How to get your pricing right using marketing pyschology
In Nigeria, there’s a lady on twitter who sells a plate of ewa Agoyin(a kind of togolese mashed beans and pepper sauce) for 6,500 naira (roughly 12 dollars) usually, a plate goes for as low as 500 to 1000 naira. A large number of people don’t like that she’s truned a very cheap meal into something that much expensive. As I took my CXL institute course this week, I kept wondering if she could benefit from the section on the section I focused on this week. Which is the pyscology of pricing.
Companies don’t just slap any price on their products, they understand that When it comes to making purchases, we as humans are irrational beings so they try to make sense of how they can rationally determine and present a price to prospective customers.
The core thing to remember in pricing is that people pay very different prices depending on the context of when they’re paying it and what it’s for.
When people look at a price, they create the context of which we view it in and make comparisons. So, we tend to kind of look at whatever similar goods we can think of that we can compare that to.And there’s two types of comparisons.So the first one is implicit comparisons.These are the ones we make ourselves.So like think about like the chairs, we’re sitting on here.We have no kind of natural calibration for what a chair should cost.So we start thinking like okay,how much have I paid for a chair before,how much have I seen prices,how much have I seen other people pay.So we’re kind of pulling in this all this random information just to kind of guess what that price should be.
To figure this out, try to answer this questions with your team:
And then just think about what’s the general budget of like your customer base that they would have for something like this.So all these pieces of information are kind of what they put together.For more information, some of these examples are taken from a really good book called, “The Psychology of Price”,which is pretty quick read.
Perceived benefits:
What people are looking to get from the product. Erik shares the levels of perceived benefits, from basic drivers like buying food out of hunger, to primary drivers like buying a specific type of food because it’s non-gmo and organic.
from The Psychology of Price Which is, I gotta mention, a great book on this.They list out that there’s all these different levels of drivers that ’cause us to assess value of a product.So there’s the Primary Drivers,which is the features of that product.Then there’s Level Two Drivers, which is the benefit so that’s getting from the examples I showed earlier like in the phone plan example, from those features and the benefits of those features.And then you go even deeper than that we go into Level Three Drivers, which are kinda the emotions or goals the benefit satisfies.So that’s thinking a little bit about those internal triggers again, like what’s going on under the surface that really makes us want to use this and what’s the value of that.And then even more basic than that is the biological drive behind those emotions or goals.He lists out that there’s four basic biological drives.There’s avoidance of pain, pleasure, time, and money.So most of our purchases satisfy some need from one of those.So now think about those.Think about what are those perceived benefits.We kind of already thought about the internal triggers,we thought about how we can speakin the language without jargon-y.So let’s get through that a little bit further and think about what are the features what are all these different drivers.And for each of those reasons, each of those buying reasons for those drivers, who are the competitors and what are their price spectrums?The further you get down the really core value the more you get down the real value that somebody’s looking to get out of a product.
How to change your price perception:
This lesson covers a handful of behavioral tactics that have been proven effective time and time again to alter the perception of your product and ultimately increase sales.
framing,where just the way choices are arranged and presented to us really changes the way that we make choices and make decisions,depending on what those options are.And this is big, and you know,this applies to almost everything we’ve been talking about and really taking action,but it’s especially apparent within pricing.
Decoy effect
Centerstage effect: people will pick stuffs in the middle\
Anchoring effect
framing the value.So, like, what does this mean in context of what you’re getting out of it,or what does it usually cost? So, whatever it is, you wanna always frame that value,not just in the cost of what you’re getting out of it, but also what they’re gaining.
o always make sure you establish what they’re gonna get out of that and why the price that you’re offering makes sense for them to invest in.This is another one that’s popular, and, you know,like I said, kinda going back to ourturn about defaults we were talking about,like, whatever the most common plan is people use,or you know, if you just say this is what most people have,like, the users are probably most people,and will probably just kinda wanna make an easy decision,so if you just say this is what most people use,that’s probably what they’re gonna pick.I’m assuming that they’re interested in the product.
And then, classic social proof.
Optimizing your payment process:
How to use psychology principles to minimize the pain of paying for your product; A lot of what we’re gonna think about with the pain of paying is how you can make the process,especially if it’s the product we know that they want,how you can make it more seamless for them to not consider getting this thing that they should give value of, and also getting more satisfaction out of the product overall, depending how it’s paid for.So, one thing is opportunity cost,we’re always thinking about, especially if it’s maybea superfluous purchase, we’re like, well,I should be saving this money, but I also really want these shoes, what should I do?It’s helpful to kind of for you, this is where framing value for your product helps a lot,so when people see a lot of value in what they’re buying,then there’s less of that trade-off kind of feeling.You just wanna think about what the other opportunities are where people could be spending money that are not here. Big one, hassle factors, and it’s like how hard the process is of paying.
only thing with the pain of paying kind of map out what your process of making a payment and just think of if there’s anything you can make sure you can improve there.Whether it’s framing the value a little bit better,reducing the hassles, we talked a lot about the PayPal button and stuff there, and the things that make it easier and more seamless for us to just get what we decided we already want.And then considering alternate methods and timing of payment to kind of just enjoy the purchase a little bit more.
