Eight pricing strategies | Hacker News Reader

Eight pricing strategies

smallbiztrends.com

47 pointsdavidw17 comments

Better title would be "eight pricing tricks". It would be neat to read a blog post on fundamental pricing strategies, like price points, value pricing, cost-based pricing, loss leading, and so on.

It's a fine blog post --- except for the Arby's part --- but if someone has something more substantive, I'd love to read it.

Apparently, people perceive different numbers differently with respect to their value. I'm not sure how to say this, but the point is that something that costs 99 cents appears cheaper than 1 dollar. The number for which the difference is greatest and most beneficial for the seller is 77, according to Chicago Business School.

A latte at Starbucks has a higher perceived value than a basic coffee with cream.

I'm not sure that that's the reason. When I pay for Starbucks what I'm paying for is the infrastructure that allows for a consistent coffee/muffin experience wherever I am in the world. I can walk in and describe my drink according to the protocol and get it. I'm happy to do that but the coffee itself is just coffee.

> consistent coffee/muffin experience

Love it!

When I pay for McDonalds what I'm paying for is the infrastructure that allows for a consistent burger/fry experience wherever I am in the world. I can walk in and describe my food according to the protocol and get it. I'm happy to do that but the food itself is just food.

I agree with your sarcasm; this actually applies to me.

There is a good deal less scope for customization in the McDonalds experience. Can you even add or remove components for your Big Mac?

Yes

The article makes mention on several occasions to the perceptions of customers (i.e. quality/value, small/large payments, etc). While it's good to try to understand the way a customer perceives your price, I caution people against trying to play too many tricks with their customers heads. From #6:

Think QVC (the shopping TV channel) offering items for 4 easy payments of $29.99 which is more appealing than $119.96.

I would much rather pay for something advertised as $120 than "4 easy payments of $29.99", because the latter seems like they're trying way to hard to trick me into paying a price I don't want to pay.

Wait, you just said you'd pay $120, so how are they tricking you into a price you DON'T want to pay? Do you think its a bad practice because it increases the conversion rate, or because it might convince people to buy something they can't afford? After all, its the same price, just presented differently. If you would buy at $120, paying 4 payments doesn't matter. If you wouldn't buy at $120, but can afford it, and are convinced by 4 easy payments of $29.99, its not like you can't do math.

At what point does a psychological trick become dirty? That one seems pretty basic, any idiot can add up the payments and know what price they're paying. Should we yell at gas stations because they convince dumb people to buy at a penny more by pricing it 1/100 of a cent below a higher price?

You're right the price is the same - my gripe is how they attempt to obfuscate the true price by breaking it up into installments. When something is priced as X payments of Y (as opposed to the actual price, XY), there's an underlying assumption that I wouldn't purchase it at 1 payment of XY, otherwise why bother with the "installments" mindgame at all? Maybe I'm a overly sensitive to these sorts of indirections and concealments, but having to constantly expend energy to figure out how much something really costs can become wearing.

And yes, I do find the fact that gas stations price at tenths of a cent to be very dishonest - especially when they ALWAYS round up to the nearest cent.

Have you read Robert Ciadini's book? You should, it explains all the tricks marketers use to persuade you to buy something or buy into something. Most successful companies use some form of persuasion to get you to do something. http://en.wikipedia.org/wiki/Robert_Cialdini

But last I saw QVC, they do say the actual price, in addition to the Easy Payment stuff. Surely you can't argue with that?

> I would much rather pay for something advertised as $120 than "4 easy payments of $29.99", because the latter seems like they're trying way to hard to trick me into paying a price I don't want to pay.

Look at all the people that bought an iPhone for a down payment of $299 and 24 easy payments of $70.

When trying to figure out pricing another thing I have done in the past is preserve your premium pricing. It somewhat adds on to #8 and how "Everyone Loves a Bargain".

You can use this in the beginning phases of selling a product or service. Give an intro price. Make sure you let the customer know that this is a special so you can preserve your premium pricing. Give a "Special" 15% discount for the first purchase... or for the first month. Then as business rolls on, you can go to your premium pricing.

No one likes a price increase, but it's not seen as an increase if you are removing a discount.

I find pricing mechanisms fascinating. I'm at An Event Apart right now, which (with a price tag of $949 for two days) CLEARLY uses the Prestige Pricing strategy. Interesting stuff!

Also note that the prestige only comes when people know that you paid that much. So thanks for letting us know!

Reply on news.ycombinator.com