Pricing psychology is a strategy that should never be underestimated–especially in the competitive world of ecommerce.
There are different strategies to achieve increased revenues, but in this article, we'll be specifically unraveling the influence of pricing psychology. How you price your products can significantly influence consumer behavior and purchasing decisions. We’ll be taking a look at the key principles of pricing psychology and how online shop owners can leverage them to increase conversions and drive growth.
The Charm of the Left Digit
Imagine the magic of transforming consumer perception with just a single-digit change. Consumers tend to perceive prices as significantly lower when the left digit changes. That’s why you can make your products appear irresistible just by pricing them at $9.99 instead of $10. That single cent creates an impression of a bargain. Embracing the “left-digit effect” strategy will make your offerings more affordable and encourage customers to make a purchase even faster.
The Power of Comparative Pricing
Comparative pricing leverages the human tendency to evaluate prices in relation to other options. By presenting multiple pricing tiers, ecommerce stores can guide customers toward a desired option. For instance, offering a “basic,” “standard,” and “premium” pricing plan makes the middle-tier option seem more attractive. And showing a higher-priced option can make the lower-priced option appear more affordable and compelling. Comparative pricing enables ecommerce businesses to effectively steer customers to their perfect product and boost your average cart value in the meantime. (yay!)
Anchoring and Decoy Pricing
Anchoring is a psychological term that refers to customers relying on the first piece of information presented to them when making decisions. So how do you put it to work in your online store? You introduce a higher-priced item (called a decoy) first. That way, your customers will see other, lower-priced products as more reasonable. Using this strategy can influence customer decisions, moving them towards your high-value products.
The Allure of Free Shipping
The secret is definitely out of the bag by this point: we all like free shipping. And yep—we’re usually willing to pay a higher price overall if we get to have whatever item we’re buying shipped to us, right? And it’s not hard for you as an online shop owner to offer no-cost shipping. All you need to do is incorporate the shipping cost into the price of whatever item you’re selling. If the normal price of the item you’re selling would be…say…$15, and you charge $5 in shipping, many of your customers will shy away. But you could charge $20—or even $21—by adding the selling into the price, and they don’t blink! Even though the overall price may remain the same or even be a smidge higher, the perception of getting something for free is a strong motivator for a bunch of online shoppers.
Implementing free shipping thresholds, where customers must spend a certain amount to qualify for free shipping, can also increase average order value. You read that right: shoppers will buy more (and spend more) to get the threshold needed to get their products shipped at zero cost. I admit that I've been ready to check out after putting items into my online cart, then see that I'll get free shipping on the whole thing if I spend $3 more. I comb through the site looking for a $3…or $4…or even $5 item to add to my cart just so I can get it sent to me at no cost. And I'm pretty dang sure I'm not alone! So when you add a reasonable threshold, prepare to witness a surge in sales and customer satisfaction.
Scarcity and Urgency
This is one of my favorites because I’ve seen it work repeatedly! Scarcity and urgency ignite a sense of FOMO in your customers, prompting them to make faster purchasing decisions. Limited-time offers, flash sales and countdown timers are tools that drive your customers to act, boosting conversions and reducing pesky cart abandonment issues.
Armed with the secrets of pricing psychology, you're poised to revolutionize your online shop’s success by influencing customer behavior. Charm pricing, comparative pricing, anchoring, and decoy pricing, free shipping, and scarcity and urgency are all used by companies of every kind to drive consumer behavior. (Psst! You might even have had them used on you!) Tailor them to your business and customers to catapult your conversion, boost your revenue and set your ecommerce business apart from the competition. You just might be surprised at what happens next!