Your pricing strategy has a major effect on the success of your store. It is more than inputting a random number. When looking for a product, the price is one of the first things that a customer notices. So it is one of the deciding factors when it comes to the decision of buying or not.

In this series, we are looking at how to increase drop shipping sales. We have discussed how to sell products that have a high rating to boost your sales in our last post. Today, we will dive into the psychological pricing strategies you can follow to tempt your customers!

Psychological Pricing: What You Need To Know!

It might seem daunting to newcomers, but careful consideration of price factors will help you make the right pricing decisions for your products. Certain prices have a psychological impact on the customer. If you can design your price to have a positive impact on the customer, you will be able to boost your sales. Here are some psychological pricing strategies that you can use:

1. Charm Pricing:

We have all seen product prices ending in 9. This is the most widely used psychological pricing strategy. You are so used to seeing it everywhere that you might not even know it had a name!

Charm pricing induces a ‘left-digit effect.’ It is most common in products ending with 9, such as $0.99 or $9.99. Customers have a tendency to ignore the .99 and focus on its left digit. This makes the price feel much lower than it actually is. For example, $9.99 feels closer to $9 instead of $10 even though it is not the case. The consumers categorize the price as ‘$9 and a bit’ and so perceives the price as being lower!

However, a price change from $5.60 to $5.59 will not have much of a psychological impact as the left digit remains the same. On the other hand, $10 to $9.99 is a huge difference because the left digit changes to a lower number.

2. Fragmented Pricing:

Suppose you are given two options – $720 per year or $60 per month. You might feel that the $60 per month feels more affordable even though they’re the same price. The customers also prefer an alternative to paying a large amount upfront. Fragmented pricing splits up the price to show the weekly or monthly cost making it seem more affordable to the customer.

SpotNPaste uses fragmented pricing for their subscriptions. Rather than paying for the whole year upfront, the consumer scan split the cost on a monthly or quarterly basis.

3. Reduce The Pain Of Paying:

No one likes to see their money leaving their hands. Paying for a purchase creates a sense of pain called the pain of paying.

We feel more pain if we see the money leaving out hands as well as if we pay after we consume something. To reduce this pain, you can take some steps to remove your customers from these two situations. Some restaurants remove the dollar sign to help ease the pain of spending. However, as an online shop, if you remove the currency sign, it might lead to confusion.

So what can you do about it?

You can make the dollar sign smaller. For example, SpotNPaste helps customers to focus on what they’re getting, rather than what they’re spending.

You should also charge your customers before they use your product or service. When people prepay, they focus on the values and benefits they’ll be receiving. This helps to reduce the pain of paying.

4. Use Price Anchoring:

Price anchoring involves giving your customer’s a frame of reference for valuing your product. Everyone perceives pricing relatively, so a product is truly never “cheap” or “expensive.”

There is a popular saying in the pricing world – “How do you sell a $2000 watch? Put it next to a $10000 watch.” For example, if you go shopping for a TV, you might find a 50” for $1000. However, right next to it, you will find another 46” TV for $500. You might think that you are getting a great deal buying that 46” for half the price of 50”. But that’s exactly what the seller wants!  They wanted the $1,000 TV to be an anchor so that the $500 TV would look like a bargain in comparison.

5. Use Discounts Properly

If done correctly and for the right reasons, discounts can be an effective pricing strategy. It highlights the perceived value a buyer might receive. However, to maximize the effectiveness of a discount, you need to explain why you’re offering it.

If you want to give a discount on a $30 product, you might go with the percentage (20%) or absolute value ($6). If you consider these two options, the 20% seems a better deal even though both of them are equal.

So, if your product is under $100, use the percentage discount. On the other hand, an absolute discount is better for products that cost more than $100.