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Pricing

Disciplines > Marketing > Pricing

How do you decide what price you should charge for your products and services? A simple way would seem to be just to add something to what it costs you. Yet what customers will pay is often unrelated to your costs. Pricing, can be something of a difficult art, yet is also a science. Here's condensed wisdom on how to decide what price to charge.

Pricing Articles

• Customer Price Thinking: Getting inside the customer's head.
• Direct Debit Pricing: Set up the payment and forget it.
• Limited Choice: Don't give them too many options.
• Price Anchoring: Connect prices of two items so perceptions are cross-fertilized.
• Price Reframing: Change how price is perceived.
• Price Elasticity: How demand changes with price.
• Price Expectation: How customers decide what it's worth.
• Price-Promotion Strategies: Balancing price and promotion.
• Pricing and Service Charge: Should you include service charge or separate it out?
• Pricing and the Investment Effect: When they invest time and emotion, they are more likely to buy.
• Pricing Objective: Know what you are trying to achieve.
• Pricing Research: How to find what people will pay.
• Shipping and Pricing: How much do you charge for delivery?
• The Black Art of Pricing: Getting it right is always difficult.
• The Price-Quality Graph and the Fair-Value Line: Understand value to help pricing.
• The Price Triangle: Balancing with other benefits.
• The Miser and the Spendthrift: Some hate spending, other love spending.
• When to Give a Discount: When you might want to sell for less.

Pricing Strategies

• Auctions: Letting the customer set the price.
• Base Point Pricing: Base price plus shipping.
• Basic-Plus Pricing: Fixed for basic service, then charge for extras.
• Benefit Pricing: Charge by what it gives.
• Bounded Pricing: Don't go above or below key prices.
• Brand Pricing: Price to support brand values.
• Bundle Pricing: Price for a group of related items.
• Captive Product Pricing: Charge more for the add-ons, service, etc.
• Charm Pricing: see The 99 Effect and The 95 Effect.
• Competitive Pricing: Price based on competitor prices.
• Competitor Index Pricing: Price based on calculated index.
• Confusion Pricing: Keep varying the variables.
• Contrast Pricing: Price relative to other products.
• Cost-Plus Pricing: The oldest method, but seldom the best.
• Discountable Pricing: Price in expectation of discounts.
• Dynamic Pricing: Changing with each sale (particularly online).
• Everest Pricing: Use odd amounts.
• Expectation Pricing: Price by customer expectation.
• Fixed Pricing: Standard price, never with discounting.
• Freemium Pricing: Basic free, charge for the rest.
• Go Away Pricing: Price high to put off unwanted custom.
• Growth Pricing: Pricing to capture a growing market.
• Hidden Pricing: Move the costs elsewhere.
• Left-side Pricing: Seen first, seems less.
• License Pricing: Pay to borrow or use for period.
• Lifetime Pricing: Price for the cost of ownership over the life of the product.
• Loss-leader Pricing: Sell below cost for strategic effect.
• Low Start Pricing: Cheap or free for first period.
• Market Pricing: Price based on market norms.
• Multi-brand Pricing: Same products, different brands, different prices.
• Old-product Pricing: How to price the previous version.
• Optional Extra Pricing: Price with additional nice stuff.
• Penetration Pricing: Price to gain market share.
• Profit Pricing: Price to maximize profit.
• Predatory Pricing: Price low to eliminate competitors, then price high.
• Premium Pricing: Price up for higher profits a smaller segment.
• Price Bracketing: Have high, medium and low priced items.
• Price Matching: Meet or beat comparable product prices.
• Price-point Pricing: Price for segments who shop within a band.
• Price Skimming: Lowering price to match demand curve.
• Private Pricing: Only the customer knows what they paid.
• Promotional Pricing: Lower price to get attention.
• Rate of Return Pricing: Price based on percentage return.
• Real-Time Pricing: Change the price with each customer encounter.
• Seat Pricing: When you have limited seats to sell.
• Separated Price: Put price away from product.
• Share Price Pricing: Designed to maximize share price.
• Signal Pricing: Send messages with the price.
• Target Pricing: Price to achieve certain targets.
• Three Tier Pricing: Cheap, Standard and Luxury.
• Total Profit Pricing: Understand price for maximum profit.
• Transfer Pricing: Priced to 'sell' within the enterprise.
• Usage Pricing: Charge by use.
• Value Pricing: Charge based on the value delivered.
• Zone Pricing: Price by geographic area.

The Psychology of Price

• The 99 Effect: Use just under a price boundary.
• The 95 Effect: Not as annoying as the 99 effect.
• The Brand Effect: We value what we trust and admire.
• The Change Effect: Getting change can seem good.
• The Coinage Effect: More coins (or notes) seems more expensive.
• The Comma Effect: Commas make prices seem higher.
• Contrastive Purchase: Customers choose by comparison.
• The Credit Card Effect: Seems less than cash.
• Discounting: How to charge less but not lose out.
• Distance Effects: Proximity of price to product affects association.
• Easy-Pay Pricing: Make it easy to find and hand over the money.
• First Digit Anchoring: Left digit is basis for contrast.
• Font Effects: Bigger, bolder grabs attention.
• Free: The ultimate motivator.
• Nearby Words: That suggest good value.
• No Currency Symbol: Don't show dollar sign.
• Number Complexity: Confusion can put people off or move their thinking off price.
• The Odd Number Effect: Odd numbers are arousing.
• Pay by Instalments: Looks cheaper than total price.
• Preferred Number Pricing: Use numbers people like.
• Previous Price: Show previous price as well as current price.
• The Price Anchoring Effect: First time counts.
• Price Boundaries: We understand by edges.
• The Price Length Effect: Longer numbers seem more.
• The Price-Quality Heuristic: We think price indicates quality.
• Price Rounding Effect: We round prices to boundaries.
• Pricing Add-Ons: Extra Costs: Include or exclude tax, shipping, handling?
• Rising Strike-Out: Cross out from bottom left to top right.
• Round Numbers: Use easy numbers for emotional purchase.
• Smaller Font: Smaller sale price font actually sells more.
• The Sound Duration Effect: Longer sounds seem more.
• Time and Pricing: Time is money and vice versa.
• Unique Number Pricing: Use an unusual price.
• The Value of Context: Where you buy affects price.
• The Veblen Effect: Buying expensive goods to impress others.
• Weber's Law: Sensitivity is proportionate to price.

Sale pricing

• Percentage Discount: Sale goods at percentage of previous price.
• Absolute Discount: Show discount as an absolute money value.
• BOGOF: Buy one, get one free.
• Twofer: Two for the price of one.
• Quantity Discount: Charge less per item as quantity increases.
• Reduced To: Focus on price charged.
• Tax-Free Price: Reduce by amount of taxation.
• Multiple Price Cuts: Show multiple higher prices, each crossed out.
• When Perfect: Selling seconds, showing perfect price.
• Competitive Price Comparison: Contrast your prices with other sellers.
• Recommended Retail Price (RRP): Mention the recommended retail price.
• Free Extras: Standard price, but 'free' extra items.
• Double Price: Show two prices on same item (sell for lowest).
• Shout 'Sale!': Lots of red signs, adverts, etc.
• Multiple Signs: Yes, it really is this price.
• Reassure About Quality: It's cheap, but really good.
• Few Left At Price: Use scarcity to sell.
• This Week Only: Scarcity in time.
• Using Coupons or Vouchers: Get money off your next purchase (before or with purchase).
• Limit Per Customer: Maximum four items per customer.
• Make Me An Offer: Let customer set the price.

More to come...

See also

Negotiation, Closing Techniques