Mar
18
The Psychology of Pricing – How to Position Your Products to Sell
Filed Under Internet And Businesses Online | Leave a Comment
Cara Lumen asked:
In his article “Pricing tips for selling in a tough market” in the Wall Street Journal, Jonathan Clements presented pricing tips for the difficult housing marketing. Using this universal psychology of pricing I have translated his concepts to help you price your products to sell.
Make your first number count
Have you noticed how $4.99 looks like and feels like a lot less than $5.00? Manoj Thomas, a marketing professor at Cornell University’s Johnson Graduate School of Management explains, “We read from left to right so we anchor our judgment on the first thing we see. We make that judgment in a fraction of a second.” A $99 home study course will look more affordable than a $100 one. A $124.75 teleclass series will feel like a better bargain than the same one at $125. Pay attention to number on the left. It’s the one your prospect will remember.
Make effective price comparisons
One study of price comparisons found that, if the left digits are the same, buyers will focus on the right hand numbers. Thus an ebook at $12.75 feels a lot more expensive than one at $12.54. Have you ever been on Amazon ordering a book from an outside source? The prices vary by only one penny, but you inevitably go for the cheapest one. We love bargains.
It also turns out that buyers perceive the discount to be larger if those numbers on the right are declining from two to one rather than from nine to eight. Go figure.
Sometimes comparisons get out of hand. Have you ever been on a sales page that says you are getting $3,572 worth of bonuses? I personally don’t need that much information, so it is a comparison that is not compelling to me. But if you tell me there is an Early Bird Special in which a $125 teleclass I’m considering is available for $99 I may jump on it. And you know what, that’s a 20% savings. Which number did you respond to – the dollar amount or the percentage amount? I’m a dollar and cents type of person but it doesn’t hurt to use both in your copy providing it’s a good percentage drop.
What is a reasonable price?
The best way to make a pricing decision has never been determined. There are guidelines, but no easy to apply rule. Obviously you want to be within the range your market dictates. When I priced my first ebook, a colleague said, “Oh well, you can always offer a discount.” I knew then that I had priced it too high. You may not be able to sell an ebook for $29.95 since you are probably sitting there with a bookshelf full of very informative hard cover business books that average $12 each. It’s very common to look at the amount of effort that went into creating your product and over price it.
Another decision is what your target market can afford. Eckhart Tolle prices his book A New Earth: Awakening to Your Life’s Purpose at $7.70. In doing so he made it available to anyone who wants it. He wants to get his message out. And it will be since he’s an Oprah book club selection. Suze Orman felt so strongly about getting her message to women that for 24 hours she recently gave away a free PDF of her book Women and Money also through Oprah. If you have a book that you want to reach as many people as possible, keep it in a price range that will entice them.
Another consideration is that academics are used to paying more for a text book than the average reader. Research your market and stay within a reasonable price range for those you want to buy your product and services.
Do you want to convey quality or a bargain?
An interesting discovery about the psychology of pricing is that a round number will convey quality. A precise number will indicate a bargain. Vicki Morwitz, a marketing professor at New York University’s Stern School of Business says that’s because we associate precise numbers with lower-priced products. A precise number also indicates you have given a lot of thought to your pricing. Look at Amazon prices, the last two numbers are all sorts of un-rounded numbers – $14.37, $12. 64. It makes you feel like you are really getting a bargain because you assume they have arrived at those prices in order to be the lowest source for that product.
Make the discount easy to calculate
Make it easy for your buyer to relate to the price cut. If it is difficult to do the math, they will perceive the savings as small. A drop from $149.85 to $127.48 taxes anyone’s math skills. But with a drop from $149.85 to $129.85 you can see a $20 savings. And in a drop from $150 to $130 the $20 savings is extremely clear.
Instead of cutting prices, add bonuses
In my coaching practice I have two ways for people to pay for my major package. They can pay in two payments, or if they pay in one payment, they get a bonus of four of my ebooks that are related to what they will be doing in our coaching sessions. My reasoning? Every time a prospect pulls out her credit card, she has the opportunity to reconsider the purchase. Fortunately my shopping cart can automatically charge monthly payments but my clients have an opportunity for some valuable bonuses if they pay in full. What kind of added value can you add to your bundles?
Don’t stay married to your price
Price your product or service reasonably and if it doesn’t sell lower your price. If it rushes out the door, consider raising your price. You could easily do some split testing by having identical sales pages with different prices and send half your list to one and half to the other and monitor the results.
