There is no middle path in pricing – Have an impulsive pricing strategy. Product pricing is a complicated issue. It can make or break your dream of leading the market or expand your business. Though many experts opine pricing is an art, in reality, it is full of mathematics, statistics, and economics. Pricing depends on product quality and your costing but pricing is a relative matter that depends on the environment and the way you present the product.
If you make the product available in a posh shopping mall with a high price tag, buyers start thinking that this product worth that price. The value of the product increases all of a sudden. Display the latest model of iPhone along with low-priced feature phones; buyers assume it is either a second-hand iPhone or a counterfeited product. The human brain speedily assesses the environment while attributing the value of a product.
Buying decisions are more on the emotional ground than logical
In his much-appraised book Alchemy, Rory Sutherland opines that we develop an emotional rush under two buying conditions. First, if we get a great unexpected sudden deal or discount and second when we pay a high price for a product.
Unexpected low or high prices produce dopamine in higher quantities
Scientist says we get a dopamine squirt in anticipation of a great reward such as high discount, buying something expensive, or waiting eagerly for a gift from a relative or friend. If this matter is explained from another vantage point, if an incident or event leads to certain behaviour that is a dopamine squirt creator, the human brain reinforces that behaviour. We want that incident or event happens again and again.
Dopamine squirt makes “free” so dear to buyers
We all like “free” offers. We adore free and look for free kinds of stuff over the internet and shopping malls. Companies also know this dopamine effect on the human brain. “Subscription is free for thirty days”, “try this for a week”, “Buy one get one”, and many other pricing policies are aimed to grab customer attention, more traffic, and more footfalls.
Free wide open the entry; hence, people show more interest and fill up the subscription forms quickly. Just like free offers, discounts work almost similar way producing dopamine effect in the human brain. To a customer getting a discount means a grand deal that cannot be left so easily. Free and discounts are two powerful weapons of marketers to pull customers in the fastest possible way.
Marketers create an environment that induces the customers to feel that they are reaping a great value in the form of the product without paying anything. That makes them feel proud of their decision. In this pricing strategy, a comparison of prices is required. A higher price tag with lower discounted price or free trial for a few days before buying induce the buyers to think that it’s a lifetime opportunity.
Luxury pricing works wonder when buyers feel they are gainers
Buying a high-end watch, an expensive brand of shoes, first-class plane tickets, and many such things give us satisfaction. It’s a kind of fulfilment that we were waiting for so long. It’s actually a kind of present that we want to give ourselves even if when we are buying a high-end product for someone else.
Here again the same dopamine works. The human brain reinforces a previously experienced emotional response to that price tag. We feel we made a perfect move and best deal. We want to show the world that we are “rich” or we can indulge in such high-end products. We visualize how our friends, relatives, or neighbours feel jealous of us. All these are different strands of smugness that any human adore.
This is why some people visit a posh restaurant to dine with friends even when the same foodstuffs are available at much lower prices in a nearby simple restaurant or buy a luxury car that is equivalent to the price of a house.
So, pricing strategy has to be much planned one. It necessitates an environment of how you are selling and where you are selling? If the pricing strategy is right, you can attract literally any category of buyers to your selling point.
Mid-level pricing may not work as per your expectation
Keep in mind, people buy with heart and less with the brain. Buying is an emotional decision. If you follow not-so-high-and-not-so-low pricing strategy, you get an only so-so response. Middle-pricing takes you nowhere. Buyers don’t get the dopamine squirt when the price is just the expected one. As there is no dopamine squirt, you don’t feel the excitement nor does your brain preserve it as a memorable event or incident.
You have a faulty watch; you went to a repair shop and get it repaired the same day. It costs as per your expectation. Does it have any effect on your life? Contrast this incident with buying a new watch almost the same type. This time, you made an expense and start taking special care of the watch. You tell your friends and colleagues your buying experience, how much you adore the brand, and so on. Could you find the dopamine effect?
Middle-level pricing is not a good idea if you want to stay in the mind of your customers and prospective buyers.
Follow a pricing strategy that reflects your business model
If you want to increase footfalls, gain customer trust, and enhance brand orientation, the free service or offer for a certain period and attractive discounts could be the right approach. Start with free, and then discounts followed by a steady rise in price with overtime. Offer discounts occasionally, especially during festivals or on some specific day of a week or month. You can also offer free accessory services with every unit sold. You can also think of customized free offers and discounts.
It is a fact that middle pricing gets middle results
Too few buyers make rational decisions while shopping. You decide something but end with another high-priced or discounted product in the market. Before pricing, look at the whole affair from a buyer’s point of view. Are the price and everything related to it going to produce a sudden gush of dopamine? If you don’t think so, then think over it and brainstorm once again.
No price is forever. You have every right to change it but use a different anchor if you think the market could be repulsive. As the owner of the business, you may have to experiment three or four times or even more with the price before coming to a final one. In any condition, buyers should feel they are gainers. In no situation follow any middle path – it makes your product mediocre and so your business suffers the consequence. At last, be specific and precise at what you price.