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The Psychology of Pricing: A Gigantic List of Strategies

nickkolenda.com

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Re: The Psychology of Pricing: A Gigantic List of Strategies

#31

Post by ddingus »

copsarebastards wrote: post #5

This kind of stuff is a strong argument for communism. An immense amount of mental energy was squandered on creating this list (not Nick Kolenda, the people who studied these things). That same energy could have been spent on curing any number of psychological ailments, but instead it was spent on getting people to pay more for less. It's interesting, but as far as I'm concerned the energy was wasted.

There is no reason at all why this information has to result in more for less.

Couple better value perception (and that's a great topic for Nick to do sometime in the future) with effective pricing and now you have them paying more for more and happy about it.

Even better, adding more value means adding more to the price too. Built in race to the bottom avoidance, while actually delivering great value, not diluted value at higher prices.

How this plays out depends on who is pricing and what their overall strategy is.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#32

Post by simoncion »

brentis wrote: post #26

This list is great. I think it's funny how many of these folks criticize the list. They are probably the same ones who chose to OS their products for them to go off and die on Git rather than actually sell it. I would add that doing bundles after payment is huge. Once a customer has paid, adding 15% to their bill is a very easy sale. Whether a soft good or in the form of version insurance/download protection. Conceiv…

"...version insurance/download protection."

This set off each and every one of my slimy scumbag and no-good charlatan alarms. Please convince me that this protection is a good that's actually not extortionate and/or doesn't rely on the ignorance of one's customers.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#33

Post by petjuh »

nkolenda wrote: post #3
foolinaround wrote: post #2

Can knowledge of these strategies reduce their effectiveness on the part of the buyer? For example, even though many items like gas are priced at 2.1999, I calculate it to be $2.20.

That's a good question. I think it depends on the pricing technique. For example, research shows that anchoring effects occur even when people are explicitly warned about anchoring before they make their estimate. On the other hand, if people are aware of other pricing techniques, then those techniques could backfire in a negative direction. For example, researchers have found a "reverse priming effect." In other wor…

So it might have negative effect on some people (who feel it as insult on their intelligence), but if twice as many people don't notice it and are positively affected, it's still a net gain.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#34

Post by hobofan »

Nice write-up, but it hurts to see a generalized warning against dynamic pricing since that's what we provide with our product Baabedo[0] (we don't adjust prices on a per-customer level though).

One point where we observed the exact opposite effect is the splitting of shipping cost. Products with free shipping sell better than with split pricing, but that might be a marketplace specific effect of Amazon.

[0] https://baabedo.com

Re: The Psychology of Pricing: A Gigantic List of Strategies

#35

Post by honesta »

imron wrote: post #30

I know the arguments behind it, and I know the research shows it brings slightly higher conversions, but I always see charm pricing (e.g. 2.99 vs 3.00) as an insult of sorts to my intelligence. It's like the company is saying they don't think their customers have the mental capacity to reason that 9.99 is effectively the same price as 10. It's even doubly meaningless for some products in Australia, because with 5c be…

I've asked Seth Godin precisely about this six years ago and his reply was "turns out people like them". It seems we are a minority.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#37

Post by danieltillett »

imron wrote: post #30

I know the arguments behind it, and I know the research shows it brings slightly higher conversions, but I always see charm pricing (e.g. 2.99 vs 3.00) as an insult of sorts to my intelligence. It's like the company is saying they don't think their customers have the mental capacity to reason that 9.99 is effectively the same price as 10. It's even doubly meaningless for some products in Australia, because with 5c be…

>It's even doubly meaningless for some products in Australia, because with 5c being the lowest coin in circulation purchasing a single item worth $9.99 will be rounded up to $10 anyway.

While I agree these charm pricings are an insult to our intelligence, they do have a slightly positive effect on the final price. Firstly, the rounding to the nearest 5c only occurs on the sum of items bought (e.g. if you buy 3 items at $9.99 the rounded total is $29.95). Secondly, the rounding only applies to cash payments as electronic payments are not rounded.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#38

Post by erikb »

imron wrote: post #30

I know the arguments behind it, and I know the research shows it brings slightly higher conversions, but I always see charm pricing (e.g. 2.99 vs 3.00) as an insult of sorts to my intelligence. It's like the company is saying they don't think their customers have the mental capacity to reason that 9.99 is effectively the same price as 10. It's even doubly meaningless for some products in Australia, because with 5c be…

Can't find it any more, but in some literature I was reading that actually it's not so clear as people think. In some situations -1ct works well in other situations other prices like $10.23 work much better. I don't remember the requirements, though.

In any case it's bad to do something that you haven't tested yourself for your market. So if you sell something try different prices and pricing strategies and see what works best.

What certainly works (but is illegal in many countries, I think) is price tagging something as $20 and offering 50% off.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#39

Post by QuantumRoar »

honesta wrote: post #35
imron wrote: post #30

I know the arguments behind it, and I know the research shows it brings slightly higher conversions, but I always see charm pricing (e.g. 2.99 vs 3.00) as an insult of sorts to my intelligence. It's like the company is saying they don't think their customers have the mental capacity to reason that 9.99 is effectively the same price as 10. It's even doubly meaningless for some products in Australia, because with 5c be…

I've asked Seth Godin precisely about this six years ago and his reply was "turns out people like them". It seems we are a minority.

Isn't it more like: "Turns out we can manipulate people"

Many of the arguments in the article are about subconscious behaviour. After reading all of these tricks for pricing tactics, I'd say it's rather like a magician fooling people with misdirection. No one likes to be fooled but you only notice it when it's too late.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#40

Post by mafuyu »

benhirashima wrote: post #14

Some of these tactics are contradictory. Tactic 2 says to add cents for a "rational" purchase, i.e. 19.86 verus 19. This contradicts tactic 3 which says to use fewer syllables, i.e. 19 versus 19.86. How do you prioritize these tactics?

I think you need to look at it holistically and place yourself in the shoes of your audience. I imagine an example of a "rational" purchase to be something like searching for a good (eg. headphones) on Amazon and comparing prices between brands. A buyer will try to research and justify their purchase, and the cents may help push them over the edge and convince them that they've "done their homework". Meanwhile, an example of the syllable tactic is a restaurant menu. When I order from a menu, I'm time constrained and forced into a decision. I ask myself internally: "Would I get 19 dollar value from this meal?", and if the answer is "Yes", I'll order it.
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