Give it time
It takes prospects as many as nine exposures before they purchase. That’s why building your list is vital to your success. An opt in list gives you permission to market. The prospects are willing to hear from you again. Through emagazines and special offer promotions, you will have time to speak to them often enough to build their trust and get ultimately them to purchase.
One last thought on information products
An information product is not your business, it is an adjunct to your business. It enhances your expert status, it lets people move up your marketing funnel. When people come to me for help in developing an information product, I make certain they have a strong name capturing system in place on a compelling web site with strong content that stimulates conversion. Laying that strong foundation is paramount to your success. Then you can create all the products you wish and use the psychology of pricing to position your products to sell.
Kelly
In his article “Pricing tips for selling in a tough market” in the Wall Street Journal, Jonathan Clements presented pricing tips for the difficult housing marketing. Using this universal psychology of pricing I have translated his concepts to help you price your products to sell.
Make your first number count
Have you noticed how $4.99 looks like and feels like a lot less than $5.00? Manoj Thomas, a marketing professor at Cornell University’s Johnson Graduate School of Management explains, “We read from left to right so we anchor our judgment on the first thing we see. We make that judgment in a fraction of a second.” A $99 home study course will look more affordable than a $100 one. A $124.75 teleclass series will feel like a better bargain than the same one at $125. Pay attention to number on the left. It’s the one your prospect will remember.
Make effective price comparisons
One study of price comparisons found that, if the left digits are the same, buyers will focus on the right hand numbers. Thus an ebook at $12.75 feels a lot more expensive than one at $12.54. Have you ever been on Amazon ordering a book from an outside source? The prices vary by only one penny, but you inevitably go for the cheapest one. We love bargains.
It also turns out that buyers perceive the discount to be larger if those numbers on the right are declining from two to one rather than from nine to eight. Go figure.
Sometimes comparisons get out of hand. Have you ever been on a sales page that says you are getting $3,572 worth of bonuses? I personally don’t need that much information, so it is a comparison that is not compelling to me. But if you tell me there is an Early Bird Special in which a $125 teleclass I’m considering is available for $99 I may jump on it. And you know what, that’s a 20% savings. Which number did you respond to – the dollar amount or the percentage amount? I’m a dollar and cents type of person but it doesn’t hurt to use both in your copy providing it’s a good percentage drop.
What is a reasonable price?
The best way to make a pricing decision has never been determined. There are guidelines, but no easy to apply rule. Obviously you want to be within the range your market dictates. When I priced my first ebook, a colleague said, “Oh well, you can always offer a discount.” I knew then that I had priced it too high. You may not be able to sell an ebook for $29.95 since you are probably sitting there with a bookshelf full of very informative hard cover business books that average $12 each. It’s very common to look at the amount of effort that went into creating your product and over price it.
Another decision is what your target market can afford. Eckhart Tolle prices his book A New Earth: Awakening to Your Life’s Purpose at $7.70. In doing so he made it available to anyone who wants it. He wants to get his message out. And it will be since he’s an Oprah book club selection. Suze Orman felt so strongly about getting her message to women that for 24 hours she recently gave away a free PDF of her book Women and Money also through Oprah. If you have a book that you want to reach as many people as possible, keep it in a price range that will entice them.
Another consideration is that academics are used to paying more for a text book than the average reader. Research your market and stay within a reasonable price range for those you want to buy your product and services.
Do you want to convey quality or a bargain?
An interesting discovery about the psychology of pricing is that a round number will convey quality. A precise number will indicate a bargain. Vicki Morwitz, a marketing professor at New York University’s Stern School of Business says that’s because we associate precise numbers with lower-priced products. A precise number also indicates you have given a lot of thought to your pricing. Look at Amazon prices, the last two numbers are all sorts of un-rounded numbers – $14.37, $12. 64. It makes you feel like you are really getting a bargain because you assume they have arrived at those prices in order to be the lowest source for that product.
Make the discount easy to calculate
Make it easy for your buyer to relate to the price cut. If it is difficult to do the math, they will perceive the savings as small. A drop from $149.85 to $127.48 taxes anyone’s math skills. But with a drop from $149.85 to $129.85 you can see a $20 savings. And in a drop from $150 to $130 the $20 savings is extremely clear.
Instead of cutting prices, add bonuses
In my coaching practice I have two ways for people to pay for my major package. They can pay in two payments, or if they pay in one payment, they get a bonus of four of my ebooks that are related to what they will be doing in our coaching sessions. My reasoning? Every time a prospect pulls out her credit card, she has the opportunity to reconsider the purchase. Fortunately my shopping cart can automatically charge monthly payments but my clients have an opportunity for some valuable bonuses if they pay in full. What kind of added value can you add to your bundles?
