Psychological Pricing For Bigger B2B Sales
When it comes to the psychology of pricing products or services, what you don’t know might be impacting your B2B revenue. Experts talk about the characteristics of a great B2B sales team, or how to recruit the best sales reps and for good reason, because these elements have a huge impact on your performance, but the psychology of numbers is another topic that shouldn’t be disregarded. Even a simple change to your existing pricing strategy can make or break your next sale, because there is a large psychological side to pricing.
More than anything, you want customers to understand the key benefits of what you’re selling before seeing your prices, so you can present that cost in the right context. As a great salesperson, you’ll have already provided them with a way to think about the return on your offering in a quantifiable way.
So how can you start using the links between consumer psychology and pricing to benefit your B2B business?
Psychological Pricing: Why Charm Prices Ending in 99 Work So Well
Charm pricing is, hands down, the most common strategy adopted by businesses around the world, regardless of industry. Simply reduce the left digit of your price by one whole unit. Charm prices are the reason why nothing at the store costs a whole dollar – it costs 99 cents instead. This method of psychological pricing is so prominent that most consumers don’t even recognize it as a strategy, they just expect it.
But why is charm pricing so effective?
Let’s be real here. As a consumer, the idea that you’re saving one cent isn’t a deciding factor in your purchase. The difference is in that smaller left digit – that number is what’s really impacting the sale. So, if you have a product that costs $3.00, reducing it to $2.99 helps you reap the benefits of charm pricing. As consumers, our minds equate that small, one cent drop in price with the assumption that a product or service is cheaper than it actually is.
Lowering your pricing by one cent seems almost frivolous – but the upshot with this pricing strategy is no joke. This little change can increase sales by up to 24%, just by using simple psychology.
Selling Luxe with Prestige Pricing
At the opposite end of the spectrum from charm pricing is Prestige pricing. Companies using this psychological pricing strategy price their products or services in rounded numbers – so they’re charging $100, not $99.99. While this seems like a contradiction, prestige pricing is also a proven strategy for increasing your sales.
Let’s take a look at the psychology at play here and why these rounded numbers equate to price points that sell. Prices like $100 or $500 are easily processed and more likely to stand out. You don’t have to think much when you look at a prestige price and it’s generally much easier to calculate how this price may fit into your budget.
Take note though, prestige pricing works with round numbers, i.e. those that end in 0s or 5s, rather than a seemingly more random sales price like $63. Can you still make a healthy margin if you drop that price to $60 or increase it to $65?
If you’re interested in adopting a prestige pricing strategy, it’s worth experimenting to see what pricing works best for your market and your bottom line.
BOGO or Bust
Buy One Get One, or BOGO, is a pricing strategy that companies in a variety of industries have been using for a long time because it works time and again to encourage sales.
This psychological pricing strategy works because you’re keying in on greed. Consumers may not need another product or service, but they’ll bite because they’re getting something for free with their purchase. They’ll throw logic into the abyss and buy something simply to get a free item – regardless of its actual value.
You will need to vary your BOGO offerings to get consumers to feel truly compelled to buy. They have to feel that the ‘free offering’ has inherent value. Like Prestige pricing, using a BOGO strategy requires some experimentation to find that sweet spot between cost and revenue generated. You may want to try campaign variations, like ‘buy one and get two free‘, ‘buy one and get $5 off your next purchase‘, or ‘buy one and get these free bonuses‘.
Comparative Pricing – Similar Products, Different Prices
In terms of psychological selling, comparative pricing is a popular strategy that pits one price against another for a very similar product. You’re offering two products, but one of those products is far more attractive to consumers than the other – by design.
This is very much a psychological play – and one that happens to work incredibly well. You’re offering two similar products at vastly different price points, and most consumers will buy the more expensive option because they ‘believe’ it’s more valuable.
In truth, you could even offer the exact same product, perhaps with different sales copy or a different product image, and leads will still choose the more expensive option more frequently.
The Role of Design in Psychological Pricing
Pricing and varying your offerings aren’t the only keys to selling success – design can also have a significant impact on sales. Combine font, size and color to really emphasize your price points, and be mindful of the psychology of color, particularly when it comes to your marketing assets. The goal is to trigger cognitive fluency , or a sense of ease or familiarity, with your audience. If they see a product price written in large, bold font, they assume that the price must be the best one, or offer the best value. This easy mental math requires less effort, so it’s that much easier for a potential customer to make a buying decision.
Pricing design tends to work best when you’re comparing two similar products or services against each other – but you’ll need to be sure the price point is right when using this strategy. Studies show that the difference in pricing should be no more than $10, or you’ll be asking for too much mental overhead from your potential customer.
Which Pricing Strategy Is the Best for Your B2B Business?
If you’ve read this far, you might be feeling a little perplexed. Don’t these five psychological pricing strategies contradict each other? You’re not wrong, some of them do – but that doesn’t mean you shouldn’t adopt one or more of these strategies when pricing products or services.
The truth is that the right pricing strategy is the one that works for your B2B company, and resonates with your particular audience. It’s worth testing a few different approaches to be sure that you’re using a pricing strategy that delivers the most conversions.
Which B2B pricing strategies are you interested in experimenting with?