In 2007Coulter and Coulter showed two advertisements to two random groups of customers. Each advertised £10 off flights to Turkey. One listed the tickets at £188. The other showed a higher price: £233.
Customers found that the cheaper tickets felt like one worse Value. Why? Researchers found that people can distinguish smaller numbers more easily. The difference between 4 and 3 appears to be more pronounced than between 9 and 8. So customers were more likely to buy when prices ended in smaller digits (£244 to £233) than when prices ended in higher digits (£199 to £188).
Taking it with you is pretty easy. Next time you offer a discount, set the selling price to less than five. This is just some pricing advice that we discussed on my podcast PushBritain’s leading marketing podcast. Here are four more psychologically sound tips for pricing your products.
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Split your price.
Check out Huel’s two cheap lunch ads. One shows the total cost of 21 meals (£78.96). In the other case, the price is broken down per lunch ($3.76). Researchers found that breaking down the price per unit worked better with customers. Displaying a lower price gave buyers the impression that they were getting a better deal.
Richard Shotton and Michael Aaron Flicker tested ads very similar to this one to see if they were fantastic Book Hacking the human mind.
In a study, 282 buyers were divided into groups. The half was shown Sierra Nevada Pale Ale, priced at $18.99 for 12 bottles. The other group was told the price per unit – $1.58 per bottle. Of those who were shown the price per bottle, 28.6% said it was good or very good value (more than double the 13.7% who only saw the total price).
Setting the cost per unit made the purchase feel more reasonable and affordable.
Show the price Difference.
Businesses that want to grow their audience need to choose the right framework. Take this 2019 Experiment by David Hardisty from the University of British Columbia. Hardisty tested different pricing packages for New York Times subscriptions.
Group A saw two plans:
- A “Digital Access” subscription for $9.99/month.
- An “all-access” subscription that includes web access, the app, print newspapers, podcasts, and the crossword for $16.99/month.
Group B saw the same products described differently. The first plan was a “Web + App” subscription for $9.99/month. The second plan called “+All Extras” was available for an additional $7/month.
Same total price. Other framing. However, Group B was twice as likely to choose the premium plan. Why? Because $7 extra is easier to justify than $17 total.
Do you want people to go premium? Don’t show them the full price. Use differential pricing and simply tell them the extra charge.
Be transparent with your costs.
I went viral on LinkedIn for sharing this picture about chicken soup. One showed a bowl priced at $7.99. The second ad showed a breakdown of all the ingredients, their cost and the profit margin before the final price. Which sign would be better for sales? The post attracted a lot of attention because the results were surprising.
My post was based on a 2020 study from Harvard Designed to test the impact of displaying product costs. The first experiment took place in a cafeteria at Harvard, where researchers tracked actual purchases after students saw the comparisons.
When costs were made visible, soup sales increased by 21%.
The conclusion: price transparency wins. Customers are more willing to pay when they know what goes into making a product.
Make the difference visible.
Imagine giving someone the equivalent of $1 and offering them a choice between two packs of gum. Same taste. Same brand. Same price.
What is happening? Decision paralysis.
In a South Korean studyParticipants in South Korea were given ₩1,000 and asked to choose between two identical packs of gum priced at ₩630 each. Only 46% made a purchase. More than half went away.
Then the researchers made a small change. They adjusted the prices slightly. A pack cost ₩620. The other brand was priced at ₩640. This time, 77% made a purchase. A tiny difference of 20 won led to a 31 point increase in purchases.
Why is this happening?
When two options feel the same, people have a hard time deciding. So when offering similar options, find differentiators. Make one a little cheaper, a little faster, or a little more appealing. This small change can make a big difference.
Small nudges can help.
None of the above tactics changed the products themselves. Each approach simply changed the way the price was presented. These small changes in the framework have dramatically changed people’s decisions. So remember: small changes can help products stand out, offers stand out, and entice shoppers to buy.
Start testing and find what works for you.