The issue of pricing came up during a talk I gave the other day when I was asked about how you should present pricing tables on a web page. The questioner wanted to know how they could display pricing options on a web page to attract the most customers. The discussion then turned to the possibility that if you give people choices, they’ll opt for the lowest price.
No doubt you have various products and services available at a range of prices. For instance, if you are in the consultancy business you might have a low-priced one-off phone call providing basic assistance, right through to in-depth research and strategic planning at a much higher price. Similarly, if you are selling to consumers you will have various price points for different products or services – a typical shoe store, for example, will have shoes at low, mid and high prices. The problem for is that by having various price points we enable people to choose low-priced items.
Yet, consistent research shows that pricing is not one of the top criteria when it comes to choosing exactly what people will buy. Sure, it is a factor, but it is comparatively unimportant. However, price becomes an important factor in product choice when the business focuses the customer’s mind on price. So, for example, supermarkets compete on price, forever reminding us of the “fact” that they sell the lower priced items. When people go into their stores they shop with price in mind, looking for a penny saving here and a penny saving there. It all adds up to reduced profitability for supermarkets. If they stopped reminding us of prices, we wouldn’t focus on them so much….!
At the other end of the spectrum, go into a high-class jewellery store and try to count the price tags….! You will be there a long time playing “hunt the price”. They don’t tell you the price because they are focusing your attention on quality and the emotional aspects of what they sell.
However, at some stage you do have to tell people the price. So how can you do that without putting them off or demanding to see something which is much lower in price?
Psychological studies show that you can influence people to buy things at a higher price by displaying prices in ways which make people want to get the higher priced items. The first step in this is to give people a choice of prices. You see this a lot on the Internet . You see a table with three options and the prices for each option as well as what you get with each price point. You also see this price choice in supermarkets – one tin of beans at 30p, a “special offer” of two tins of beans at 59p or a pack of four tins of beans at £1.10. Many people who actually only want or need one tin of beans end up buying the four-pack “because it is cheaper”. Except of course, it isn’t – it is almost four times what they actually need to pay…!
What you need is to display prices so that people believe they have a choice in the amount of money they are going to part with. But those prices need to infer increased value for the higher prices. However, as I point out in my book Click.ology, you really ought to display your prices the opposite way round to the way most websites do this. Most pricing tables online have the lowest priced item on the left, the middle price in the middle and the higher price on the right. More effective is to have the higher price on the left and the lowest price on the right. Studies show that we perceive things on the left to be smaller than similar things on the right. Hence the high price does not seem to be as high if it is placed on the left.
Another set of studies shows that if you give people a choice of three things, they tend to choose the middle one. If you were a courier, for example, and you gave people the choice of delivery within an hour, within 12 hours or within 24 hours, most people would choose the 12 hour slot. If your priced them at £10, £20 and £30 that means most people end up paying £20. All you have to do is change the prices. Changing them to £20, £30 and £40 means now that most people end up paying £30 beacuse they choose the middle option.
So, how can you stop people choosing low prices? Easy. Give them a choice of prices and put your prices up. They will opt for the middle price, assuming you put the highest price first in the line of options.