GREGORY CIOTTI | SEPTEMBER 15, 2015
Pricing can be challenging, complex, and offers no shortcuts. This reality makes “winging it” an enticing option when you don’t know where to begin.
But that’s the wrong move to make; smart pricing is deliberate. While intuition plays a role and you’ll learn more from getting your hands dirty than armchair analysis, it can be helpful to review findings on pricing that have stood the test of time.
In that spirit, let’s take a look at a few enduring studies from the behavioral sciences to provide inspiration and insight on how to effectively set your prices.
When Similarity Costs Sales
Limiting choices helps combat “analysis paralysis,” as too many options can be demotivating. You might expect, then, that having identical price points for multiple products would be ideal, right? Not always, according to research from Yale: if two similar items are priced the same, consumers are often less likely to buy one than if their prices are even slightly different.
In one experiment, researchers gave users a choice of buying a pack of gum or keeping the money. When given a choice between two packs of gum, only 46% made a purchase when both were priced at 63 cents. Conversely, when the packs of gum were differently priced—at 62 cents and 64 cents—more than 77% of consumers chose to buy a pack. That’s quite an increase over the first group.
percentage completing a purchase
The implication isn't to set your identical vintage T-shirts at variable prices. Rather, recognize the why behind the inertia: when similar items have the same price, consumers are inclined to defer their decision instead of taking action.
GREGORY CIOTTI | SEPTEMBER 15, 2015Pricing can be challenging, complex, and offers no shortcuts. This reality makes “winging it” an enticing option when you don’t know where to begin.But that’s the wrong move to make; smart pricing is deliberate. While intuition plays a role and you’ll learn more from getting your hands dirty than armchair analysis, it can be helpful to review findings on pricing that have stood the test of time.In that spirit, let’s take a look at a few enduring studies from the behavioral sciences to provide inspiration and insight on how to effectively set your prices.When Similarity Costs SalesLimiting choices helps combat “analysis paralysis,” as too many options can be demotivating. You might expect, then, that having identical price points for multiple products would be ideal, right? Not always, according to research from Yale: if two similar items are priced the same, consumers are often less likely to buy one than if their prices are even slightly different.In one experiment, researchers gave users a choice of buying a pack of gum or keeping the money. When given a choice between two packs of gum, only 46% made a purchase when both were priced at 63 cents. Conversely, when the packs of gum were differently priced—at 62 cents and 64 cents—more than 77% of consumers chose to buy a pack. That’s quite an increase over the first group.percentage completing a purchaseThe implication isn't to set your identical vintage T-shirts at variable prices. Rather, recognize the why behind the inertia: when similar items have the same price, consumers are inclined to defer their decision instead of taking action.
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