What Is Psychological Pricing And How Can It Help Businesses?
Price is a staple of modern-day consumerism. Psychological pricing, charm pricing, and other concepts can confuse small business owners. Within the field services industry, you must understand the definition of psychological pricing to give you an edge on the competition.
One study revealed that 90% of all prices in America end in a “9” or a “5”. This is a psychological pricing strategy in action.
Let’s jump into utilizing psychological pricing techniques to increase your customer base and grow your profits.
Psychological Pricing Defined
Psychological pricing is based on the premise that pricing services as less than a whole number will push consumers to spend. It combines the price someone sees in front of them and marketing and sales to build an attractive proposition.
For example, suppose you’re selling lawn mowing services, and you’ve priced your services with a “.99” or “.95” at the end. In that case, you are using psychological pricing to make your services appear more attractive to customers.
The psychological pricing definition is nothing new. Smart businesses have been using these techniques for decades. Visible prices replaced haggling and allowed companies to benefit from the power of intelligent pricing.
To define psychological pricing is to opt for something other than a whole number to make a price appear lower than it actually is. Although a few cents off a regular pest control service may not seem like a big deal, it has tremendous power.
Does Psychological Pricing Work?
In short, when people ask, “What is psychological pricing?” they also want to know whether it works. It does work, and it’s why the vast majority of businesses use it, regardless of the industry and their target market.
Pricing psychology goes back to Maslow’s hierarchy of needs. The pyramid outlines how humans prioritize the different things in their lives, such as the basic things they need for survival, safety needs, and community.
Mazlow’s hierarchy is the foundation of modern marketing. Anyone who has worked in the industry will have been taught how this works.
Any psychological pricing strategy will refer back to these needs, particularly when it relates to the top tiers of “Esteem” and “Self-Actualization.”
Psychological pricing demonstrates an innate understanding of what drives people to make their decisions. A firm understanding of the concept enables you to hit upon what your target market is searching for.
So, what are the advantages of using psychological pricing for your field services business?
- Get An Attention Boost – Soar above the local competition with prices that stand out from the conventional.
- Simplify – Make the decision-making process simple. If another pest control business provides the same standard of service as you, psychological pricing could be the tipping point that convinces someone to buy from you.
- Create A Sense Of Urgency – Psychological pricing drums up urgency. If someone isn’t sure whether they’re ready to pay a professional to fix their lawns, the right price could convince them.
Like all types of marketing techniques, you also need to know the disadvantages. Psychological pricing can come with its drawbacks, such as:
- No Long-Term Solution – Psychological pricing is not a long-term pricing solution. If the price is always the same, it loses its potency.
- Pricing Expectations – Psychological pricing is supposed to be a short-term strategy. Creating pricing expectations could cause discontent among customers when you eventually alter the price again.
- It May Not Work – Price is not always the main priority when choosing a field services business. Quality, reputation, and customer service could still lead to customers going with another brand regardless of your prices.
Psychological Pricing Strategies to Attract Customers
Altering your prices is not the only way to execute a psychological pricing strategy. There are many ways you can implement this technique to grow your business. Here are some psychological pricing examples you can try with your business:
Charm pricing is the idea that a service will be priced with nines on the end; 9-ending prices are proven to increase customer demand because they give the illusion of a bargain.
Your field service business may decide to offer pool cleaning, lawn chemical treatments, or pest control services by turning all your prices into ones ending with a nine. It’s a psychological phenomenon that repeatedly works, so you constantly see this strategy in practice.
However, there’s also another side to it. While 9-ending prices give the impression of a bargain, prices ending in a whole number, or a zero, give the impression of a prestige price.
If you’re marketing your services to a high-income area, you may decide to opt for whole numbers to send the message that you are a field service business that goes above and beyond your competitors.
Everyone loves a discount when purchasing anything. Another best psychological pricing strategy example involves adding artificial time constraints to a price.
For example, you may choose to offer a set of lawn care services for $299.99, down from your usual $350. This is both a deal and an example of psychological pricing.
Running a social media campaign with a limited sale of your services could encourage customers to try you out for the first time.
It’s also an excellent way to pull customers away from the competition. Offering occasional psychological prices combined with a limited-time deal could create a buzz in the ultra-competitive landscape of field services.
Beware of decreasing your prices too much when trying this psychological pricing strategy. Cutting too deep with your discounts could inadvertently create the impression that you are not a high-quality business.
Innumeracy is a concept that has been discussed many times in business. According to the Economist, the average customer doesn’t understand the mathematics of a discount.
For example, if someone is promoting a buy one get one free offer and another is offering a promotion that lets you buy two items for 50% off both, which is the better offer?
They’re the same offer, but people often cannot tell the difference. Percentage pumping, coupon design, and other such techniques take advantage of innumeracy to make customers believe that they’re getting a better deal than they actually are.
How can you apply this concept to psychological pricing for a lawn care, pest control, or pool care business?
Try offering a promotion where you bundle several services together. You could opt for a buy one, get one free offer on some of your services, or opt for the classic: “If you order our landscaping service, we’ll include seasonal leaf blowing for free.”
Avoid shady design work and sneaky terms and conditions. Innumeracy can be used temporarily, but you should be wary about slashing your prices too much. Focus, instead, on the quality of service and the way you treat your customers.
Remember, this is the darker side of psychological pricing, and customers are starting to wise up to this strategy.
How do your prices look on your website? What do people see when they’re browsing your services?
Think about how you’ve designed your prices. Price appearance is a big part of psychology. It’s known that the longer the price, the more expensive customers perceive it.
For example, if you offer a service for $99.99, consider reducing the “.99” in size to make it smaller. Such a simple change makes the price look more affordable.
A price with more syllables is also viewed as more expensive because when your customers look up your prices, they’re reciting those prices inside their heads. The longer it takes to recite that price, the more expensive they believe it is.
A simple tactic on your website is to omit the dollar signs and any redundant numbers, such as “.00”.
If you’re using charm pricing alongside your main price, make the “.99” extremely small compared to the rest of the number.
Value-based pricing is an excellent strategy for brand positioning and ensuring it hits the correct demographic. However, it would help if you had an intimate understanding of the local community and the competition.
For example, if you live in a town that’s awash with cut-price lawn care services, does it make sense to try to compete with these established companies? Of course not, so you may want to search for an alternative.
Instead, you may see an opening in your town for a “luxury” lawn care service. You wouldn’t decrease your prices but increase them above those of the competition while branding yourself in a way that paints your company as one that offers five-star service.
Likewise, if you’re looking to market yourself as a lawn care brand that offers the best value-for-money choice in the area, you would price accordingly.
It all depends on the communities you serve and what other companies providing the same services are setting their prices at. You’ll need to research the market and your customers and continue doing it long into the future to take full advantage of value-based pricing.
It’s a complicated strategy to get right because it also connects to how you position yourself as a company and the way you market yourself. However, if you get it right, you’ll easily be the best choice among your target audience.
Figuring out what psychological pricing is can give you more tools to work with. Intelligent pricing, however, is just the start of maximizing your potential.
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