By Jon Clark, managing partner at Moving Traffic Media, a New York digital agency offering SEO, PPC and Amazon marketing services.
A lot of business owners develop a pricing strategy when they first open their doors, and they never address it again. However, like most things in business, you should never view pricing as a one-time thing.
Innovation is the key to growth, so you should always be looking to innovate and move forward. With that being said, below, I’m going to reveal some creative pricing ideas you can try to increase sales and profit based on my experience setting prices as an agency owner.
Name Your Own Price (NYOP)
Name Your Own Price is a strategy whereby businesses let buyers decide the final price they want to pay. Of course, you can establish a threshold to ensure you’re not selling all of your products for just $1.
This is how the process works:
1. You list your products and choose minimum threshold prices. The purchaser cannot view the threshold.
2. If a buyer likes any of your products, he or she will place an offer.
3. If the offer equals the threshold or is greater than it, the transaction takes place.
4. If the offer is less than the threshold, the buyer has another chance to submit an offer if they wish to do so.
This is essentially a reverse auction, and we’ve seen a number of brands adopt this approach. Priceline was one of the pioneers.
Why Does It Work?
It works because it is customer-centric. The buyer pays what he or she wants. Therefore, they are likely to experience psychological relief. The buyer never feels like they have overspent.
Premium Pricing
A lot of pricing strategies focus on creating the feeling of getting a special deal or discount. This approach is the opposite. After all, sometimes we like expensive toys.
If you price your products higher than your competitors do, it can create a premium feel. People feel like your brand and products are of a much higher quality.
Even though your products may cost the same to manufacture as your competition’s, the sheer fact that your prices are considerably higher can create a feeling that your products are much better.
Of course, whether or not this pricing strategy is suitable for you depends on your target audience and the type of items you sell.
Why Does It Work?
Premium pricing works because it makes potential customers feel like they’re getting a much better product if they spend extra money. After all, if your products are more expensive, they must be much better, right?
Odd Pricing
Would you rather spend $9.99 or $10? There’s only a cent difference between the two, but we feel like we’re getting a much better deal when we go for the $9.99 option, don’t we? This is a very simple tactic that plays into the psychology of the human mind.
Why Does It Work?
Even though we all know that we’re not saving much money at all, we simply feel more comfortable when the purchase is beneath a certain amount. It seems to naturally convince customers that they’re getting some sort of savings or deal, even though they’re not.
Penetration Pricing
If a customer doesn’t know about a product, they cannot purchase it. And in a market that’s heavily driven by brand loyalty and consumer trust, a lot of customers are reluctant to try new products or switch brands. They don’t want to spend significant money on a product that may not be any good.
This is where penetration pricing comes into play. We see this heavily in the entertainment industry, with TV and internet providers often adopting this approach. You’ll pay less at first, and then the price goes up after a period of time.
You can also use this for retail products. Whenever you bring a new product to the market, offer it at a lower price for a period of time. People will feel much more comfortable about trying something new if it’s mega cheap. Then, your product wows them and they keep on buying even when the prices go back up.
Why Does It Work?
Penetration pricing works because it encourages loyal customers to try something new at a low, tempting price. The hope is that you’ll then create a brand switch in a crowded marketplace because your product or service will be so impressive.
Price Discrimination
Some companies will sell the same product to different people at different prices. This is what is known as price discrimination.
For example, you may sell a bag of popcorn for $5 in Colorado, but it may be $6.50 in New York.
Your pricing should be based on the market to optimize sales.
Why Does It Work?
Price discrimination works because you’re pricing your products for your target audience. If one state has a much lower average wage, you’ll want to make sure your products are cheaper there so that you can encourage more sales.
Decoy Pricing
Last but not least, another approach you may want to think about is decoy pricing. Let’s say you sell makeup, and you have three different types of mascara for sale. If you implement decoy pricing, you should price two of the mascaras a lot higher than the other.
The objective here is to make customers feel like they’re getting an excellent deal on mascara. However, the truth is that the other two mascaras are actually expensive, and the third is a standard price.
Why Does It Work?
Decoy pricing works because it makes people feel like they’re getting an amazing deal. And who doesn’t love getting a deal?
Achieving More In 2023 With A Creative Approach To Pricing
As you can see, there are a number of different pricing ideas you can use to take your business to new heights in 2023. I hope that the ideas and suggestions I’ve provided above have helped you unearth a fresh pricing approach that could be perfect for your business.
