The Psychology of Price: How to Influence With Numbers (Feat. Nate Lagos)
Sep 19, 2024
auto_awesome
Nate Lagos, co-founder of Original Grain, shares his insights on pricing strategies that not only attract customers but also differentiate his brand in the market. He dives into the psychology behind charm pricing, revealing why prices ending in '7' or '9' can influence consumer behavior. Nate discusses the effectiveness of dollar vs. percentage discounts and the importance of testing various price points to optimize sales. His fresh perspective on strategic pricing uncovers how brands can unlock growth by experimenting rather than imitating competitors.
Charm pricing can influence purchasing behavior, but it may not be suitable for luxury or premium products.
Running price tests is crucial for optimizing pricing strategies, as consumer reactions can lead to unexpectedly higher profits.
Deep dives
The Impact of Pricing Psychology
Pricing psychology plays a critical role in influencing consumer purchasing behavior, particularly through techniques like charm pricing, where prices commonly end in sevens or nines. Testing these pricing strategies has yielded interesting outcomes, as the hosts discuss their experiences with price endings, noting that charm pricing may not always be effective for luxury or premium products. For instance, while standard practice might suggest ending prices in these digits, research indicated that more precise, non-rounded prices could actually increase purchase intention for hedonic products. This highlights the necessity of adapting pricing strategies based on the type of product being sold and the psychological perceptions of the target market.
Testing New Price Strategies
Running price tests is essential for understanding how different pricing structures affect sales and profit margins. The hosts discuss their practices of adjusting prices to examine consumer reactions, emphasizing the importance of flexibility in pricing strategies. Specific tests were mentioned, such as altering a price from $199 to $209, which surprisingly resulted in an increase in profit per session despite a higher price point. Such testing not only reveals consumer behavior but also assists in determining the necessary adjustments to maximize revenue during crucial sales periods like Q4.
Differentiating Discount and Pricing Psychology
There is a significant distinction between discount psychology and general pricing psychology, which affects how consumers perceive offers. The hosts outline strategies for effectively presenting discounts, including visual considerations like font size and color, particularly noting how red can influence male consumers' responses. Clear differentiation between the original price and the discounted price also plays a crucial role in consumer understanding, ensuring that discounts are easy to comprehend. As discussions revolve around using large dollar-off amounts versus percentage discounts, it becomes clear that tailoring these strategies to target demographics enhances their effectiveness.
Should you always use a 7 or a 9 in your pricing? Is there a “best practice” when it comes to pricing new products? What’s the best way to do discounts, and what is OG doing with their prices that no other brand seems to have figured out yet? All this and more in this episode of Brain Driven Brands!
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
starstarstarstarstar
Game Changer
Gpeeps78
App Store
I cannot recommend this app enough. It belongs in my top three AI apps. It’s that good!
starstarstarstarstar
The game changer for learning from podcasts!
Nelson
App Store
I used to use a different app that was able to save excerpts from podcast and really enjoyed it. I could listen to the podcast and quickly save things that I wanted to come back to later. Snipd take this to a whole new level with AI integration, creating summaries of podcasts and summarizing the main takeaways from what I’ve saved and snipped. I really love how it helps me prioritize what podcast to listen to with it summaries & deep dives.
