How to Use Pricing Psychology to Generate Sales
Monday, December 07, 2015
No matter
the market, developing a pricing strategy is essential for ensuring something
sells. However, the price can't be determined based solely on what the seller
hopes to get for it; there are a variety of factors that come into play,
including demand and the current market atmosphere. There are a number of psychological tricks that come
into play, as well.
Pricing Based on Market
In some
situations, you can price a product as high as you want -- and no one will buy
it unless they are stupid. For example, a real estate agent would advise
homeowners against pricing a home $200,000 over the market price. If the homes
on a street are identical, but one is priced much higher, it may attract more
initial interest; after all, buyers are curious. However, once they realize it
has no advantage over any of the competitors, they will certainly settle on the
lower priced options.
Pricing Based on Competition
Another
strategy for pricing something to sell is based on the price the competition
sells for. This is a common retail strategy; store A will offer a product for
one price, while store B offers it for several dollars less. In most cases,
store B will have the market for that product because of the pricing
difference. The only time customers would choose to buy at Store A would be due
to convenience. Of course, there are downsides to this: the profit margins
usually end up being very narrow. The 'race to the bottom' tactics only benefit
consumers, not businesses.
Pricing Based on Loyalty
This is
often called a penetration strategy. A
company will sell a very high-quality product at a price much lower than the
competition would. This is most often used for smaller companies trying to
break into an industry dominated by giants; it allows them to get a wedge of
the market share without offering any initial innovation, but through building
customer loyalty, they're able to build slowly until they can compete with the
bigger players.
Loss Leaders
This price
strategy definition is sometimes called promotional pricing. Because the
business doesn't make any profit off the initial sale, it's called a 'loss
leader' -- it brings customers in to purchase other products that will turn a
profit. The initial purchase is just to capture their interest. As a result,
the original product is usually priced much lower than the market is asking.
Using an 'Almost' Price
This
tactic is exceedingly common. Companies will price a product at $4.99 instead
of $5, but because it isn't quite $5, customers don't see it as so great an
expense. It's a simple way to trick the brain into believing a product actually
costs significantly less than it does, even if the actual price difference is
only one cent off.
These four
pricing strategies in marketing examples should help you better understand how
to implement them into your own business. By using smart pricing strategies and
psychologies, you can begin to generate sales even if there are far stronger
competitors against you.
This post
comes from Sarah, an inspirational writer who is taking QLD real estate course
online at NREL Australia to grow her marketing career. She is
part of crews at a specialized training center for the real estate industry,
working with entrepreneurs and small business owner to upskills and achieve
results that raise the standards of professionalism and respect in the Real
Estate industry.
Marketing Blog founder and top-selling author Michael Fleischner has been featured on The TODAY Show, ABC World News, and Bloomerg Radio. 
0 comments :
Post a Comment
Please note that we reject all posts that clearly are leaving a comment simply to acquire a back link. Only comment if you have something of value to share with other readers.
Thanks!