Blast Conversions With These 5 Pricing Strategy Examples
I have an interesting story to share with you on price points and I hope it is going to shed a lot of light on how, we as people, interact to different price points and how as humans we quantify different price points and value in our decision-making.
This story on pricing and the overall idea for providing pricing strategy exmaples started when I was recently on a vacation with my family in Santa Monica, California. For those of you unfamiliar with the area, there is a famous pier (Santa Monica Pier) that is in essence an amusement park with rides, entertainment, restaurants, buskers, and beautiful views of the surrounding landscape.
A fun place.
Anyways, I went to get some ice cream for my eldest daughter (4 years old now), and I noticed something very bizarre about the pricing. In fact, so bizarre it inspire me to write this post because the effectiveness of this marketing was evident as it worked on me (even after approaching and think about this as a marketer).
If you look at the bottom of the image below, what do you notice about the price points under the "dippin' dots" section?
If you can see that the regular and large only being $0.50 apart, or 7% different in terms of price, then you noticed what I noticed right away.
It is not the first time I have seen pricing like this, but being in the online business space either as an affiliate marketer or and internet business owner, pricing is something that always has had a significant impact on conversions and user perception.
So I wanted to spend some time analyzing and putting my thoughts about pricing and different price points. I think this exercise in pricing can help you drastically with your affiliate marketing efforts, your product reviews/comparisons, as well as help you in many ways if you are running an e-commerce, drop shipping or you are a merchant yourself.
I am also going to give you some insights into other pricing methods that are subtle, but can have a huge impact on conversions and your ability to sell more efficiently (and more quantity) without any additional marketing effort. It's all about the pricing!
Strategy 1: Two Choices, With the Best Value Being Apparent
This is a prime case of two side by side prices, and the human instinct being able to immediately put the most value on the best value.
$7.50 is not a good price for a small container or ice cream pebbles. Far from it. But I was able to quantify purchasing that in my mind by comparing it to the lower priced item. In fact, I almost felt as though I "worked the system" by getting double the amount for only $0.50. I felt that I as the consumer made a smart purchasing decision that lead to me getting much more value from my purchase. I can assure you that 99.9% of the people that buy "Dippin Dots" are buying the Large size. It simply doesn't makes sense to buy the Regular one, even if you want Regular.
So the first lesson is, when you can clearly decide on a winner and when it appears to be an obvious value, you will make your decision with much more efficiency. I didn't need to 'waffle' about whether the Regular or the Large would be the right one for us, I immediately decide on the Large because it was a no-brainer.
I emotionally felt as though I got a pretty good deal because I made a smart purchasing decision, not even realizing the fact that I just spent $7.50 for a very small amount of ice cream.
Strategy 2: Introducing the Product at a Higher Price Initially, Then Lower
I always used to do this as a kid. If I wanted the newest basketball shoes, I would tell my mom some insane amount of money that they cost. I would say something like "$350", I would get a response like "that is ridiculous", then I would indicate that they were actually only $180 (which is still expensive for a basketball shoe).
I minimized the pain of the price point by saying something much higher first. LOL
But this is the reality and you see this approach on some of the most famous and successful infomercials out there. From the Foreman Grill, Slapchop, Shamwow to the "Set it and Forget" Ronco Rotisserie, they set you up at a much higher price point, then at the end of the infomercial when the hard sell comes you hear.
"These retail at $500. But we are in a good mood and we are not going to charge you $500...not even $400...not even $300...and NOT EVEN $200. For $149.99, you are going to get the amazing PRODUCT_HERE. BUT, that's not all. If you order within the next 30 minutes through our hot line, we are going to throw in the second PRODUCT_NAME for free!"
It is easy to minimize a price point when you first introduce a higher price or when you introduce two products with similar parity, one having a much higher price point (which I am going to get into within the next section).
Consumers are clumsy when it comes to determining value of something based on a "number". But the reality is that everything is priced with a financial dollar amount, thus leaving room for marketers, merchants an e-commerce stores, and affiliates to have some control over the consumerist behavior and the decisions they make.
Strategy 3: High Price Alongside a Low Price
As a marketer, you can do something very subtle to influence people's purchasing decision. It follows the same principles as the ice cream example I have given above.
People by virtue are price conscious. They make decisions to a great extent on the price first, alongside value, and quality. If you can introduce a similar product, with similar features and price points alongside a MUCH more expensive one that is overpriced, it will have a great impact on conversions.