Don’t stay married to your price
Price your product or service reasonably and if it doesn’t sell lower your price. If it rushes out the door, consider raising your price. You could easily do some split testing by having identical sales pages with different prices and send half your list to one and half to the other and monitor the results.
Give it time
It takes prospects as many as nine exposures before they purchase. That’s why building your list is vital to your success. An opt in list gives you permission to market. The prospects are willing to hear from you again. Through emagazines and special offer promotions, you will have time to speak to them often enough to build their trust and get ultimately them to purchase.
One last thought on information products
An information product is not your business, it is an adjunct to your business. It enhances your expert status, it lets people move up your marketing funnel. When people come to me for help in developing an information product, I make certain they have a strong name capturing system in place on a compelling web site with strong content that stimulates conversion. Laying that strong foundation is paramount to your success. Then you can create all the products you wish and use the psychology of pricing to position your products to sell.
Kelly
Jan
20
How Comparison Shopping Engines Are Innovating
Filed Under Internet And Businesses Online | Leave a Comment
Jasmeet Sawhney asked:
I always get into an argument with a friend who works at a first generation Comparison Shopping Engine (CSE). My opinion that CSEs need to do much more than just provide price comparisons does not fare well with him. His mantra – “Get shoppers in and out as quickly as possible and run with your cut”. Until recently, no one seemed interested in engaging shoppers, or providing better experiences. But, what my friend doesn’t realize is that the CSE world is changing. What was once considered taboo is soon going to become a hygiene factor. And, new breed of Comparison Shopping Engines are leading the charge to see about this change.
Some first generation CSEs: Shopping.com, Nextag, Shopzilla, MSN Shopping, Yahoo! Shopping, PriceGrabber and Google.
Some second generation CSEs: Become, Pronto, Shopwiki, Smarter, Shop.com, Bing, TheFind and Retrevo.
Here’s what is changing at CSEs:
Content – New CSEs are focused on providing a one-stop shop complete with user reviews, expert reviews and videos. It is clear that providing relevant content produces qualified traffic that in turn has higher conversion rates. Players like Retrevo also provide product manuals and I like the way they summarize reviews. Bigger players like Google and Bing are improving as well with integration of product images, reviews and multiple site links (Google) in their search results.
Social – Community features on comparison shopping sites are bridging the gap between CSEs and social shopping sites. These features empower users to rate/review products and get advice from peers and like-minded people. Social Sharing and Facebook Likes have become ubiquitous, but integration with social networks is still evolving with Facebook launching new products every few weeks.
Deals/Coupons – Shoppers have gotten used to shopping with coupon codes, which makes this feature an important value-add. An example is Ask.com that started offering this feature to save shoppers the extra step of hunting coupon sites.
Localized results – It is rare to find an in-store shopper who hasn’t done some research online, especially in popular product categories. Visiting comparison shopping sites is an important part of this research and ability to lookup local results along with availability information adds to this experience.
Mobile – With the potential to transform the in-store shopping experience, possibilities with mobile are endless. Many shoppers today use CSEs to compare prices while in-store and to shop on-the-go. Mobile is the new frontier for any retail operation. CSEs have taken note of this and are developing rich mobile experiences.
Business model – Most new CSEs offer a CPA model that is conducive to retailers. Even bigger-older players including Google (Product Listing Ads) have started offering CPA instead of PPC.
Over the last year, Google and Bing have turned up the heat as they compete with each other on their eCommerce offerings. They are increasingly evolving into shopping marketplaces leaving CSEs no choice but to innovate. Most first generation CSEs (now owned by large organizations) have failed to catch up and are constantly losing traffic to second generation CSEs and bigger players that continue to improve (Google, Bing, Amazon). CSEs now have to answer a very different question, which is ‘where to buy’ instead of ‘what to buy’. There is no doubt that in the next few years we’ll see demise of some big first generation CSEs due to their failure to embrace these changes. Comparison shopping has moved beyond simple price comparisons to a one-stop shopping experience.
Ray
I always get into an argument with a friend who works at a first generation Comparison Shopping Engine (CSE). My opinion that CSEs need to do much more than just provide price comparisons does not fare well with him. His mantra – “Get shoppers in and out as quickly as possible and run with your cut”. Until recently, no one seemed interested in engaging shoppers, or providing better experiences. But, what my friend doesn’t realize is that the CSE world is changing. What was once considered taboo is soon going to become a hygiene factor. And, new breed of Comparison Shopping Engines are leading the charge to see about this change.
