Pricing Psychology Strategies: 7 Smart Tweaks To Make Clients Buy Again
Your pricing structure might be impacting your customer retention rate more than you think. Of course, there are other factors that come into play when forming an opinion about so-and-so brand, such as quality, but price is an incredibly powerful psychological trigger for your customers, and the wrong strategy can mean less clients for your brand.
The good news is there are several ingenious tweaks and tricks you can use to make sure you’re maximizing your profits through your pricing psychology, and in this article, we’ll explore all these strategies.
Remember, a happy customer can mean substantial profit in the future.
So without further ado, let’s have a look at the best strategies to employ in your pricing structure.
Strategy #1: Offer a ‘Buy Now, Pay Later’ deal
This pricing strategy is related to financial impact. Think about it, no one wants to part with their hard-earned cash, and by using the ‘Buy Now, Pay Later’ strategy, you’re effectively trusting your customers to pay you some other time, while they’re free to use your product or services right now.
It’s a strategy that works because:
a) It removes the ever-awkward financial factor from the equation;
b) It builds trust between you and your clientele;
c) It gives customers time to get hooked, so that when the time comes for them to pay, they will do so more freely, knowing they’re paying for a quality product.
All these points encourage client retention by building a satisfied relationship between buyer and seller, which is why this psychological strategy works.
Strategy #2: What’s the (Payment) Frequency?
More and more businesses are employing this strategy by offering both a monthly subscription, as well as a yearly-subscription (that ends up being cheaper than if you pay each month).
For example, you pay $10 for one month, but $100 for 12 months. Sure, there’s quite a leap, but you might just be saving $20 and people love a good discount.
This doesn’t only represent a bigger sum for your business, but a psychological investment. It’s much easier to abandon a service after a month, than after a full year, and chances are, those customers paying for a yearly subscription will do so next year, also.
When choosing between two payment frequencies, customers usually consider two questions:
- How often will I use this?
- Is it worth my money?
So it’s important that the customer trusts your brand and its’ quality, which is why it would be wise to also employ a strategy that builds trust, such as the ‘Buy Now, Pay Later’ one.
Tip: When displaying multiple subscription packs side by side, make sure you show not only what they get with each pack but also what they’re missing by now purchasing the more expensive service.
This technique works wonders on your client’s psychology, because it makes them afraid that they are missing out on a potentially vital service.
This ‘Payment Frequency’ strategy is closely related to the following one:
Strategy #3: Promotion = Consumption
While it’s great that a yearly subscription will increase trust and loyalty, there is the danger of it decreasing consumption.
If you’ve paid for a service for only one month, you’re eager to ‘get the most of it’ before it expires. If you have it for 12 months, however, you’ve got nothing to worry about, and often, end up using it less than you first imagined.
This is a veritable issue, one that will influence your client retention rate over time. If they didn’t use your services quite so much last year, they might not be so willing to purchase again next year.
Remember, these people want to make sure they’re getting their money’s worth.
So how can you ensure that they do?
It’s easy, don’t let them forget you. Send them e-mails, texts, notifications. Build a strong social media presence – if they follow you on Twitter and see you in their feed daily, chances are they’ll use your product more.
Invest in a quality content blog that will get your clients interested in your products.
Speaking of which, constantly offer to improve your products and services offer (and don’t forget to send out the newsletter!).
Maybe even offer a discount or a free sample of a service/product to devoted customers. Create a connection that encourages daily use.
Promotion is the key to retention, so don’t overlook it!
Strategy #4: A little thing called ‘price anchoring’
This is perhaps one of the best tricks in the book and if you’re not using price anchoring, that might explain poor customer retention.
So, how does it work? Say you’re trying to sell a mountain bike. You put it on display, along with a price tag that reads $349. Potential customers walk by and think ‘huh, that’s a bit steep’ and walk on.
Now, say that beside your bike, you also display two similar bikes, one priced at $549 and another at an even $700. This affects your customers’ thinking, because compared to the latter two, the initial bike now sounds pretty cheap. A bargain, really, and so, they want to scoop it up before anyone else does and all that’s left are the more expensive bikes.
You can use this strategy in any business and to market any product or service.
In fact, studies have shown that when a customer is led to believe a product is more expensive than it actually is, they will be more willing to pay the actual price, once it’s revealed to them, certain they’ve gotten a good deal.
Tip: Make sure you use price anchoring as often as possible – not just on product pages, but in promotional e-mails and newsletters also.
