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vangogh
08-09-2012, 07:37 PM
I found an interesting article today about pricing. The article Pricing Experiments You Might Not Know, But Can Learn From (http://conversionxl.com/pricing-experiments-you-might-not-know-but-can-learn-from/), talks about a variety of different pricing experiments like ending the price with the number 9 to give the perception it's less expensive.

The article came to my attention via another article, Nobody bought the cheapest option (http://www.davidairey.com/nobody-bought-the-cheapest-option/), talking about one of the experiments where you offer 3 price points on your product. In this case it was the price of a beer. Regardless of the specific prices for the high, middle, and low end version of the product, most people invariably choose the middle option. The prices were all within reason for what a beer might cost.

The ultimate message is to offer 3 price points, making the one you most want people to choose the middle option.

All of the experiments in the original post are worth a look as is the one I linked to for the specific 3 price point experiment.

Out of curiosity do any of you use this kind of advice to set prices?

GreaterVisibility
08-09-2012, 09:42 PM
Cool article, thanks for sharing. I recently read "Yes! 50 Scientifically Proven Ways To Be Persuasive" by Robert Cialdini (who wrote the more notable book "Influence", which I want to read soon too), and he discussed some of the same things that were mentioned in that article. Along with price, there are many other things that you can do to influence sales. For instance, the book mentioned that one of the home shopping channels skyrocketed sales by simply telling people that if they called and the lines were busy, to please call back again, rather than saying the old "operators are standing by" line. By doing so, they painted a picture of people flocking to buy the item instead of bored operators sitting around, and it made sales jump dramatically. So, the numbers matter, and what you say in conjunction with those numbers can bring people in too.

I find it all fascinating. I haven't tried it yet, as I just haven't had opportunity, but it is something I'm considering in another venture.

billbenson
08-09-2012, 10:34 PM
Real interesting article. I don't do anything they suggest, but its a great read.

painperdu
08-10-2012, 07:37 AM
Gas stations are infamous for trick pricing. Instead of listing a price as 3.49, for instance, they will list it at 3.48 and 9/10. Most will look at the price and think it's 3.48 while in fact it's much closer to 3.49.

KristineS
08-10-2012, 12:21 PM
Interesting article. We don't tend to use any of this info when we set prices, at least not consciously. Most we set prices based on profit margin, manufacturers suggested retail price and what our competition is charging. It is fascinating to see how the science of it all works though. Makes you wonder how often you're manipulated into buying something by a pricing strategy.

vangogh
08-10-2012, 07:33 PM
who wrote the more notable book "Influence"

That's been on my list to read for awhile. I guess I'll have to add his other book now too. :)


one of the home shopping channels skyrocketed sales by simply telling people that if they called and the lines were busy, to please call back again, rather than saying the old "operators are standing by" line. By doing so, they painted a picture of people flocking to buy the item instead of bored operators sitting around, and it made sales jump dramatically.

That's a good one. It's amazing how such a small change paints such a different picture and gets us to think differently about a brand, hold different expectations about them, and take different actions.

I always enjoy these kind of stories.


Instead of listing a price as 3.49, for instance, they will list it at 3.48 and 9/10

Another good example of the 9 trick. We all know 3.48 and 9/10 is basically the same as $3.49, but we still perceive 8 as less than 9 and so think it's less.

huggytree
08-11-2012, 06:11 PM
i try to have 3 price options when possible....i also tack on extra profit on the upgrades....for instance i only pay $10 more for my mid grade sump pump, yet i charge an extra $80 for it....90% of people take the upgrade

same goes for water heaters...i pay $20 more, but charge $100 more.....because of the expense of a water heater only around 40% take the upgrade....almost no one takes the high end option for water heaters $250 more......most are happy with the lowest price one

so the mid grade concept doesnt always hold true for my business....but most of the time it does....

i dont think it works over all....i still believe the lower 50% of customers will always take the cheapest option no matter what......i DO think it holds true with the upper 50%(which are my customers)

When i think one of my prices feels too high(but isnt) i typically reduce it slightly....example $500 i will reduce to $495
...not sure if it works, but it cant hurt and the $5 isnt going to matter to me

vangogh
08-12-2012, 12:37 PM
huggy, I think some of the middle price working will depend on what the 3 prices are and the differences between them. I don't think you could take any 3 prices and then people will mostly choose the middle one. For example if low price was $20, mid price $150, and high price $175, I would think most people would chose low price. However of the 3 prices were $125, $150, and $175, I'd think you'd the middle price doing well.

Some of the takeaway from the experiment was to figure out the price you want to sell for and then offer a lower priced option that isn't much different from the middle price as well as a premium price. In that scenario the middle price likely looks to be the most valuable and probably gets more people to buy than if you only had the one price.

GreaterVisibility
08-12-2012, 11:15 PM
According to the "Yes" book, having a really high priced item along with a cheap and a moderately priced item will make the sales of the moderate item spike. If you have a cheap and a moderate, people buy the cheap. But having the high priced item adds value to the moderate, and people have a natural tendency to gravitate toward the middle if there is one.