Some first generation CSEs: Shopping.com, Nextag, Shopzilla, MSN Shopping, Yahoo! Shopping, PriceGrabber and Google.
Some second generation CSEs: Become, Pronto, Shopwiki, Smarter, Shop.com, Bing, TheFind and Retrevo.
Here’s what is changing at CSEs:
Content – New CSEs are focused on providing a one-stop shop complete with user reviews, expert reviews and videos. It is clear that providing relevant content produces qualified traffic that in turn has higher conversion rates. Players like Retrevo also provide product manuals and I like the way they summarize reviews. Bigger players like Google and Bing are improving as well with integration of product images, reviews and multiple site links (Google) in their search results.
Social – Community features on comparison shopping sites are bridging the gap between CSEs and social shopping sites. These features empower users to rate/review products and get advice from peers and like-minded people. Social Sharing and Facebook Likes have become ubiquitous, but integration with social networks is still evolving with Facebook launching new products every few weeks.
Deals/Coupons – Shoppers have gotten used to shopping with coupon codes, which makes this feature an important value-add. An example is Ask.com that started offering this feature to save shoppers the extra step of hunting coupon sites.
Localized results – It is rare to find an in-store shopper who hasn’t done some research online, especially in popular product categories. Visiting comparison shopping sites is an important part of this research and ability to lookup local results along with availability information adds to this experience.
Mobile – With the potential to transform the in-store shopping experience, possibilities with mobile are endless. Many shoppers today use CSEs to compare prices while in-store and to shop on-the-go. Mobile is the new frontier for any retail operation. CSEs have taken note of this and are developing rich mobile experiences.
Business model – Most new CSEs offer a CPA model that is conducive to retailers. Even bigger-older players including Google (Product Listing Ads) have started offering CPA instead of PPC.
Over the last year, Google and Bing have turned up the heat as they compete with each other on their eCommerce offerings. They are increasingly evolving into shopping marketplaces leaving CSEs no choice but to innovate. Most first generation CSEs (now owned by large organizations) have failed to catch up and are constantly losing traffic to second generation CSEs and bigger players that continue to improve (Google, Bing, Amazon). CSEs now have to answer a very different question, which is ‘where to buy’ instead of ‘what to buy’. There is no doubt that in the next few years we’ll see demise of some big first generation CSEs due to their failure to embrace these changes. Comparison shopping has moved beyond simple price comparisons to a one-stop shopping experience.
Ray
Sep
14
Ian D Spencer asked:
Selling online is no easy feat especially in a growing online market. Gone are the days when just having a website meant that you stood a chance of selling your products, to gain good visibility you must consider the following:
SEO (Search Engine Optimisation) Social Media PPC (Pay Per Click) campaigns
Once you have started to become visible and attract visitors you really need to think about what they will experience once there and what they will expect. You will want to get your conversion rate as high as possible because there really is no point in attracting a thousand visitors and selling only one item.
Here are the top five tips for successful selling online:
Price Comparison
The internet is like no other place as customers can make many price comparisons on the same product from different retailers in minutes. This makes your price very important indeed because if you are one of the highest selling prices online you will not get many sales. By simply performing weekly price comparisons you can check exactly what your competitors are up to and adjust your prices and offers accordingly.
Free Delivery
Consider offering free delivery to your customers, this way they won’t get a nasty sting when they go to checkout. Most people leave the checkout area if they deem a delivery charge to be too high. The free delivery charge can be factored into your selling price if it hits your bottom margin too much but be careful to not break tip number one in the process.
Checkout Options
Give the customer checkout options such as PayPal, Google checkout and World Pay. Customers may already have an online account with merchants such as PayPal and they may even have credit. This gives them the option of a one or two click checkout adding speed to your websites process.
Good Product Range & Sizes
This goes without saying; if your product range is poor then you will struggle. You need to be able to offer many products in many ranges to keep customers engaged in the website. The other issue is having good stock levels of sizes so that customers can get what they need. This isn’t always possible but the better your stock the more sales you will get; you cannot run it on a shoe string.
Contact Details
Let your customers trust you by offering as many contact points as possible, this can be email addresses, telephone numbers, contact forms and even live help. The more options given the more the customer thinks “Well if something goes wrong there are lots of ways to get hold of them”. Build trust and rapport with your customers even if you cannot see them and they will come back in future and also tell their friends of their great experience.
Rhonda
Selling online is no easy feat especially in a growing online market. Gone are the days when just having a website meant that you stood a chance of selling your products, to gain good visibility you must consider the following:
SEO (Search Engine Optimisation) Social Media PPC (Pay Per Click) campaigns
Once you have started to become visible and attract visitors you really need to think about what they will experience once there and what they will expect. You will want to get your conversion rate as high as possible because there really is no point in attracting a thousand visitors and selling only one item.
