Do you know that 87% of online buyers consider price as the most important factor affecting their purchase decision? In this scenario, you cannot go wrong with your pricing strategy. Price your products too high and you are at the risk of losing your customers. Price them too low and you are at risk of losing your profits. So what is the point of having a great product when you are unable to convince the buyers to purchase it?
Luckily, things do not work that way always.
There is a wide range of psychological pricing strategies that e-commerce or dropshipping businesses can use to encourage their target audience to buy. Implementing these strategies can help drive conversions as well as increase profits in the long run.
Psychological Pricing - What is it?
Psychological pricing works on the principle of how human minds perceive the prices of products. It is an approach to target the "sweet spot" on the minds of the customers that triggers their automatic beliefs on seeing the price of a product. Various leading brick-and-mortar stores have been practicing this pricing strategy for long. However, it also ensures remarkable growth in sales and increased profits for e-commerce/dropshipping stores too.
5 Psychological Pricing Strategies for E-commerce or Dropshipping Business
For many dropshipping and e-commerce business owners, psychological pricing serves as a money-maker that can help them drive traffic, improve sales, and grow profits. Here are 5 effective psychological pricing strategies that you can implement for significant results:
#1: The Charm of '9'
It may appear to be a simple mathematical number, but '9' holds immense importance when it comes to pricing. Rounding up the price to 0.99 is a powerful pricing tactic used by businesses and has increased in sales and revenues.
The concept works on the foundation of "left-digit effect" wherein the human brain focuses on just the first digit of the price and rounds 'down' instead of rounding it 'up.' The strategy works because psychologically, rounding off to 0.99, makes the price appear lower. That means 399.99 appears closer to 300 than it does to 400, though it is not.
For instance, an item priced $9.99 will appear cheaper to purchasers than $10.00, despite that the difference is just $0.01. Consumers tend to see only the first number, i.e., $9, and will perceive it to be more pocket-friendly than $10.
Online retailers, e-commerce stores, or drop shippers can use this strategy to encourage shoppers and sell more products, especially when people are looking for good discounts.
See the below example to understand how giant e-commerce stores use the power of 9 for product pricing.
Cutting-edge dropshipping software like AutoDS empowers business owners to set a price at their advantage and gain revenues. We have integrated " Round Price to 0.99 " feature into the software, enabling drop shippers to price their products rounded off to 0.99. This will help them gain a pricing advantage over others and encourage online shoppers to buy.
#2: The Right Way to Display the Price Online
E-commerce pricing strategy works basically in the manner our brains perceive numbers or objects. How the human brain conceptualizes sizes of various objects is one approach to price your products. You can use this approach to display product prices in a smaller font. That is because, in the human brain, VISUAL size often overlaps with NUMERICAL size when they see any object. That's why buyers tend to perceive the price to be less if it is displayed in a smaller font.
Another good tactic to display your price is by removing the comma. According to several studies, removing commas from prices can make them appear lower. For instance, $1,299 vs. $1299. That is because when you minimize the phonetic length of the price, then the human brain tends to perceive it as lower.
#3: Showcase Good Product Quality with a Higher Price
It is a universal truth that consumers perceive a better quality of a product if the price is higher. Several studies reported that individuals are happier buying items that are high priced, having the perception that they have bought a good quality product.
Using this human psychology is a wonderful option when trying to represent your product as high-value. The strategy is known as prestige pricing, i.e. pricing products at a high level to exemplify great quality. This works well for e-commerce or dropshipping businesses because consumers often expect high value from their purchases, and a high-priced product may trigger their "prestige" sentiment.
Thus, slashing down your prices may not always draw quality-driven customers because they often attach a lower price to poor quality.
#4: Leverage the Power of Comparison Pricing
Buyers always compare prices of similar products before making a purchase decision. E-commerce store owners and drop shippers can use this psychology in pricing their products. It is also known as Comparison Pricing.
When you visit a brick-and-mortar retail store, you will find two similar items with different prices displayed together, for example, a steam iron for $25 and a steam iron for $125. You can use this strategy for e-commerce stores as well. This is because psychological pricing is all about how you position a product's value compared to another.
If you are trying to sell a high-priced or high-value product, positioning it next to a "normal" or "low" priced item can help consumers compare based on the value of the products.
#5: Bundle Pricing
This is yet another powerful and effective strategy you can use for e-commerce/dropshipping pricing. This works on the concept that when you purchase a camera, you might also be interested in having a cleaning kit by paying additional money. Taking this human psychology into consideration, bundle pricing is a fantastic way to boost sales.
The pricing strategy works great because buying in the bundle comes cheaper for the buyer, and it adds more value to the original product purchased. Moreover, buying items altogether appears easier than purchasing individually.
Conclusion
There are many psychological pricing strategies that we mentioned above so if you decide to try some of them don't forget to testing different strategies before determining one. That's how you'll find the one that is most suitable for your audience. Because understanding your consumer's purchasing psychology and applying it to price your products can remarkably increase your conversions.
