The Psychology of Pricing: How to Help Clients Get Past Sticker Shock and See the Value in Your Premium Packages

Have you ever avoided buying something amazing because it was “too expensive,” and then regretted not just doing it later?

If so, you know it’s a rotten, sinking-in-regret, why-was-I-so-chicken feeling.

You don’t ever want a prospective client to feel that way.

Especially if you’re the type of entrepreneur who pours her heart and soul into what you do, it feels particularly gut wrenching to hear someone say “that’s too expensive for me.”

Because you know it will help them. You know they’d flip out and love it and tell all their friends and be so glad they did it.

You wish you could hand them magic glasses to help them see past their own sticker shock into how cool their future would be if only they had bought/done/hired you for ____________ [whatever awesome thing you do].

Three Ways to Hand Prospective Clients Those Glasses

Well, they’re not complete magic – there are many factors weighing on any decision. But by understanding these three aspects of how people evaluate prices, you can arrange your pricing information in such a way that reduces sticker shock and helps them buy what they truly need.

Here we go:

1. Ahoy There: Pay Attention to Price Anchoring

Ever gone to a new place, hopped in a taxi, and then said “Wow, taxis here are so ________!”

Whether you filled in that blank with “cheap” or “expensive” probably depends on where you live and what taxis cost in your own town.

If you live in Smallishtown USA and turn up in Austin, you probably flinch at the price of your ride from the airport.

But if you’re from NYC, you’re probably glad that Austin ride is relatively “inexpensive.”

That two people can react to the same cab price differently shows the power of something called “the anchor bias.”

The anchor bias basically means we tend to grab the first number we see and weigh everything else against it.

For example, if I ask you to estimate 5 x 4 x 3 x 2 x 1, your estimate will probably be wildly higher than if I asked you to estimate 1 x 2 x 3 x 4 x 5. The real answer is the same for both problems, but you’d typically react differently depending on the number you see first.

Unfortunately, it’s the same with pricing. Whatever number potential clients see first influences how they think about other numbers.  If you’re used to a cab costing $5, then $30 seems high! But if you’re used to $60, then $30 seems like a steal!

While you can’t do anything about the fact that the person down the street is selling the same service as you for $2 (or what feels like $2), price anchoring can still work for you in short-term situations. For example, you could perhaps re-order your own price sheet, such that they see:

$2599
$1699
$1299

Instead of:

$1299
$1699
$2599

This method isn’t guaranteed to work for everyone, however – when you have simple packages, starting with the most expensive may make the others “feel” less expensive.

If you show them $1299 first, then $1699 sounds “more expensive.” By comparison, showing them $2599 first makes $1699 sound like a better deal.

Their reaction to the same number ($1699) can differ considerably, simply depending on which number they see first.

Use this effect wisely when selecting how to present your pricing information.

My Personal Recommendation for YouSteal This! My Perfect Pricing Strategy to Drastically Increase Your Bottom Line

2. The “Magic” Sale Number

You already know that buying something for $99 feels a little better than buying something for $100.

But were you aware that $99 also feels better to an audience than $94?

When researchers looked at how well an article of women’s clothing sold at three price points ($34, $39, and $44), they found the clothing always sold better at $39. Even better than at $34.

You have probably already heard the advice to end your prices in ‘9,’ but this research suggests that – especially when there’s limited information about how much something ‘should’ cost (which is often the case in creative or custom work) – prices ending in 9’s sell even better than slightly lower prices.

The only thing that sold better than a single price ending in ‘9’ was a tag that emphasized the original price point, such as: $48 $40.

But even then, a more convincing option was $48 $39.

Pricing is a challenging game, but the ‘9’ effect is so persistent it’s worth paying attention to, and using it to your advantage when you make your price lists.

3. The Salon Secret

Imagine you’re the type of person who enjoys getting a $60 pedicure every month.

Now imagine I come and try to sell you a fabulous $720 year-long club membership to a salon so gorgeous and amazing you practically float off the floor thinking about it.

But then you look back at the $720 price tag. What do you think?

Most people think something like: “$720? That’s so much money! That’s a third of my monthly income! I could pay a good chunk of my rent with that! No way can that be worth it.”

The enterprising mathematicians among you may have caught something just now, though: A $60 pedicure every month adds up to $720 a year.

This “$60 is no big deal, but $720 is ridiculous” reaction is due, in part, to something called the total expenditure effect.

People tend to be more sensitive to price when the amount in question seems to take up a larger chunk of their income. If you make $2000 a month, $60 a month is 3% of your monthly income, but a one-time lump of $720 would be 36%.

Thirty-six percent feels a lot harder to spend than three percent. Even if it’s the same amount in the end.

There’s also something called the denomination effect, where people will spend five $20 bills much more willingly than a single $100 bill – even though the end amount is the same.

The $720 sounds like a lot more, so people reject it – even though logically, it makes little difference. They could simply save their $60 a month and have enough by the end of the year!

My Personal Recommendation for YouHow to Price Your Services with Confidence

What does this have to do with you and your offerings?

Well, helping people mentally break down the price into manageable chunks can sometimes help them get more of what they want.

For example, someone might not want to spend $720 on a year of coaching, when you think that’s an absolute steal.

But if you helped them think of it as $60 a month to have an experienced mentor-friend they can powwow with once a month, it helps them reframe their thinking from what-the-heck to “wow, that’s not so bad.”

It’s not that you have to actually introduce a $60/month payment plan – but even a simple mention on a sales page – “that’s like spending $60/month” – can help people reframe their buying decision into something that sounds more manageable.

You could also compare your offering to the same spending choices they make every month. Like: “You pay $40 for cable every month – wouldn’t it be worth the same to have ______ in your life for the same amount?”

Help them see how the total expenditure could break down and feel more logical, and they’re more likely to bite.

The goal of using these three tricks – anchoring, ending in ‘9,’ and helping people break down prices – isn’t about manipulating people to “get them to buy more.”

Rather, you’re eliminating unnecessary mentally-generated barriers to help them understand your prices better and fit them into the rest of their everyday buying decisions. Tweet that!

Combined with a great product, solid sales copy, and good relationships – these little tricks can help you help others.

I’d love to hear from you!

In the comments below, tell me…

Have you ever made a small change (like one of these) and found it had a big impact on sales?

Or, the other way around – have you ever seen a neat trick another business owner used that gave you the courage to buy what you really wanted?

What seems to be your biggest struggle getting people to see the value in your top/best package?

I can’t wait to read about your experiences and chat further in the comments below!

*****

Jenika McDavitt teaches creative people how to understand clients and run better businesses over at Psychology for Photographers (Spoiler Alert: It’s not just for photographers!)

If you enjoyed these tips, be sure to grab the valuable (but free!) e-book How Clients Make Decisions About Money – one reader made $3000 his first time using Tip #2. Enjoy!