Here are the top five tips for successful selling online:
Price Comparison
The internet is like no other place as customers can make many price comparisons on the same product from different retailers in minutes. This makes your price very important indeed because if you are one of the highest selling prices online you will not get many sales. By simply performing weekly price comparisons you can check exactly what your competitors are up to and adjust your prices and offers accordingly.
Free Delivery
Consider offering free delivery to your customers, this way they won’t get a nasty sting when they go to checkout. Most people leave the checkout area if they deem a delivery charge to be too high. The free delivery charge can be factored into your selling price if it hits your bottom margin too much but be careful to not break tip number one in the process.
Checkout Options
Give the customer checkout options such as PayPal, Google checkout and World Pay. Customers may already have an online account with merchants such as PayPal and they may even have credit. This gives them the option of a one or two click checkout adding speed to your websites process.
Good Product Range & Sizes
This goes without saying; if your product range is poor then you will struggle. You need to be able to offer many products in many ranges to keep customers engaged in the website. The other issue is having good stock levels of sizes so that customers can get what they need. This isn’t always possible but the better your stock the more sales you will get; you cannot run it on a shoe string.
Contact Details
Let your customers trust you by offering as many contact points as possible, this can be email addresses, telephone numbers, contact forms and even live help. The more options given the more the customer thinks “Well if something goes wrong there are lots of ways to get hold of them”. Build trust and rapport with your customers even if you cannot see them and they will come back in future and also tell their friends of their great experience.
Rhonda
Jul
27
Adam Jaylin asked:
The concept of price comparison has taken the online market by storm. And the popularity of this method is justified as well. Comparison shopping makes it really easy and convenient for anyone to find the best deal out all that are available in the market. The consumer is able to find the best available deals on a single platform, allowing the user to pick and choose the various packages in accordance with their requirement and suitability. The online market is flooded with a plethora of products and services and it becomes really tough for the normal user to hunt and select the best possible offer on the Internet.
So, in order to ease out the hassles of the ordinary consumer, the online retailers coined the concept of price comparison, that finds the best offers, list them under one e-shop and creams out the best deals and displays it for consumers that can be easily used. Normally, the comparison is done according to a particular product and service, that are placed before the user and he can choose the best deal out of it. However, the transparency and the procedure of any comparison portal should be taken into consideration while deciding your buy. There are some portals that are not as good in offering deals than others. So the focus should be finding the right place for comparison that in turn would help you locate the right kind of deal.
These price comparison websites could easily be located on the World Wide Web with the help of the various search engines. There are also some reputed players in the field of comparison shopping that promise to give you the best comparison. Further, the user should be wise enough to consult more than one comparison shopping portal before freezing his final deal. However, a lot of justifications have also come across that claim that there isn’t a much difference between the deals and it is futile to watch out for more than one comparison website. But, it is wiser still to be on a safer side and look out for other options as well.
Thus comparison shopping, if done with adequate research and analysis could be really helpful for your deal.
Ruby
The concept of price comparison has taken the online market by storm. And the popularity of this method is justified as well. Comparison shopping makes it really easy and convenient for anyone to find the best deal out all that are available in the market. The consumer is able to find the best available deals on a single platform, allowing the user to pick and choose the various packages in accordance with their requirement and suitability. The online market is flooded with a plethora of products and services and it becomes really tough for the normal user to hunt and select the best possible offer on the Internet.
So, in order to ease out the hassles of the ordinary consumer, the online retailers coined the concept of price comparison, that finds the best offers, list them under one e-shop and creams out the best deals and displays it for consumers that can be easily used. Normally, the comparison is done according to a particular product and service, that are placed before the user and he can choose the best deal out of it. However, the transparency and the procedure of any comparison portal should be taken into consideration while deciding your buy. There are some portals that are not as good in offering deals than others. So the focus should be finding the right place for comparison that in turn would help you locate the right kind of deal.
These price comparison websites could easily be located on the World Wide Web with the help of the various search engines. There are also some reputed players in the field of comparison shopping that promise to give you the best comparison. Further, the user should be wise enough to consult more than one comparison shopping portal before freezing his final deal. However, a lot of justifications have also come across that claim that there isn’t a much difference between the deals and it is futile to watch out for more than one comparison website. But, it is wiser still to be on a safer side and look out for other options as well.
Thus comparison shopping, if done with adequate research and analysis could be really helpful for your deal.
Ruby