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Pricing strategies


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

Published in: Business
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Pricing strategies

  1. 1. Pricing Strategy<br />@paullomax<br />
  2. 2. FREE! From £19.50<br />
  3. 3. Starts at £19.50<br />
  4. 4. Suddenly £71.25<br />
  5. 5. Removing doesn’t save<br />
  6. 6. FREE is powerful<br />It is preferred by customers even when the rational paid-for choice may be a better deal. A free choice carries no risk.<br /><br />
  7. 7. Compromise marketing<br />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<br /><br />
  8. 8. Decoy marketing <br />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.<br /><br />
  9. 9. More choices equals fewer sales<br />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. <br /><br />
  10. 10. Establish an anchor price<br />A customer seeing a high number establishes an anchor price in their minds, making any subsequently cheaper offers appear to be a better deal<br /><br />
  11. 11. Deal with ‘tightwads’  <br />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.<br /><br />
  12. 12. Maximise revenue from ‘spendthrifts’<br />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.<br /><br />
  13. 13. Example<br />FREE:  A very cut-down trial service, purposefully hampered in some way, capture the tightwads to grow volumes and marketplace liquidity<br />£100: Decoy product, similar but inferior to the one up, designed to boost sales but not sell many itself<br />£129: Target product, where we want to see most volumes – roughly equates to AOV.<br />£399: Anchor product, targeted at spend-thrifts, designed to boost sales but not sell many itself<br />
  14. 14. Obligatory funnel: value<br />
  15. 15. More reading<br /><br />
  16. 16. Thank you<br /><br />