🧠 Pricing Psychology: 3 Tactics to Boost Sales

Hey there,

Welcome back to the 25th edition of Brandish,

Your guide to crafting an iconic brand.

This week, I want to discuss a crucial yet challenging topic: Pricing.

Pricing matters for two reasons:

A) Setting the wrong price point can be the sole reason your business has no margins.

B) Pricing is the single biggest lever you can use to influence your product's demand.

So, let's explore some pricing strategies and the psychology behind them.

Before we dive in, a quick note:

Some of these strategies might seem "basic," and you might think, "I already knew that."

However, many of you have set your price and forgotten about it. While these concepts are simple, most don't A/B test them.

This newsletter is your cue to start.

Two last things…

1. Our Chew On This founder dinner event last week in NYC was a HUGE success. If you want to see if there’s an event near you soon, check out the rest of the event schedule to see all we have planned this year.

2. We talk about these pricing topics and so much more to all kinds of entrepreneurs, founders, and just all around awesome people on the Chew On This podcast. Go watch the latest episode here.

Now that we have that all done, kick your feet up, grab your Brez, and let's roll!

Price Strategy 1: Charm Pricing

Why are you more likely to buy something for $4.99 instead of $5?

Though there's only a penny difference, $4.99 appears much cheaper. Here are a few reasons why:

1. Customers perceive $4.99 as closer to four dollars than five.

2. Consumers often remember only the first digit of a price. So, they might recall $5.99 as $5 or $5.90.

3. Consumers view odd pricing as the lowest possible price.

Price Strategy 2: Anchoring

Anchoring is straightforward.

The first price you show sets the stage for what consumers expect the product to cost. For example, if the normal retail price is $1,000, a $500 price tag becomes the anchor.

The $500 seems like a better deal because it's compared to the initial $1,000, whereas, without a reference price, it wouldn't have the same impact.

Price Strategy 3: Decoy Pricing

Decoy Pricing nudges customers towards a specific choice by introducing a third option that makes the desired option more attractive.

Consider three coffee cups:

Small: $4

Medium: $4.50

Large: $4.99

Here, the Medium cup is the decoy. It's slightly more expensive than the Small but doesn't offer much more value.

The Large, priced just 49 cents more than the Medium, offers significantly more coffee, making it a more attractive option. Customers think, "For just 49 cents more, I get a Large cup. That's a great deal!" This makes the Large cup, the target product, more appealing.

Thanks for reading along.

That's all for this week's newsletter. I aimed to keep it short, sweet, and tactical for easy consumption, digestion, and implementation.

Have a great weekend, and I look forward to serving you again next week.

All the best,

Ankit