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Pricing Psychology: Behavioural Economics and New Economic Models by Leigh Caldwell at Chinwag Psych
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Pricing Psychology: Behavioural Economics and New Economic Models by Leigh Caldwell at Chinwag Psych

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A company's choice of pricing can create a psychological response in its customers, but how can businesses choose the best pricing tactics to create a positive response, maximising customer …

A company's choice of pricing can create a psychological response in its customers, but how can businesses choose the best pricing tactics to create a positive response, maximising customer satisfaction and profits. “Psychology of Price” author, Leigh Caldwell uses a nuanced understanding of psychology to unlock the potential of behavioural economics that can provide new models for business.


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  • 1. £5.99   £7.99  0  50  100  Total  revenue:  £619  
  • 2. How  should  this  shop  increase  its  profits?  a)  Decrease  the  price  of  the  £5.99  boCle?  b)  Decrease  the  price  of  the  £7.99  boCle?  c)  Increase  both  prices?  d)  Round  them  up  to  £6  and  £8?  e)  Offer  10%  off  if  you  buy  three?  f)  Something  else?  
  • 3. 0  50  100  £5.99   £7.99  Total  revenue:  £809    31%  up!  £14.99  0  50  100  Total  revenue:  £619  
  • 4. £3600  £2150  
  • 5. Time  given  up  to  be  here   Cost  of  travel  Cost  of  food  Benefits  of  new  knowledge  Day  out  of  the  office  Fun  talks  People  I  might  meet  -­‐  networking  Boring  talks  Possibility  of  TSB  funding  Could  find  a  new  job  SiZng  in  a  chair  all  day  Hot  women  Hot  men  £199  
  • 6. £234  
  • 7. £14.99  
  • 8. ₹47,291,002,181  
  • 9. Price  is  an  arficial  neatener  
  • 10. •  The  same  sofa  that  I’d  pay  £1199  for  •  I’ll  pay  £59.99  a  month  for  36  months    •  A  total  of  £2159.64  
  • 11. £6/boCle  £60/boCle  
  • 12. Cogni&ve  economics  
  • 13. THE 7 PRINCIPLES OF PRICINGPricing should be based on thevalue to the customer,not the cost to you11 copy of PowerPoint – what is it worth?
  • 14. THE 7 PRINCIPLES OF PRICINGPrices should be tangible,so your customers can see whatthey get for what they pay2App vs. website: “what am I getting?”A bird in the hand etc…
  • 15. THE 7 PRINCIPLES OF PRICINGThe positioning of the productmakes a huge difference to howmuch people will pay for it
  • 16. THE 7 PRINCIPLES OF PRICINGPrices should be comparable(on terms that you control)3How much is something really worth?Make your product seem like a good deal bychoosing the right comparison point.Nescafe  instant  £2.49  Lavazza  coffee  £3.49  Starbucks    la<e  £2.55  vs.   vs.  
  • 17. THE 7 PRINCIPLES OF PRICINGIf you want to change yourprices, you mustreframe the product4What’s included?
  • 18. THE 7 PRINCIPLES OF PRICINGPrice differentiation is thekey enabler of profit5Horses for courses – different people have differentbudgets.To maximise profits, have something for everyoneand let people tell you what they want.
  • 19. THE 7 PRINCIPLES OF PRICINGPricing communicationshapes the customer’sperception of value6There’s no absolute value – the way you talk aboutthe product and its price will set expectations
  • 20. THE 7 PRINCIPLES OF PRICINGYou must be prepared tolose some sales in orderto increase profits7Accept that some of your customers won‘t come with you….but its still worth it.
  • 21. The  seven  principles  1.  Pricing  should  be  based  on  value,  not  cost  2.  Prices  should  be  tangible  3.  Prices  should  be  comparable    4.  To  change  your  prices,  you  must  reframe  5.  Price  differenaon  is  the  key  enabler  of  profit  6.  Pricing  communicaon  shapes  the  customer’s  percepon  of  value  7.  You  must  be  prepared  to  lose  some  sales    
  • 22. Usually  £14.99  Today  £12.72  Signed  £12.71  Free  guide  to  behavioural  economics  

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