Transcripts
In this episode of Live With the
Pricing Lady, we're looking at
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:part one, pricing psychology, how
the psychology impacts customers.
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:Sit back and relax and enjoy the episode.
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:Hello, and welcome to this episode
of Live With the Pricing Lady.
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:I'm Janene, your hostess.
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:The show is all about helping you build a
more profitable business by understanding
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:the tactics and strategies of pricing.
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:If you feel uncomfortable with pricing,
you are in the right place because we
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:are gonna help you take concrete steps
towards building your pricing confidence.
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:Today we're going to be talking
about pricings psychology in
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:the context of your customer.
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:Now, this is part one
of a two-part series.
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:When it comes to pricing psychology,
there are two aspects of psychology
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:we need to pay attention to.
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:One is the external aspect, which has
to do with your customers and with the
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:competencies and the market, and the
other is internal to your business.
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:What's going on that's keeping
you from doing the right things?
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:We'll cover that in episode two.
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:In this first part, we're going
to be focusing on the importance
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:of what your prices are telling
people beyond just the number.
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:That's right.
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:The price is never just a
number, it's actually a message.
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:Your prices are constantly communicating
to customers and they're telling
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:them what to think about your offer.
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:What to think about your
business, how you can serve them.
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:They're even communicating about
the values of your business.
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:So aside from the number itself,
your prices break volumes, and it's
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:important for you to understand what
it's saying so you can make sure that
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:it's conveying the right messages.
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:As I said, this is part one
of the two part series, so
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:let's go ahead and get started.
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:So first of all, why is it
important that you understand this?
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:Math is part of pricing, but there is a
bigger impact, and that is perception,
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:and that has to do with the psychology.
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:I always joke with people and say,
pricing is all about the psychology
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:baby, and since you can't see me, I'm
wiggling my eyebrows when I say that.
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:And it's true.
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:Pricing is a lot about psychology.
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:And when we don't understand that
psychology, then we can end up
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:inadvertently doing the wrong things.
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:You want to understand how people
interpret the signals or the
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:messages that your prices are putting
out there so that you can ensure
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:you're doing the right things.
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:I alluded to already.
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:If you don't understand some of these
intricacies of the psychology, then
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:you may end doing things that make it
harder for you to close the deal or for
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:clients to understand why that price is
a fair price for what you are delivering.
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:Now we're gonna do this in two parts.
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:We're going to first take a look at
the challenges that people have when
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:it comes to the external psychology,
and then I'm gonna give you some tips
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:on how you can be doing it better.
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:So first of all, one of the challenges
when it comes to the psychology is
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:that if you're just using random prices
because somebody out there told you
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:you had to use 97 or 2 97 or 2 9 9 9
or whatever it is, and you don't really
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:understand, you're using random prices.
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:Quite often those prices
don't actually align with the
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:value that you are delivering.
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:So if you use those prices and there
is a misalignment, then customers are
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:going to have a hard time believing that
that is a fair and reasonable price.
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:And that can be in either direction.
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:If it's too low, it can indicate
that maybe your offer isn't going
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:to deliver people, deliver people
the value that they're looking for.
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:And if it's too high, people may think,
oh gosh, it could never deliver that.
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:That's crazy.
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:We're looking for a point or a
price range that toes the line in
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:terms of the price value trade off.
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:If you're just using a price that someone
says, okay, every offer like this has
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:to be this price, then of course you
may not be aligned with the value.
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:Now another challenge that people can
find in this aspect is assuming that
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:lower prices always equal higher sales.
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:If you use 99 instead of a hundred, you're
going to get a more volume out of that.
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:And that's not always
necessarily the case.
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:Those sorts of tactics can be
effective, but in very specific.
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:Industries in very specific
situations they are effective,
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:but you can't apply that across
the board to any kind of business.
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:You need to understand which psychology
tactics and strategies are going to
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:be the ones that suit and fit your
needs and the needs of your customers.
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:Now the third challenge that people
have is they don't often take the time
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:to understand how their customers make
buying decisions, which means that
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:they don't understand the triggers
behind their buying decisions.
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:So I had said this before, but
. It's worth repeating again here.
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:Now, typically what I see when people
set their prices is service-based
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:businesses use a thought process that
goes, I do this really cool thing,
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:or We do this really cool thing.
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:Everybody else is charging this
much, so I'll charge 10% less.
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:And that's how they come
up with their price.
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:And product-based businesses tend to go.
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:We make this really cool thing,
or I make this really cool
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:thing, it costs me this much.