Put a high priced affiliate product beside the one that you actually want people to purchase (and that is the best). If you are reviewing products/services in a particular niche or category, you can test putting something really expensive within your comparisons or breakdowns to exemplify the value of the more cost-efficient item.
There are high end or overpriced products/services in every industry, so it doesn't take much effort to find something like this.
Let's look at a few examples of this, just some I can give you some perspective and you can try to apprehend your own consumerist feelings towards "high vs. low" price comparison.
The first is a TV. You have an LED Smart TV by Phillips, a reputable brand, which gets great reviews in Amazon. Put that along side an the high end Samsung TV and the potential customer will really start to see the value.
Phillips 55" LED Smart TV - $699 VS Samsung 55" LED Slim Smart TV - $9,999
In the exercise and health world, there are many different programs, types of equipment, supplements, and services that you can leverage to try to get into shape. A very common way for people to get into shape is a Home Gym, but these can be very expensive as shown below.
Put that along side a dieting membership like eDiets, and your website visitor will be able to make a purchasing decision while maximize the idea of "value".
BodyCraft Galena Pro Home Gym - $13,771 vs. eDiets.com - $9.95 per month
And lastly, if you put two very similar dieting plans beside one another, you can also weigh the value purely based on price. The Weight Watchers plan includes more and includes actual products, but you can see how the impact of a product being priced at 350% can have.
eDiets.com - $9.95 per month vs. Weight Watchers $35.95 per month
I certainly don't advocate the idea of selling out the customer, in fact, quite the contrary.
As an affiliate marketers and authority site owner, you want to help your audience realize what else is out there and show them that you have done your research and due diligence...and you are showing them the most cost-efficient product possible.
Strategy 4: Discounts When Purchasing in Bulk
You have likely heard the term "Costco size", because this has become synonymous with "too much, but it was a good deal".
I remember in the early stages of Costco been successful, we will go in there as a family and end up buying 24 large muffins, a chip bag the size of me, a mustard container that would surely last a year.
Its human nature to want to discount, but we are also willing to spend more money if we can quantify it as being a deal. Similar to the idea of spending $0.50 more to get more ice cream, when you are in Costco you were willing to spend more money to get more something if it averages out to less.
It's not just Costco anymore. You or seen volume discounts in all types of stores, dollar stores, grocery chains.
First 5, Only $4.95 each (after that $5.95).
Buy 10 chocolate bars for $10. (when in actuality the price is $1.09 for the same item). As a result you end up buying nine more chocolate bars than you actually need, and the grocery store makes 8-9 times the revenue they would if you didn't invest that amount.
And this pricing strategy seems to be sticking and become more prevalent. Why? Because the words on you, and it works on me. Perhaps not every time that you see it, but over time it is going to increase your spending habits and ultimately you are going to be buying more of something that you don't need more of.
As a company, this is brilliant. As a consumer, this also seems brilliant because you feel as though you have beat the system and saved (or even made) money as a result.
Strategy 5: Discounts When Committing to a Longer Term
The last pricing strategy that I'm going to discuss is getting a discount, if you commit to a longer tenure. This is one pricing strategy that we use here at Wealthy Affiliate and it works very well.
As a premium member you can get a yearly discount on your membership. Instead of paying $49 per month, you can get $29 per month pricing if you pay for a year all at once (which works our to $359). People of the budget to do so, typically upgrade to the yearly membership simply because it makes more financial sense.
This is the common pricing strategy with membership/recurring based pricing in both the online and the off-line worlds.
For example, if I purchased my entire golf membership within one yearly payment, they offer a 10% discount on the entire year (basically a month membership for free).
The same with my gym membership, if I pay yearly they give me 12 months for the price of 10. So if I am paying $50 per month for gym membership, it is discounted by $100 on the year if I pay all at once.
Companies implement this pricing strategies so that they don't have dealt with ongoing "billing issues", but also so they can maximize the revenue per customer.
Customers highly benefit from doing this if they can budget for it because there is significant and deep savings often times through doing this.
You will find that almost EVERY recurring/membership based company will offer some sort of discount if you pay for a year or multiple years at once. It makes sense to both the company and the customers.
So when you are developing your pricing strategies on your website, for your business, or when comparing products/services on your blog, these are all variables that you should consider.
Customers do behave in predictable ways, once tested. Many of the biggest companies in the world have done the legwork for us and have tested and refined their campaigns to maximize conversions and revenue. As a result, we can leverage their models in our own affiliate marketing or ecommerce businesses.