The Science of Pricing

www.blog-growth.com The cience of. Pricing $69 Dan Ariely (Behavioural Economist) conducted a study offering 3 types of Subscription for The Economist Magazine to 100 MIT Students: web ($59), Decoy Pricing print ($125), print+web ($125). $59 $125 $125 16% 0% 84% $59 s125 No-one was taking the print-only subscription, so it was removed and the experiment repeated – with the result of selling less print+web subscriptions. 68% 32% TAKEAWAY: Offer different options with similar (or almost equal) prices for two of them. Of the two, one is a decoy, and the other is the more attractive choice you wish for the consumer to make. A study by St Andrew's Restaurant in New York No Dollar Sign showed an increase in sales for menus without the dollar sign. $24 24 Dishes with a That's cheaper! number-only price were perceived as less expensive by customers. TAKEAWAY: Remove the dollar sign from your products. The Magic 9 The University of Chicago and MIT tested 3 prices for a women's clothing item: $34, $39 and $44. $39 O$44 $34 There were more Biggest number of sales sales at the price of $39 than at either of the other prices. TAKEAWAY: Make the price of your products end in 9. Size Matters Marketing professors at Clark University and University of Connecticut found that consumers perceive sale prices to be a better value when the price is written in a small font rather than a large, bold typeface. $49 is better value than TAKEAWAY: Write your price using small fonts. When you make an offer, write the discounted price smaller than the original one. Anchoring Researchers invited real estate experts and undergraduate students to appraise a home for sale. The seller listed his house at different prices and as a result both students and experts made different evaluations. Listed Appraised by the experts $119,900 $111,454 $129,900 $123,209 $139,900 $124,653 $149,900 $127,318 TAKEAWAY: Start high in negotiations. Put very expensive products (or plans) near the the product (or plan) that you want to sell. Delete Ruben Gamez offered both free and paid plans for his product, but most people were just taking advantage of the free one. Free Plan Free Paid 99% 1% Paid 8x Previous customers 0.8% (800% increase!) When he closed the free plan, he increased his customers by 800%. TAKEAWAY: Delete your free plan if you have one. Tests showed that: between Bracketing a premium beer ($2.50) and a bargain beer ($1.80) people preferred the premium beer. $1.80 20% $2.50 80% $1.60 0% $1.80 80% $2.50 20% Adding a third super bargain beer ($1.60) people preferred the original bargain beer at $1.80. $1.80 5% $2.50 85% $3.40 10% Replacing the bargain beer ($1.60) with a super premium ($3.40) beer, people then preferred the premium beer ($2.50). TAKEAWAY: Offer three options, and include the one that you want people to buy in the middle. Make the luxury option really expensive: some people will buy it, no matter the price. Main Source: http://conversionxl.com/pricing-experiments-you-might-not-know-but-can-learn-from/ Decoy Pricing: http://www.ted.com/talks/lang/en/dan_ariely_asks_are_we_in_control_of_our_own_decisions.html No Dollar Sign: http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-15048.html Size Matters: http://www.cbsnews.com/8301-505144_162-41541822/pricing- psychology-7-sneaky-retail-tricks/?tag3mwuser Delete Free Plan: http://www.softwarebyrob.com/2010/08/18/why-free-plans-dont-work/ Bracketing: http://thinktraffic.net/most-common-pricing-mistake Credits Brought to Blog Growth you by www.blog-growth.com Infographic imagineered by Socially Sorted www.sociallysorted.com.au upgrade ...