What makes you spend more on any product/ service?
Read this post to understand:
In the current world, Selling Price ❌Cost Price+ Profit
The selling price is a function of lot many different parameters like:
· Perceived value of the product/ service
· Time saved due to that product/ service
· Opportunity lost due to non-usage of product/ service
· Perceived price in buyer’s mind
· Competitor’s pricing
· Monopoly in the market
· Ease of switch
· Macroeconomic factors
· Demand and Supply gap
And many other factors
There are a few effects that can help you understand how orgs are playing around with human psychology while deciding the price of their products/ services.
Decoy Effect
It is when the consumer changes their preference between 2 options when they are presented with a 3rd option. Ex: French fries (Small, Medium, Large)
Strikethrough Pricing
This is done when a seller wants to highlight the value before offering a discount, this is commonly observed on Ecommerce sites
Surround Effect
In this, the pricing of the base product is kept lower than that of competitors, but the better version of the same product is priced at par with the competition. Most common phenomena in Food & Beverages and quick-serve restaurants.
Undercut
The price of a few of the best features is kept less as compared to that of competitors to attract and onboard the users.
Penetrate Pricing
This strategy is followed when the product/ service is offered at dirt-cheap prices as the main goal of the company is to penetrate the market and disrupt the industry. Ex: How Jio entered the market
Anchor Effect
Helping prospects in making decisions by providing tags on the pricing plan and highlighting those plans. Ex: Best Value, Best priced, etc.
Which other pricing effect have you come across? Leave a comment below
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