the premium beer: 1) Bargain beer ($1.80) - 20%; 2) Premium beer ($2.50) - 80%.
- Adding a third super bargain beer ($1.80) people preferred the original beer at $1.80: 1) Bargain beer ($1.60) - 0%; 2) Premium beer ($2.50) - 20%; 3) Original beer ($1.80) - 80%.
- Replacing the bargain beer ($1.60) with a super premium beer ($3.40), people than preferred the premium beer ($2.50): 1) Super premium beer ($3.40) - 10%; 2) Premium beer ($2.50) - 85%; 3) Original beer ($1.80) - 5%.
- Takeaway: Offer three options, and include the one that you want people to buy in the middle. Make the luxury option really expensive: some people will buy it, no matter the price.
Brought tp you by Blog Growth - www.blog-growth.com | Infographic imagineered by Socially Sorted - www.sociallysorted.com.au | Main source: http://conversionxl.com/pricing-experiment-you-might-noy-know-but-can-learn-from;
Decoy pricing: http://www.ted.com/talks/lang/en/dan_ariely_aks_we_in_control_of_our_own_decisions_html; Size matters: http://www.cbsnews.com/8301-505144_162-41541822/prcing-psychology-7-sneaky-retail-tricks??
tag=nweuser; Bracketing: http://thinktraffic.net/most-common-pricing-mistake.