This Man Breaks Down How Companies Use Pricing Principles To Sell More Products To Customers (12 Pics)

Businesses put a lot of effort into finding the right prices for their products. Keep it too low, and you leave money on the table. Make it too high, and you can say goodbye to sales that could have made your year.

Finding the ideal number means choosing a strategy that is appropriate for that particular situation. and Imgur users Shlomo Jenchin Thought it would be interesting to explore some common options.

But what’s really amazing, after doing all the homework, ShlomoGenchin decided to summarize everything into simple concepts and post the images online where everyone can see them.

1. Decoy pricing. Premium costs a little more than decoy but provides a lot of value.

Image credit: Shlomo Jenchin

2. Location cost

Image credit: Shlomo Jenchin

3. Determination of relative prices. Good positioning forces customers to compare your product with more expensive products.

Image credit: Shlomo Jenchin

4. Social pricing. People only talk about very expensive or very cheap things they have bought.

Image credit: Shlomo Jenchin

5. Magic of the Middle. People who don’t know the market, or don’t care about it, will usually choose the middle option.

Image credit: Shlomo Jenchin

6. Bundle Pricing. Use bundling to sell more while lowering the price a bit.

Image credit: Shlomo Jenchin

7. Breakdown Pricing. Divide the higher price into smaller units.

Image credit: Shlomo Jenchin

8. Price vs. Value. Is price the main advantage? Emphasize it. If not, focus on something else.

Image credit: Shlomo Jenchin

9. Pricing on Immediate Basis. Create shortages by promising to raise prices.

Image credit: Shlomo Jenchin

10. Rule of 100. % discount if price is less than $100. Discount in $ if it is over $100

Image credit: Shlomo Jenchin

11. Premium vs. Low Price

Image credit: Shlomo Jenchin

12. Penetration Pricing

Image credit: Shlomo Jenchin

Bonus: Pricing Placebo

Image credit: Shlomo Jenchin

The phenomenon of identical products being perceived differently because of price differences is called the “marketing placebo effect” and, just as with drugs, the effect is only due to certain characteristics: “quality It’s worth it!”

To illustrate how prices affect consumers, Shlomo Jenchin concludes his post with a quote from 2017. the studyOrganized by scientists from INSEAD Business School and the University of Bonn.

The researchers invited 30 participants (15 women and 15 men, with an average age of about 30) and offered them some alcohol.

The wine-tasting process involved lying down in an MRI scanner, allowing participants to record brain activity as they sipped. But each time the price of the wine was revealed first. Then approximately one milliliter of the respective alcohol was given to the test subject through a tube in their mouth. Participants were then asked to rate on a nine-point button press how good the wine tasted to them.

Their mouths were then rinsed with a neutral liquid and the next sample of the same wine was given to taste.

“As expected, the subjects reported that the higher-priced wine tasted better than the apparently cheaper wine,” reported Halke Plasman, a professor at INSEAD Business School.

“However, it was not significant whether the participants also had to pay for the alcohol or were given it for free.”

To highlight the impact of these strategies on consumers, the original poster also mentioned an interesting study.

“How much a customer is willing to pay for a product has little to do with the seller’s price and more to do with how much they value the product or service they are buying. ” Eric Dolansky, Associate Professor of Marketing. Brock University in St. Catharines, Ontario, told BDC, Bank for Canadian Entrepreneurs.

According to Dolansky, pricing is a decision that should not be driven by accounting.

The customer needs to know that the price falls within their acceptable range, and the company’s ability to set a price is limited by its costs.

To choose the right price within the customer’s acceptable range, businesses should consider the following factors:

  • operating expenses;
  • inventory shortages or overabundances;
  • Shipping costs;
  • fluctuations in demand;
  • competitive advantage;
  • The concept of value.

Different pricing strategies can and do coexist as a product evolves through its life cycle in the market. Companies needing an overall pricing strategy (for example, price-based or value-based), usually need to determine how high or low the price will be (skimming and penetration pricing). , and they need to respond to competitors (competitive pricing).

For example, one may initially want to price their product using a price-based approach, then switch to a skimming strategy and conclude with penetration pricing.

Pricing is one of the most important and visible aspects of marketing strategy, along with promotion, placement (or distribution) and people (a formula known as the classic four Ps of marketing). .

The price you offer, Dolansky said, should be consistent with “how you want to be seen among your competitors, and your promotional messages, your packaging, and the types of stores you sell.” in accordance”.

Let’s say your product is premium olive oil. It needs a premium price that reflects better packaging, better distribution in grocery stores, and higher-level promotional messages.

However, at the end of the day, all pricing strategies are double-edged swords. What attracts customers will repel others. No one can sell all things to all people.

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