Sneaky Pricing strategies
- Irrational pricing is putting the price of items at say $4.95 instead of $5. The reason is based on memory processing time. Rounding upward involves an additional decision compared with storing the first digits. Furthermore, due to the vast quantity of information available for consumers to process, the information on price must be stored in a very short interval. The cheapest way to do so, in memory and attention terms, is by storing the first digits. Customers think they are getting a better deal than they in fact are. (Besides, by pricing like this, you force the cashier to make change, reducing opportunities for fraud.)
- The purpose of the discount vouchers is not to save customers money, but to get them to buy products they don’t normally buy, or to buy more of it. Look again at the terms/ offers associated with your loyalty card.
- Eye level is buy level: Products positioned at eye height sell twice as well, so place your highest margin (not most expensive nor most popular) items there.
- Known Value Items (KVIs) can be sold below cost to try to beat the competition: these are loss leaders. Margins must be increased by raising prices on other items that are not KVIs, and then upsold with the loss leaders. Consumers exaggerate the perceived value of the savings and tend to spend (more than) they thought they saved. NEVER run a loss leader on an item that os not a KVI.)
- Buy one Get one free ('BOGOF') has been shown to increase purchases by up to 150%. Unlike 50% off, which actually does save money, 'BOGOF’ deals accustom consumers to buying more of a product than they normally do, so when the offer ends they are likely to carry on buying more.
- Value add or bundling. Bundle a few complementary products in one package and charge marginally less. Or, add value by slicing/ opening/ cleaning/preparing a product. Anything that spells convenience is worth extra dough – and well beyond the cost of adding the value.
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