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:Let me add 10% margin
and that'll be my price.
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:Both of these thought processes
leave the customer out of.
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:The equation.
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:So when they're setting their prices, they
haven't even thought about the customer
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:and what the customer could really use.
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:They haven't thought about the value, they
haven't thought about willingness to pay.
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:They're just kind of, you know, they're
using some aspects of price setting.
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:They're important, but the
ones that are most important.
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:Important they're ignoring.
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:And that tells me that they also probably
do not understand how their customers
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:are making buying decisions because if
they haven't included the customer in the
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:thought process, how could they possibly?
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:So that's another challenge because
if you don't understand their customer
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:and how they make buying decisions,
you don't know what might actually
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:trigger them to buy something.
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:Now the fourth challenge that people
have is they underestimate or they
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:completely ignore the impact of how
you present prices and how you present
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:a price can make all the difference
actually in price acceptance.
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:It's very important and there are
some nuances there, and the more
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:that you understand them are aware.
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:And are aware of them, the more that you
can use them effectively in your business.
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:The last challenge that people
people have here is overcomplicating
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:and confusing buyers.
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:I see this quite often.
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:Sometimes we think, okay, the more
we throw at them the more likelihood
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:there is that one thing will stick.
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:And this is really a, a bad way to go
about presenting prices to customers.
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:Customers are easily overwhelmed
when they're making decisions and.
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:If they feel overwhelmed, then chances
are they will go look somewhere else where
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:the decision can be made more easily.
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:We as consumers, as people making
purchases, we're easily fatigued,
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:let's say, when it comes to decision
making, and so you actually want to
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:present the right amount of information.
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:In a simple way in order to help customers
easily come to a decision for themselves.
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:So those are five challenges
that people have when it comes
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:to the psychology of pricing.
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:Let me say one more thing about
overcomplicating and confusing.
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:So I think, last time I looked,
there's, I don't know, like 76
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:different pricing psychology tactics.
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:I'm sure it's more by now, but
there's lots and lots of them, and
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:you're not gonna go and use them all.
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:If you try to use too many of
them, you actually will end up.
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:Creating more confusion and
hesitation in your customers,
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:you'll make it more complicated for
them to make the right decisions.
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:So when we look at using pricing
psychology tactics in our pricing, we
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:want to be selective so that we use
the right things in the right way at
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:the right time in order to make that
buying decision process easier for the
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:clients, but also easy for us to manage.
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:So let's look at five tips or
tactics, if you will, that you can
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:start using to help yourself in
terms of the pricing Psychology I.
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:And the one of the first tactics
that is almost universal is what
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:we call anchoring and anchors.
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:Using anchors is a great way to
sort of prime people's minds or
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:prime the client's brains for
seeing your price and anchoring.
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:Basically, what the studies have
shown is that if you introduce
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:a number higher than your price.
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:Prior to delivering the price
and that number is higher, it can
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:make your price seem lower, right?
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:An example of this that I, you know,
quite often when I am coaching with
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:clients, I'll say, you know, what is the
easiest way to sell a 5,000 frank offer?
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:And they look at me a little
cross-eyed and I say, put it next
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:to a 15,000 frank offer, right?
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:Or dollar a year.
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:It doesn't matter the currency.
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:But if you, you know, simply by adding
that extra higher priced offer, you make
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:the perception of the original offer.
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:Seem less expensive to the customer.
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:Now, it doesn't have to be a
price that you used to anchor it.
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:You know, if you have some copy or a
big heading on the top of your landing
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:page, you can use some numbers in
the copy there to also help anchor.
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:So there's different ways to use
anchoring, but it's important.
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:It's equally important for you to be aware
that if you have a really small number.
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:In front of your price, then it
can have the opposite impact.
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:Then it makes your price
look very expensive.
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:So even if you aren't going to use
it proactively, you want to make
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:sure that you aren't doing using the
converse by accident and inflating
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:or making your prices seem inflated
compared to what they really are.
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:So anchoring can be a very effective tool.
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:This is also why quite often you'll
see people have, you know, a really
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:large offer with a very high price.
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:Now, they may, they may
never sell that big offer.
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:They might if somebody really wanted it,
but sometimes they have it there also
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:simply for the purposes of anchoring.
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:And that's not always the case, but
sometimes that can be effective.
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:The sec.
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:Second tip I'd like to use here
is, you know, I talked about
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:this a little bit earlier, but
it's to use these wisely, right?
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:So charm pricing, that was when
I was talking earlier about I.
