The Art & Science of Effective Pricing
A top question for first-time entrepreneurs is just how to effectively price their products and services. Thankfully, there's an art and science to the process. Baker County Chamber of Commerce shares a few top tips to assure your shop visitors will become active and repeat buyers.
- Give 'em a decoy: A behavioral economist recently conducted a consumer study that involved offering three separate magazine subscription options to 100 MIT students. One was a web-only subscription for $59 and the other two were print and print+web subscriptions, both for $125. The vast majority of subscribers - 84 percent - bought the print+web subscription, even though it was significantly more expensive. Sixteen percent opted for the web-only subscription and no one chose the print-only option. Conventional wisdom would say to remove the $125 print-only option altogether, but that move resulted in an undesirable shift. More customers - 68 percent- choosing the cheaper web-only option. So, the middle-level option used as a decoy actually helped to effectively upsell customers.
- The Magic 9: For some reason, $99 seems a whole lot less than $100. Results of a study by the University of Chicago and MIT proved that theory by offering the same dress for sale at three different price points - $34, $39 and $44. More dresses sold at the $39 price point than either the pricier $44 or the cheaper $34.
- Nix the dollar sign and downsize: Two separate studies by Cornell University and New York's St. Andrew's Restaurant found that formatting menu item prices without using dollar signs resulted in customers voluntarily spending significantly more money. Another by Clark University and the University of Connecticut found that customers perceive sale prices to be better values when written in a small font. Need convincing? Consider that Neiman Marcus doesn’t use dollar signs to sell high-end, pricey items like Valentino handbags.
For more pricing tips, download the infographic below. And for ongoing business support, mentoring and networking, call 904-259-6433 and speak with a membership specialist at the Baker County Chamber of Commerce today.