In the book, it is called the "magnetic middle". According to the notes I took (I listened to the audiobook, so I don't have the print version as a reference), the magnetic middle was exemplified in the following example. A utility company went into a neighborhood and told everyone how much energy they used in comparison with the average. In the energy audit, people that were told that they used too much energy made changes and those families cut back an average of 5% the next month. The people that were way below the average though, tended to lose their mojo when told that they were so far below the norm. They actually gravitated back toward the average the next month, which was a surprising result.

So, they conducted another energy audit. They went into a neighborhood once again, but instead of giving people numbers, they used literal smiley and frowny faced stickers to let people know how they did. Those that used higher than average energy resources were given frowny faces, those that used much less and conserved greatly were given smiley faces. The group that was the high energy users went down by, you guessed it, 5% once again. Having the numbers vs. the stickers made little difference. But where it did make a difference was with the low energy consumers. Instead of gravitating toward the middle, they, armed with their smiley stickers, kept their consumption low and didn't gravitate toward the middle.

So, the magnetic middle doesn't work all of the time, but when dealing with real numbers it can be a very good way to price things, offering an expensive option that pretty much just shores up your mid priced option and adds value to it, which makes it more appealing than the cheap option.

Steve B
08-13-2012, 05:20 AM
I may have to try some of these tips. I've been thinking about adding a bargain and premium choice anyway, this gives me some motivation.

vangogh
08-13-2012, 11:50 AM
@GreaterVisibility - Interesting experiment that for the most part reinforces the idea of three tier pricing. I think it shows how subtle some of this stuff can be and how just a small change can really change the eventual results. I wonder if in this experiment there was something else at play too. Did those using more energy feel guilty for using more energy? With the low energy homes did knowing how much better they were doing get them to think they could relax and still do better than average.

Since the experiment wasn't specifically about making a purchases, but includes other possible motivation, I wonder how much it was the other motivation that led to the results that were observed.

KristineS
08-13-2012, 12:28 PM
I was wondering about the same thing Vangogh. Energy conservation is such a weighted issue, I'm wondering how much of the motivation was quilt or satisfaction. If you were told you were doing well, you may slack off a little, figuring you'd still do well. If you were told you were doing poorly, you might feel bad about it and try to do better. Since the middle was kind of an arbitrary point in this case, and I don't even know if people were told what the middle was, just that they were doing better or worse than average, I'm thinking it was more about how they felt about their ranking than what their ranking actually was.

GreaterVisibility
08-13-2012, 09:54 PM
If I remember correctly, I do believe that the people using more energy felt somewhat guilty and wanted to do better, like their neighbors. Their conservation minded counterparts relaxed when they found out how well they were doing and felt like they didn't need to pay as much attention, so they gravitated back toward average. Of course, that's only if I remember correctly, but that's how I remember it. In the end, the middle is magnetic. In tiered pricing, you can have two products and people will gravitate toward the cheapest, but if you add a third and sometimes even much more expensive option, suddenly that formerly higher priced option looks really good. If you add a fourth price, I think the world comes to an end. :eek:

vangogh
08-13-2012, 11:51 PM
I bet the guilt about not saving energy did influence the experiment, but it does seem to show that middle pricing works. It's an interesting experiment.


If you add a fourth price, I think the world comes to an end.

Funny. I think a fifth price causes a black hole to form directly around your business.

GreaterVisibility
08-18-2012, 09:20 PM
From what I understand from reading many reviews, the "Influence" book by Cialdini gets more in depth on the hows and whys of these processes. It is the foundation, and this "Yes" book that I read was kind of short, practical application chapters giving some real world examples. I probably should have read "Influence" first, but well, I didnt. I do intend on doing so though. I think that I got a much better deal on the Yes book on mp3, and that Influence might have been kind of pricey or hard to find, I can't remember. I'm not a real reader, I get distracted too easily, but if I can listen while working during the day, I can retain what I learn and pay attention much better. So, I buy everything on mp3, and they can be expensive at times.

vangogh
08-20-2012, 11:52 AM
Thanks for the extra info. "Influence" is the book I see recommendations for all the time. It's been on my to read list for a few years, but for whatever reason I haven't quite gotten to it yet. I think I've seen articles online written about so many different ideas in the book it'll probably feel very familiar when I do read it.

I love to read. No distractions here. I get lost in books. I don't start them as frequently as I have in the past, but once I start one I can easily get lost in it for days.

KristineS
08-20-2012, 12:08 PM
Just for fun, we've been trying some of these pricing strategies, just to see what happens. It's very unscientific, but one that we have seen work is ending prices with a 9 instead of a 0. We set up a Clearance Bin on our site for items that we were closing out and discontinuing. At first I priced things on even dollar amounts, and we didn't get much interest. Then we changed the pricing so it ended in 9. We've been consistently selling items from the Clearance Bin ever since. I know there are a lot of factors that could have impacted the sales, but I still think it's interesting that lowering the price of something a cent makes that much difference.

vangogh
08-20-2012, 03:44 PM
Amazing how one little penny could affect sales.

The 9 thing is so tried and true it's surprising when you see someone pricing something to a 0. Some people will use 7 instead of 9 for the belief that 7 is a luck number and more people will respond to it. You also see $XX.95 instead of $XX.99 a lot