Do you know that small changes in your pricing scheme can have a significant impact on your sales? In general, shoppers are drawn to the lowest prices. However, you would want to price your product so that it is not too expensive and turn away potential buyers. You also would not want to set the price tag too low because it can be misconstrued as a proof of poor product quality. So, when does the price you’ve set for your product seem just right for your target customer? Here are six consumer research findings that uncover how best you can use pricing to boost sales or improve customer satisfaction.
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Round Numbers and Emotions
When emotion motivates a person to buy an item, he will be drawn to rounded numbers in pricing. Meanwhile, non-rounded numbers in price tags drive consumers to depend on their reasoning and objectivity. This is according to the paper “This Number Just Feels Right: The Impact of Roundedness of Price Numbers on Product Evaluations” published in a 2015 issue of the Journal of Consumer Research.
Generally, a rounded pricing strategy can work wonders in products that are bought for recreational purposes or personal reasons. Examples include handbags, houses, and holiday packages. Non-rounded pricing, on the other hand, are most suitable for utilitarian products such as a blender or toothpaste.
Deeply Discounted or Everyday Low Pricing?
The paper “Retailer Pricing Strategy and Consumer Choice under Price Uncertainty” in a 2014 issue of the Journal of Consumer Research detailed how consumers, who are trying to save the most money, gravitate toward retailers they believe would offer the lowest prices most of the time. So, in order to attract majority of money-pinching shoppers, retailers are better off lowering their prices in general instead of running occasional deeply discounted deals.
Reminder of Price to Help Drive Customer Satisfaction
Reinforce the value of a purchase decision–which then impact long-term product satisfaction–by reminding the buyer of how much he had paid for the product or service. A study conducted by researchers from the University of Toronto’s Rotman School of Management demonstrated that even if consumers have the tendency to choose based on short-run convenience, their long-term satisfaction greatly depends on the product’s usefulness. The results of their study were detailed in the paper “The Effect of Price on Preference Consistency Over Time” published in a 2014 issue of the Journal of Consumer Research.
People who sign up to gym or health clubs, for example, tend to later regret doing so, making them view the product or brand unfavorably. To prevent negative impact on repeat business, marketers might want to regularly send an email that mentions the price paid for the product and the benefits that buyers can derive from the product’s features.
Who Tends to Judge Product Quality by Price?
It truly pays to know your target customers, most especially if you are launching a new brand or product whose pricing is not yet known. People from “less individualistic cultures,” such as Chinese, Indian, Japanese, and Korean, tend to see pricing as a measure of product quality. Conversely, those from individualistic cultures–like American, Australian, British, Canadian, and French–don’t have the same tendency. This was according to the paper “You Get What You Pay For? Self-Construal Influences Price-Quality Judgments,” which appeared in a 2013 issue of the Journal of Consumer Research.
How to Make Shoppers More Willing to Pay Higher Prices?
The paper “The Role of Relaxation in Consumer Behavior” in the American Marketing Association’s Journal of Marketing Research specified a reliable way to make consumers more willing to pay higher prices: making them feel relaxed. This finding explains why the interiors of high-end boutiques and retail outlets for luxury products almost always have a relaxing vibe. Anything from soothing lighting to color schemes that generate calmness can help make it easy for upscale retailers to sell more of their pricey products.
On Non-Cash Pricing Strategies
Luring a shopper to provide his contact information or require him to view an ad, for example, in lieu of paying cash for a product is a marketing move that can backfire. According to the paper “Mental Accounting, General Evaluability Theory and the Framing Losses Posed by Partitioned Monetary and Nonmonetary Prices,” which was one of the three finalists for the 2012 Behavioral Pricing Dissertation Competition, non-cash pricing strategies have a way of making a product seem a riskier buy than one that can be bought through straight-up cash alone. Thus, it is recommended that a marketer carefully finds the right balance between this perceived additional layer of risk and boosting sales.
The psychological aspects of product pricing are complex. Some are even controversial. All in all, when it comes to deciding on a viable pricing scheme for your product or service, it always helps to identify your target customers and to study their preferences, as well as to examine the pricing strategies of your competitors.