Pricing your products and services can be very tricky to Increase sales and conversion. Both overpricing and underpricing are bad for your business: if you overprice, you will lose your customers to your competitors as they can get the product of the same quality at lower prices, and if you underprice, you will not be able to maintain sufficient supply and meet even operation cost.
When it comes to setting prices for your products and services, you are recommended to research the prices charged by your competitors. However, you can set the limit over the market price because your product offers a unique feature.
To convert your potential clients, prices play a crucial role. No matter how unique a product you are offering to your customers, costs play a paramount role in deciding whether to invest in your product and service. People are reluctant to spend money. When they find an opportunity to buy a product at a discount or under a special scheme, they immediately get ready to buy that. Therefore, price optimization is crucial. According to research, entrepreneurs find a 10% increase in profits by a 1% improvement in pricing strategy.
This blog discusses some strategies to set prices for your products and services in order to increase sales.
Use price anchoring to set a baseless value
Price anchoring is the most effective way to set a baseline cost for your product. It is the human tendency that we rely too heavily on the first information shared to make a decision. You all say that quality matters, but when it comes to making a buying decision, prices serve the basis for it. To some extent, it is right, and it should be this way because customers do not have the sense to understand the intrinsic value of products you are offering.
For instance, can they compare the quality between two pairs of jeans – one at £100 and the other at £700? Though quality is essential to maintain, it in no wise can affect the decision. This is because customers comprehend exterior information to determine the right price for a product. For instance, if you see a shirt costing £999 and the other similar shirt at £299, you would find the second shirt much more affordable.
In this example, £999 is an anchor price. It will shape the base for the expectation of customers about the prices of the other items. When your customers find this much difference in the pricing, they are more likely to buy the shirt costing £199 because they will find it affordable even though it is still expensive. This is how the price anchoring can lead to an increase in the second type of shirt’s sales. People will find them worth buying.
Do not set same prices for similar products
You can think that similar pricing items at the same price can be a good way to attract your customers, but research suggests that it would hurt your sales. According to experts, if you fix the same prices for similar items, people will less likely buy your products than if you fix different prices. You must be wondering why customers would do this.
This is because customers get a chance to compare prices. If you set the same prices for similar products, you will block your customers’ ways to make an analysis. However, do not confuse similar items with identical items.
Of course, you will set the same price for identical items. Similar items should be priced differently because they look alike, but they are not. Some retail stores fix different prices for a solid shirt and pattern shirts, although they are identical in shape.
Use charm pricing strategy to increase sales
Have you ever seen the price of a product ending with 9? The best example to understand this scenario is the price tags of shirts and jeans. This strategy is known as charm pricing. You can also use other odd numbers like 5 and 7, but 9 works better and more effectively.
As you know that prices serve the basis for making a decision regarding buying a product and service, customers hesitate to pay such huge prices. They feel pain when they find exorbitant prices.
If you end your prices with 9, you will be able to assuage them. Charm pricing strategy has a great impact on the psychology of customers. For instance, when you sell a shirt for £200, people will find it more expensive than when you sell the same shirt for £199.
By reducing the price just by £1, they will feel like the shirt is half price. Further, customers generally pay attention to left digits. Even if the shirt’s cost is £199, they will feel like they are paying £100.
However, charm prices do not work when you are selling luxurious items like watches and handbags. You should price the item with whole numbers. This will give a feeling of luxury that people do not feel when you end the price, for instance, £1,999 instead of £2,000.
Highlight the sale price differently to increase sales
When you are running sales, you should use a couple of visual tricks to pull your users’ attention. For instance, if you are selling a handbag worth £2,000 at £1,400, you should place the sale price next to the original price so customers can see clearly the difference in the price.
When you create a popup to show a clear difference, they will feel that they are getting a very attractive deal. Use different fonts and colours to highlight the difference. Visuals have a great impact on the psychology of users.
Pricing strategy plays a paramount role in converting your potential prospects. However, it can consume a lot of time. If you are unable to decide how to do it, you should hire a marketing expert. It can be quite expensive, but your business will get benefit in the long run. In case you have a start-up and cannot afford to hire a marketing expert, look for funding sources like guaranteed payday loans from direct lenders.