The 5 Rules of Pricing: Price Psychology

This blog entry was posted on November 11, 2009.

Pricing strategies are about encouraging predictable irrational buying behavior. Buying is an emotional decision while shopping is a rational activity. When people buy, they decide based on the relative advantages. Pricing is a key part the buying decision. This applies as much to Internet marketing as in traditional marketing.

1. Rule of Odds: For some reason odd numbers seem more appealing in sales letters and pricing than even ones. “The Five Highest Earning Investments Ever” sounds more enticing than “The Six Highest Earning Investments Ever.” Books will tout 101 ways to… rather than 100. An odd number seems to leave you hanging and poised for action. Even numbers have balance while odd numbers seem unfinished and encourage action.
2. Rule of 7s: Prices that end in seven will convert better than any other number. For whatever reason, response rates are higher and conversion rates are better for prices that end with a 7. If you are pricing your product near $300, then $297 will outperform $299 or $295.
3. Rule of Price Influence: Consumers automatically assume that higher the prices mean higher quality. Sellers should use price to position their product within the market. Cheap pricing is usually interpreted as low quality.
4. Rule of Decoy Pricing: People will buy the best deal, so make the choice obvious.  Introduce one product to stimulate the sales of another. If you add an inferior product at the same price or a much higher priced product that is only slightly better, people will flock to the better deal.
5. Rule of Anchor Pricing: The very first price that a buyer sees becomes the baseline for all other comparison. The anchor price becomes the amount they are willing to pay. They will measure all other prices or products against this. That is why you always present the highest priced product first and less expensive versions afterward. This is why elevator pricing (show the lowest price item first) does not work.

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Related posts:

1. Do Sale Prices Make your Product Look Cheap?
2. 2 Rules of Business Web Design
3. Developing Your Website Selling Process
4. How to Grow Your Business during a Recession
5. Is it Jedi Mind Tricks or Website Design Psychology?

Filed under: Internet Marketing

This entry was posted on Wednesday, November 11th, 2009 at 5:42 am and is filed under Internet Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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1. Wow, Doug, really interesting stuff here.

   The first two list items blew my mind, especially the rule of 7′s.

   Comment by Adam Bullock — November 11, 2009 @ 9:40 am

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