Strategy #5: 9 is the Magic Number
Have you ever noticed how all displayed prices on virtually every website end in $.99? And haven’t you wondered why they didn’t just round it up? After all, when you say the price out loud, you don’t say $99.99, you say ‘a hundred dollars’.
Well, it’s not just some strange coincidence. This is actually a very clever psychology technique that has been proven to influence buyers. The number 9 simply has more selling power, as studies have shown.
And contrary to what you might think, a number ending in ‘9’ actually seems more rounded up to potential customers, than one ending in ‘.00’.
The number 9 is so powerful in influencing buyers that your price doesn’t even have to end in ‘.99’. Products that cost, for example, $3.49 sell much better than those priced at $3.10, even though they are more expensive.
So, don’t forget to change your prices into something ending in 9 – it’s no skin off your nose and if it might get you more customers, isn’t it at least worth a try?
Strategy #6: Time is Money!
I’m sure you’ve all heard this saying and it couldn’t be more accurate when it comes to customer retention. The fact is, people are fearful by nature and when buying a product, we are constantly hounded by the fear that we might be missing out (also known as FOMO).
Now, if your product stays at one settled price all year round, then FOMO isn’t so great. After all, I know I’m not missing out and can as easily purchase tomorrow or keep looking for a better offer.
However, if you occasionally offer a time-limited deal, you’re making me – the customer – choose between paying now or missing out on a good deal.
But it’s not enough to just set up the time-sensitive offer. You need to make sure your clients know about it, so make sure you tweet it, send them notifications, e-mails etc.
People have trouble resisting a deal, even if it’s not really that much cheaper. Once again, it’s the impression that they’ve gotten a bargain that makes them buy.
Tip: You can also offer coupons and vouchers on purchases and ‘big’ brands frequently do so. Buy something now (usually something above a certain price) and get a 10% discount in future. This not only assures you a purchase now, but also the possibility of another in the near future.
And don’t forget your loyal customers – this is another trick that successful businesses use all the time. To reward your customer for being with you for a year, offer them a discount or some type of limited offer. They’ll feel like they’ve done something good (been loyal to your brand) and they’ll almost feel entitled to a little celebratory purchase.
Strategy #7: Everybody loves a bundle!
Remember when you were a kid and would run down the stairs on Christmas morning to unwrap all your gifts?
That is basically what discount bundles do for your customers now – and not just on Christmas. We’ve said it once and we’ll say it a million times, people love knowing they’ve gotten a good deal.
By offering them multiple products sold together (presumably at a better price than if they were sold as stand-alones), you’re giving them that feeling and you’re convincing them to buy something they might’ve gone without otherwise.
Take, for example, the hugely popular gaming company Nintendo. They offer loads of bundles, in the form of a console plus game, or in their e-stores, bundling multiple games together.
How does this work?
If you had to purchase each game individually, you probably wouldn’t. It’s expensive and besides, you don’t really want so-and-so game. However, by bundling, they create the idea that you’re getting so much for such a good price that you end up buying the whole bundle (instead of one stand-alone game) and paying more.
Furthermore, bundles aid customer retention, because clients who got one good deal from you will be eager to get another and they’ll keep coming back to check for more bundles.
Also, offering them bundled items might encourage them to repurchase those items at full price, in future. So, it’s a win on all counts.
Bonus Strategy – When and How to Increase your Prices
There comes a time in every business when you feel the need for a spike in your prices. However, this can come as an unwelcome change to your existing customers, which is why it’s vital that you deliver it in a proper fashion.
Let them know beforehand – this is a great way both to get more sales now (before the price spike) as well as make your clients feel included in your business. By telling them beforehand, you’re essentially making them feel as if they had some sort of say in the change of price. It’s a sign of respect, one that in turn builds brand loyalty.
When you’re hiking the price, make sure your customers know why it’s happening. Remember, you don’t want them to walk away with the feeling you’re trying to scam them out of their hard-earned money. So, tell them. Show them where that money is going, highlight all the improvements in your product or service that warrant the extra cost.
Tip: A great idea when you’re increasing your prices is to sweeten the deal with a little extra service that your customers would otherwise have to pay for. We’re not talking about something huge, just a little thing, accessory or additional service that works in conjunction with their purchase and that you’re now offering at no extra cost.
This makes it sound like it’s a better deal. Sure, they have to pay more, but they also get more (which is, in all honesty, the case), and as long as they understand this, they won’t be as bothered by the higher price.
There’s no limit to what you can achieve by treating your customers with respect and common decency. By putting yourself in their shoes and creating deals that are satisfying for both ends, you will inevitably increase your customer retention rate and your sales, so always know and understand your client’s interests!