Effective Price Anchoring Strategies
You can get super-deep into the psychology behind price anchoring, which is simply offering your audience a focus price based on the fact that they tend to remember and rely on the first piece of information that they see. You often see this when a business offers a pricing table with three or four different choices.
That first piece of information that the audience sees is the anchor. Using price anchoring can help your audience feel like they’re getting a good deal and like they had a choice. It helps your customer feel like they are winners, and it’s a win-win for you too. To ensure that you practice effective price anchoring strategies, follow these tips.
Understand the Psychology
Start with a High Price
Always start with a high price in your sales copy to get your audience thinking about a higher price before you tell them about your actual price. Even if your item is still high priced, if it’s lower than the initial number you put in their head then they’re going to feel like they’re getting a bargain.
Drop the Price but Not Really
A great way to present your price is to use so-called manufacturer suggested retail price, or an
y number you want if your product is unique. If you can find a super-high priced item to compare it to, that will work too.
Add On Value
Always add on as much value as you can to anything you offer anyone. If you’re mowing grass, make sure you sweep up the mess. If you’re offering a service, do a little extra to wow your customer. If you’re offering a product, make sure the packaging is special. Whatever you can do to make it seem worth more can make a huge difference in perception.
Remember That Price Is Relative
As a business owner, if you price in the traditional way using costs and traditional markup as a factor, you could be leaving money on the table. Instead, use that as a starting point and then price according to value and based on who your audience is. You can often charge more with this in mind.
Show Other Prices on Similar Items
Even if you provide a service, you can put a price in your audience’s mind by stating that similar items / services usually cost xyz amount before telling them your amount. This puts a larger price in their head before they see the real price.
Use Package Comparisons
This works really well on memberships, monthly software fees, monthly memberships on products and even services. This is usually shown in a chart form where one of the choices is the package solution, which seems less expensive next to the anchor prices.
Don’t Discount the Value of Your Offering
One thing you want to be careful about doing is discounting your value so much that you set a new price anchor in the minds of your audience. You want them to be accustomed to well-priced, high value items from you.
Effective price anchoring works really well if you give it some thought and think outside of what you’ve learned about pricing. Lower is not always better, and do not start with low. Start with really, really high, and then display high to get the best from your products and services.
Finding Your Perfect Price Point
One of the first things you’ll need to do when you create a product or service is determine how you’re going to price it. There are a lot of thoughts about pricing and none of them are right or wrong. How you price is up to you. But, think about using a method that considers value and not just how much it cost you. This is one of the best ways to come up with the perfect price point.
Know Your Audience
You have to know everything you can about your audience, including how much money they have to spend on extra items in their budget each month. When you understand your audience you’ll not only know what type of products they need, but also how much they’re going to be willing to pay for them.
Identify Your Direct Costs
You must always cover your costs in any pricing method, because if you don’t you’ll lose money. So a great place to start is figuring out the direct cost of your product. But, if your product is digital, it’s going to be somewhat relative. For example, it might cost you 500 dollars to have the product created but you’ll not have individual per item costs to consider in your pricing.
Identify Your Indirect Costs
Sometimes there are costs such as marketing, advertising and other indirect costs that you should consider adding. For example, if you’re teaching a course that you had to get a Master’s Degree to understand, then you can add in something for your education.
Identify Your Competitors’ Prices
Take a look at your best competition’s prices. It’s more than likely that this price is something you should consider being around, because if your competitor is successful it’s a price point that’s working. However, you never want to get into a situation where you’re competing on price. You want to compete on value.
Consider the Market
The market plays a huge role in pricing for pretty much every product. If you have a digital product, this is especially great for you because you don’t have incremental costs like you do with a physical product.
Understand the Value of Your Offering
Ensure It’s Worth Your While
If the price you come up with feels too low, then raise it. You want the work that you do to be pleasurable for you too. If you under-price your offerings, you’re going to end up resentful instead of happy.
Test Different Prices
When you come up with a price point, try testing different prices. You can do this by having different sales pages, or you can do it by offering different levels of service on one page with the various price points.
When you come up with your perfect price point, you’ll be able to work less and make more money. The reason is that your buyers are focused on the value of your offering and you don’t have to concern yourself with selling high volumes if the price is right.