Pricing strategies
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Pricing strategies



Pricing psychology, package pricing, power of free - delivered at Product Camp London 2011

Pricing psychology, package pricing, power of free - delivered at Product Camp London 2011



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Pricing strategies Pricing strategies Presentation Transcript

  • Pricing Strategy
  • FREE! From £19.50
  • Starts at £19.50
  • Suddenly £71.25
  • Removing doesn’t save
  • FREE is powerful
    It is preferred by customers even when the rational paid-for choice may be a better deal. A free choice carries no risk.
  • Compromise marketing
    A high-end and high-price product in a line-up can boost sales of the next product in the line-up , even if it sells poorly itself
  • Decoy marketing
    If two products have a similar appeal, offering a third inferior product at about the same price may increase sales of the other products. This differs from the usual ‘good, best, better’ strategy.
  • More choices equals fewer sales
    A product line-up must offer enough choices to ensure that a customer can find a satisfying product, but not so many that the customer will be bewildered or demotivated.
  • Establish an anchor price
    A customer seeing a high number establishes an anchor price in their minds, making any subsequently cheaper offers appear to be a better deal
  • Deal with ‘tightwads’ 
    25% of customers may not buy a product even if it makes economic sense and special tactics need to be employed for these customers, especially copywriting.
  • Maximise revenue from ‘spendthrifts’
    Just 15% of customers have an unusually low sensitivity to the pain of purchasing, but luxury items are purchased disproportionately by this group. The trick is closing the deal.
  • Example
    FREE:  A very cut-down trial service, purposefully hampered in some way, capture the tightwads to grow volumes and marketplace liquidity
    £100: Decoy product, similar but inferior to the one up, designed to boost sales but not sell many itself
    £129: Target product, where we want to see most volumes – roughly equates to AOV.
    £399: Anchor product, targeted at spend-thrifts, designed to boost sales but not sell many itself
  • Obligatory funnel: value
  • More reading
  • Thank you