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:You know, using 99 at
the end of your prices.
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:Now that can be very effective
in certain retail industries.
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:So where you see that most effective is
in re the retail business where people
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:are trying to move a lot of inventory
fast and their consumers are generally
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:looking for the lowest price, right?
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:So 9 99 a.
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:You know, in our brains, the way
our brains process information
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:is cheaper than a thousand.
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:And so people would be more likely
to, to buy that, buy something at
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:9 99 than they would at a hundred.
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:For example.
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:I.
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:But if you are a consulting business and
you're selling your consulting services
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:and you're adding nines onto the ends,
it really doesn't quite fit right.
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:And so you have to be careful of this.
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:In fact, the other day,
a colleague of mine was.
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:Commenting on the price
for a coworking space.
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:And she goes, you know, their price
is like 23 Franks and 85 robin which
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:that's in, in Switzerland here.
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:And they're like, why?
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:You know, why would a coworking
office have a price that precise?
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:It seemed.
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:Odd, it seemed out of order.
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:That's something you would
see in a different industry
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:or in a different context.
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:And we both know this coworking
place and we know, you know, they're
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:not trying to, you know, attract.
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:Super cost sensitive people.
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:They actually have a service.
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:Is it a value?
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:And it just didn't align with that
business and what we know about them.
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:And you know, she kind of had this
like stinky cheese face when she
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:said it because it just didn't fit.
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:So you want to use these toxics
wisely in your business, and that's.
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:Probably one of the most important things.
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:It should align with what your customers
expect and what fits with your brand
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:and the values of your business.
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:Now for most service-based businesses,
not all, but for many, you're not
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:trying to be a bro a low price leader.
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:So it's important that you frame your
prices for value and not for cost.
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:So you want to focus on the outcomes
that your services bring, not.
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:On the number of hours they have with
you or on the different mo modalities.
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:If you're a coach, let's say
you have different modalities of
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:working, the value isn't that you
can bring these modalities to people.
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:The value is in what they get out of using
them, and you are experience with them.
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:And so you need to be able to
take that beyond these benefits
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:to concrete, quantifiable value.
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:How do you help them save time?
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:How do you help them save money?
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:How do you help them reduce
risk, but quantify those things?
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:It's beyond deliverables, even
deliverables the number of
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:sessions, those types of things,
and the way that I, you know.
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:Bundle that you know, in terms of what
they are, I call those logistics and
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:people don't come to you for logistics.
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:They come for you.
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:What they can get out of, you know,
that program that you have or that
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:consulting process that you use.
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:And so you really want to.
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:Focus on what those things bring
in a quantifiable sense, and that's
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:what we mean by framing something
for value as opposed to cost.
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:When you're talking and focused
on the number of sessions, you're
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:focusing yourself and your customer.
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:On costs.
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:They're thinking this number of hours
at this rate, that's a cost to me.
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:So that's why you want to shift
it to what they're going to gain.
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:I'm going to gain back five hours a week
of my life, or I'm going to gain a job,
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:you know, two months earlier than I would
if I tried to do this all on my own.
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:So frame for value, not for cost.
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:People buy the results that they
expect to get, not just the hours.
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:So the fourth tip here is that simplicity
cells the simpler you can make it for
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:people to make a decision, the much.
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:You increase the likelihood that
they will choose to work with you.
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:So you want to avoid a lot of options.
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:Earlier last year I had a, a client
and she said, oh, can I send you my
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:new land, my pricing page, my new
page, and can you gimme some feedback?
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:And I said, sure, send it to me.
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:So she did.
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:And, and I opened it up and I scrolled
and I scrolled some more, and I
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:scrolled some more, and I scrolled.
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:I scrolled some more and it was like
she had put her entire price list
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:on one landing page and it went on.
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:I, I felt like I was scrolling forever.
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:And as a customer, I mean, even if
I go to a restaurant you know, my
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:ability to choose something easily
on a menu is directly proportional
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:to how much there is on that menu.
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:And when I visit the US,
sometimes I get really just like.
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:In decision overload because there's
just too many options on the menu.
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:And it's similar with your
landing page or your offers.
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:I saw this even this week that,
you know, a customer, they had
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:a really looked at first glance,
like a relatively simple summary of
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:their pricing on two slides, right?
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:But when I started doing the
math of how many different.
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:Options there were for a customer.
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:Between those two pages,
it was well over 20.
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:And presenting a client with, for
consulting with 20 different options
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:is gonna be really hard for them to
understand where to put themselves.
