Tag: Pricing

Learnings

Pricing depends on customer perception

Chris Labs

For example, in the customers minds, the difference between 20.95 or 21.95 or 22.95 on your website is not that big. But the difference between 20.95 or 19.95 is huge and should be taken into consideration. In a different scenario, where your product is sitting on a shelf in target. And your competitor sells for 24.95. In this case, whether you price your item at 21.95 or 22.95 will make little difference in the customers’ minds. – Mike Beckham (SimpleModern), (around 8mins) E018: How To Price Your Products. A Deep Dive Special. Continue reading Pricing depends on customer perception

Learnings

Where you should excel depends a lot on your pricing strategy

Chris Labs

Let’s say you are a chinese seller on Amazon and your differentiating factor is that you undercut your competitors. In this case, you should focus on producing that t-shirt for a low cost. And that should be your absolute priority. In this other example, where you are now selling a 400$ t-shirt, the price to manufacture the t-shirt almost doesn’t matter at all. Instead, you should excel at marketing and desirability. – Mike Beckham (SimpleModern), (around 10mins) E018: How To Price Your Products. A Deep Dive Special. Continue reading Where you should excel depends a lot on your pricing strategy

Learnings

How to frame a deal with The Rule of 100

Chris Labs

A simple way to figure out which discount frame seems larger is by using something called the Rule of 100. If the product’s price is less than $100, the Rule of 100 says that the percentage discount will seem larger. For a $30 T-shirt or a $15 entrée, even a $3 discount is still a relatively small number. But percentagewise (10 percent or 20 percent), that same discount looks much bigger. If the product’s price is more than $100, the opposite is true. Numerical discount will seem larger. Take a $750 vacation package or the $2,000 laptop. While a 10 … Continue reading How to frame a deal with The Rule of 100

Learnings

Promotional offers that seem surprising or surpass expectations are more likely to be shared

Chris Labs

This can be because the actual deal itself exceeds expectations (for example, the percentage off is so unbelievable) or because the way the deal is framed makes it seem that way. Quantity limits work the same way. Retailers sometimes create limits around the number of a given discounted item a given customer can buy. “One per household” or “Limit three per customers.” You might think that by making it harder for people to get as many as they want these restrictions would hurt demand. But they actually have the opposite effect by making the promotion seem like an even better … Continue reading Promotional offers that seem surprising or surpass expectations are more likely to be shared

Learnings

Diminishing Sensitivity

Chris Labs

Imagine you are looking to buy a new clock radio. At the store where you expect to buy it, you find that the price is $35. A clerk informs you that the same item is available at another branch of the same store for only $25. The store is a twenty-minute drive away and the clerk assures you that they have what you want there. What would you do? Would you buy the clock radio at the first store or drive to the second store? If you’re like most people, you’re probably willing to go to the other store. After … Continue reading Diminishing Sensitivity

Learnings

The psychology of deals – Importance of reference points

Chris Labs

Kahneman received the Nobel [prize] for his work with Amos Tversky on what they called “prospect theory”. […] One of the main tenets of prospect theory is that people don’t evaluate things in absolute terms. They evaluate them relative to a comparison standard, or “reference point”. Reference points help explain the barbecue grill scenarios we discussed a few pages ago. People use the price they expect to pay for something as their reference point. So the grill seemed like a better deal when it was marked down from $350 to $250 rather than when it was discounted from $255 to … Continue reading The psychology of deals – Importance of reference points

Learnings

Where economy is a necessity most people like to defy it.

Chris Labs

When silk shirts cost $15 they became so common among laboring men that other classes went to broadcloth. My experience on cosmetics prove that a low price on perfumes, etc., does not appeal to the girl who should economize. She demands what the “best people” use. Many people around me, working at small wages, consider cost far less than I do. Suggest a thingto them because it is economical and you arouse opposition. You hurt their pride. But direct your appeal to those who do not consider cost and they like to be included. -My life in advertising, p.111 Continue reading Where economy is a necessity most people like to defy it.

Learnings

It is just as hard to sell at a half price as at a full price to people not converted.

Chris Labs

Instead, offer a free sample to those interested. Ask them to fill a request for a free sample. Ex: Inquiries for free samples may cost 25 cent each. Ask 10 cents for the samples, and the inquiries may cost you $1.25 or more. To gain that 10 cents you may be losing one dollar. -My life in advertising, p.94 Continue reading It is just as hard to sell at a half price as at a full price to people not converted.

Learnings

The importance of being unimportant

Chris Labs

Customers always want lower prices. But when it comes to demanding lower prices, customers will focus first and hardest on their biggest categories of spending. Being a relatively unimportant part of your customers’ total cost structure won’t eliminate all price pressure, but it will go a long way toward making you less visible when your customers turn their attention to reducing expenses. Continue reading The importance of being unimportant