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10/07/14

Secret Strategies to Raise Prices and Sell Even More Online

Some people think that product pricing is mostly about supply and demand.  If there’s a large audience that wants a product that is in short supply, that company can charge a higher price.  The reality though is that pricing is highly psychological and goes far beyond simple economic factors.  This is why you can actually raise your prices and still make more sales if you take advantage of several psychological principles.

Psychology of Influence Perceptual Contrast Theory

Credit: Ugg

The “Perceptual Contrast Effect” allows you to sell something at a higher price by first introducing the customer to something that’s even more costly.  The principle reveals that if you show a person two related objects, they will perceive an exaggerated difference in the thing that they see second.  So you can get someone looking at a $150 pair of shoes to behave as if they are purchasing a $100 pair of shoes by first showing them a $250 pair of shoes. Because the customer was shown a higher-priced pair of shoes first, the second pair of shoes seems even less expensive in contrast, which is where the term gets its name.

So what do you think happens in the opposite situation?  The principle says that people perceive an exaggerated difference in the second thing they see, so if seeing something cheaper than the first item makes you behave as if it’s even less expensive, then if you show a prospect a higher priced item second they will treat it as if it’s even more expensive!  So if you show a customer a $150 pair of shoes first and then try to get them to upgrade to a $250 pair of shoes, they will act as if the second pair of shoes actually costs $300 or more.

Price anchoring leverages a decision-making principle called primacy effect

Credit: Basecamp

Understanding the perceptual contrast principle shows that, regardless of anything else, you should consider listing your most expensive products or services first on all of your materials. Doing so leverages the “Primacy Effect“, a decision-making principle where the expectations for a person are set based off of the first item that they see. Even if you don’t do anything else, putting your most expensive product or service first, will make your remaining offerings seem like they are even more affordable to your prospects, which will boost sales.

That’s a simple strategy though.  If you want you can do even more.

If you list your most expensive product first, you can try raising the price of your other products on top of that.  Since in contrast they will still appear less expensive, many prospects will purchase the higher priced offerings as if they were still the original price.

Many companies will create an offering that they have no intention of people actually buying.  The only reason that package or product exists is to make their other offerings, the ones they really want people to buy, seem less expensive by comparison so they can raise the prices on those items.

Here’s an example.  Let’s say you are a web designer and you only have one package you offer to potential clients.  You can add a second one to your sales sheet that is far more expensive and appears first on the list, but only includes minor additions to what you provide for the client.  This will let you increase the price of your original package and still make it seem like it’s a good value.

Since the core of both packages is essentially the same and they both take roughly the same amount of work, in this situation you now have nothing to lose!  If anyone buys the premium package it’s a huge payday for you for no extra effort.  If they don’t buy that package, then they wind up buying your standard package at a slightly increased prince and you’ve still raised your rates for the work you used to for less.

Another psychological principle is that people equate quality with price.  By raising your price you can make people believe you have a better product or service and therefore are worth the additional cost.  There’s a case study from Robert Cialdini’s “Influence” of a jewelry-store owner who was having trouble selling a particular set of items.  One day she got frustrated and when she was going home that night she left a note for the person who was going to open the store the next day to drop the price for the items by half in order to move them and make room for new inventory.  When the owner returned to the store the next time, she found that the items had sold like she expected.  However what she didn’t expect was that the person who got her note misread her handwriting and actually doubled the price instead of halving it.  So not only did she get rid of the previously undesirable products, but she also did it at a two-times markup!

This approach won’t work for all products, but the instances where people are willing to pay for luxury goods is wider than most businesses realize.  Rather than trying to beat your competitors by always being the least expensive choice, see if there’s a way you can do the opposite.  People want what they can’t have, so if you market your product as the premium option that only the best customers can afford, it will have an instant attraction to prospects.  Plus it will be a way for you to differentiate yourself from the competition.

Look for additional ways to differentiate yourself from the competition? Learn how to ramp up your Facebook-brand, build your community, and create a valid sales channel for your business with our free guide to selling on Facebook.

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