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:So simplicity sells and you want to avoid
having lots of options and you know.
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:Having to explain too much.
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:Keep it simple first, you know,
from your conversation, try to
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:understand what it is that they need.
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:Then present them with one or
two offers and let them say, yes,
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:that's what we need, or, no, we'd
like this, or can we do that?
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:Then you can always bring in.
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:The next level of offer or go down
a level and offer rather than just
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:plopping everything in front of them.
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:That's kind of like the lazy man's way
of selling, but unfortunately it's also a
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:very ineffective way of doing it as well.
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:So now the fifth tip or tool I
have here when it comes to pricing
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:psychology is use social proof.
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:Now, and you've know this, I know
you already know this, but it bears
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:repeating because, you know, we like to
see the results that other people get.
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:That gives us.
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:Certain level of comfort that we're
about to spend our money wisely.
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:Right?
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:And seeing that others have
made that investment and that
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:they've gotten the results that.
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:You know, we as a customer are
seeking, can make a significant
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:impact on what people decide to do.
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:So use social proof, use
it in in different ways.
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:There's, you know, lots of different
contexts in which you can bring
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:that into a discussion or bring
that into your marketing strategy.
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:Don't be shy about using it.
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:If people have gotten the results,
have them share those results
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:with other people or get their
permission for you to share them.
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:That's also important when you're
using testimonials, recommendations
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:to make sure or to ensure that you.
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:Get their permission for that.
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:But it's very important to utilize
that social proof in any pricing
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:strategy because it will help you.
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:You can also use business cases.
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:There's another form of social proof if
you have a business case from a client.
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:And you know, if you didn't get.
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:Permission to use their name with it.
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:You may still be able to use
it without sharing their name
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:or revealing who they are.
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:I have, you know, some clients who
don't want their clients to know
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:that they've been working on their
pricing and the way they have.
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:So there are, the important thing here
is that you take the opportunity to
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:use it and you use it purposefully.
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:Now one caveat I'd like to add when I talk
about these, you know, aspect of pricing
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:psychology over the years, people have
often said to me I don't want to use this.
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:It feels manipulative in
some way, and I don't feel.
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:It is manipulative.
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:It depends on your intention, right?
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:If you're using social proof, but
those aren't things that people have
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:actually said about working with you or
those results, or if you're utilizing
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:something with the wrong intentions
behind it, then I would agree with you.
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:But what's more important is that if you
don't understand these tactics and you.
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:Inadvertently or accidentally do
something, and it makes it harder for your
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:customers or harder for you than you're
doing them and yourself a disservice.
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:So even if you choose not to use
some of these actively, make sure
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:that you understand them so that you
don't inadvertently, inadvertently
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:use them in the wrong way.
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:I like to wrap this episode up.
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:With a small challenge.
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:So I suggest that you take 10
minutes this week or 15 minutes
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:to look at one of your offers and
answer three questions about it.
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:So one is your pricing,
sending the right signals.
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:So take a step back
and look at that offer.
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:Look at the price in relation to
that offer, and ask yourself, what is
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:this really communicating to people?
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:Is the offer structured in a
way that makes it reflect the
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:value that you really deliver?
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:So those are my, that's my challenge.
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:Those are three questions
you can ask yourself.
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:I'd like to wrap this up by saying.
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:Now that you know about how your
customers can perceive your price
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:and what types of things your prices
might actually be communicating to
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:them, it's important that you use that
information effectively in your business.
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:The next episode.
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:Part two of pricing, and psychology.
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:We'll be diving into the other side
of pricing psychology, what I call the
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:internal side, and whether you're a
one person business or a 500,000 person
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:business, the internal aspect of pricing
can be just as challenging as the external
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:side, so we wouldn't want to miss that.
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:I hope to see you in the next episode.
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:That's all for today.
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:I wish you a great day, and
as always, enjoy pricing.
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:Thank you for listening to this episode of
Live with The Pricing Lady, the podcast.
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:If you enjoyed the episode, rate,
review, and subscribe to it, then share
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:it with your friends and colleagues.
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:I love hearing back from you listeners.
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:If you've got comments, questions, or
topic ideas, go on over to thepricinglady.
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:com and contact me there.
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:Not sure where to start when it comes
to improving pricing and profits?
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:At ThePricingLady.
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:com you can download a copy of my
Self Assessment Pricing Scorecard.
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:Find out where it's going well
and where you can begin improving.
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:Or just simply book a
discovery call with me.
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:There we can discuss what's up
with pricing in your business and
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:how I might be able to help you.