11 Pricing Strategies the Best Companies Use

and Print Profits - Part 1

11 Pricing Strategies Utilized by Top-Performing Companies to Generate Profits (Part 1):

1. Price Anchoring: Exploiting the psychological bias of anchoring, companies showcase a higher initial price followed by a lower one to enhance perceived value, ultimately driving increased sales.

   

2. Decoy Pricing: Frequently observed in sets of three pricing options, the inclusion of a "decoy" encourages the sale of a ‘better value’ plan. For instance, the presence of a $6.99 medium coffee boosts the sales of a $7.99 plan as it appears much better value.

   

3. Freemium Pricing: Companies offer free, limited product access in exchange for user account creation. Typically, key features are restricted or users experience ads, effectively enticing potential customers to transition to paid versions.

   

4. Price Reframing: Dividing monthly or annual prices by the corresponding number of days reveals the daily cost, making larger expenses more digestible. Additionally, comparing prices to everyday items, such as a cup of coffee, minimizes perceived costs and reduces friction.

   

5. Charm (or Psychological) Pricing: Ending prices with the digit 9 triggers a psychological response, leading to an increase in sales.

   Consumers may even opt to pay more for a product if its price ends in 9 as opposed to another digit.

   

6. Loss Leaders: Temporarily pricing certain items below cost serves as a strategy to boost traffic and visibility, facilitating the sale of higher-margin products. Grocery stores, for example, often price essential items like milk very cheap - at a loss, enticing customers to purchase additional items, thereby increasing overall order value. Large retailers like Costco and Ikea price their menu items like hotdogs absurdly low.

   

The next set of Pricing Strategies (7-11) will appear in next week’s newsletter. Be sure to subscribe.