Yesterday I wrote about pricing pages. But I didn't address the elephant in the room – which is pricing. Pricing is hard. Thankfully, we don't have to do our own research to learn a ton from pricing experiments that have already been done.
So today, let's look at what we can learn from some research you didn't know about.
It's very hard for people to define value
Let's say you're in an MBA program and some researchers decide to put you to a test. They ask you to put the last two numbers of your social security number on the top right of your paper and then they give you a list of common objects. Toasters, wallets, staplers.
The task is to determine if you would buy those items for the number on the top of your paper (which, in terms of the objects, is a totally random number). Some items get marked as no, others as yes.
But wait, that's not the pricing experiment.
No, the real fun happens when they ask you what you would buy it for. That's when we put new numbers down. And these should show a lot more consistency across all of us, because we're all smart and we all know the price of a toaster.
What they discovered was that people with higher numbers (in their SSNs) suggested higher prices for everyday items. And people with lower numbers offered lower prices.
By a factor of 200-300%.
That's the power of anchoring. That number on the top of the page is an anchor that changes how we define value.
That's why cars show you an MSRP. It anchors you.
So if you want to anchor people on your pricing page, put down the normal price, draw a line thru it, and give us a new (lower) price. We know you're doing it. But it won't stop our brains from feeling like we're getting a good deal and draw us into a purchase.
Greater competition drives greater revenue (for some)
Want to hear another interesting pricing experiment, when it comes to pricing?
Imagine you and I walked down the aisle looking for some chocolate.
Would you be surprised if I told you that the number of entries in the field had an impact on price?
Imagine walking into a 7-11 and looking at tons of soda (or pop). The number of options doesn't normally change the price, right?
Well in the case of one experiment done at the London School of Business and Georgetown University, the number of entrants actually had an impact.
When 21 options for chocolate were presented, people were willing to pay 33% less for the cheap stuff, and 40% more for the good stuff. That's compared to when only presented with five options.
When the market is saturated, people will pay more for what they perceive is the higher end, quality product.
My guess is that you're in a crowded market. So there's more upside for you if you can align your brand with the higher end of the market rather than the downmarket offering. So work to create an upmarket option. Add some white-glove installation!
You may want to kill that competitor comparison from your pricing pages
A couple weeks ago I wrote you about the pages missing from your site – which were comparison pages. Those are great if they're on their own. But if you're putting that kind of comparison on a pricing page, it may be hurting you.
Why am I telling you that? First, you have to check out the pricing experiment from Stanford to find out that not all comparison-making is the same.
If you do the comparison on your own, then cheaper alternatives get bought at a better price, more often, faster. But that's when I'm not explicitly asking you to compare alternatives.
But the moment I do an explicit comparison, or ask you to do a comparison, guess what?
There's a huge difference. The explicit request to compare ends up slowing things down, drawing them out, and seeing far less purchases.
All because the comparison was explicit. It put customers into “research” mode and that's not a great mode that delivers conversions. It leads people to analysis paralysis.
So keep explicit, head-to-head comparisons off your pricing pages and leave the comparisons to those other dedicated pages that are better at the top of the funnel than at the bottom where you want conversions.
There is power in stories
I love stories and try to share everything I know using them.
That's exactly what Rob and Joshua did when they sold cheap stuff (on average $1.25 each) on eBay. But instead of simply putting the stuff online, they asked writers to write stories to go with the items. Now, just because a neat story is next to a wine glass doesn't make it super valuable, does it?
Whatever your thoughts are, before you answer, make sure you head over to the Significant Objects site, to see how they made $8,000 dollars of those cheap items. Simply because people (ready for this?) aren't great at perceiving intrinsic value.
In some cases the prices were up 2700% from their actual cost – all because a story turned objects into significant objects.
How does this apply to you? Well the best approach I know is to grab those case study stories from customers and put them all over your site. Testimonials are also incredibly helpful if they tell your story. Check out Testimonial.to for that.
These pricing experiments make pricing easier
In the end, pricing is hard because it's not purely technical. There's psychology involved. And that means it would be hard work for us to figure all of this out without someone else doing some of these pricing experiments for us.
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