Examining how you price your products and services can go a long way toward increasing your bottom line without much effort on your part.
There’s a distinct psychology to pricing that takes into account what people perceive as a good deal, even when there are better deals to be had. You can also use this trick to make a “value” package of your products or services. Do this by combining a slow-moving product or service with one that gets a lot of attention.
Certain prices, and comparisons of certain prices, have more psychological impact than others. Retailers have long known that prices ending in the digit 9 are perceived by the brain as cheaper, even though it’s only cheaper by one penny. For instance, $2.99 is perceived as closer to $2 than closer to $3, even though that penny barely makes a difference.
In an experiment conducted by the University of Chicago and MIT, prices for women’s clothing were set for $34, $39 and $44. To the amazement of the researchers, the items sold best at $39 even though that price was more expensive than other options.
Comparison pricing works well when customers feel they are choosing between a cheaper product and a more expensive, but similar, product. An example of this is well-illustrated by a famous case study involving the company Williams-Sonoma’s bread machine. They introduced a $275 bread machine, which almost no one purchased. Then they introduced a $415 model and, amazingly, the $275 model started selling well. People thought they were getting a “deal” because it was similar to the more expensive mode but cheaper.
So, think about how you can combine your products or service packages into comparison groups with the goal of having the customer pick the one you really want them to pick . . . the one with the higher profit margin. If you have a small and a medium package, add a large package. Some will choose the large package, but many more will choose the medium package, which is where you’ve bundled your most profit-generating items.
Most for-sale services can benefit from this principal…customers like to buy more than one of a thing when they find something they like and believe in. And it really doesn’t matter what you sell . . . haircuts, cold-pressed coffee, carpet cleaning or dog walking. When your customers are making their decisions, give them the option to buy more than one at a time.
You can offer haircuts every two months, daily coffee delivery, quarterly carpet cleaning or dog walking whenever they need it. It’s why the “subscription of the month” clubs and the weekly meal delivery services are so popular right now.
Give them a discount or a bonus of some kind if they make a long-term commitment to you. Your customer no longer has to think about where they are going to go for that service six months from now, because they’ve already chosen you. You no longer have to worry about how many customers you will have six months from now.
If you own a hair salon and a competitor opens up, not only near you but with cheaper haircuts, it could be tempting to see that as a negative that you can’t overcome. But think again.
If all of their signage advertises $10 haircuts, your signage can be the one that advertises, “We FIX $10 haircuts.”
What else has negative sides that can be put to advantage? Here’s some…
1. Cost, expense.
Here’s how you sell that negative: “Yes, it’s expensive, but that’s because I believe it will deliver exactly as advertised.” Or, “Yes, it’s expensive, but let’s look at the ROI you’ll get.”
2. Too complicated.
Here’s how you sell that negative: “It requires some attention to use this. It’s not right for people who want a hands-off approach. This is for people who are willing to put the time in to have a successful outcome.”
3. It doesn’t have this feature I want.
Here’s how to sell that negative: “The features it does have are the best in the industry.”
What negatives relate to what you’re trying to sell?
And here’s the flipside to this…if there’s not an authentic way to sell the negative, then evaluate why you’re so set on keeping things the way they are. Maybe you should be fixing them instead.