Stop Playing Games With My Money!

Did the title get you here? Yeah – it was a good one and it's one of the strategies we're going to discuss below. Today we're going to briefly dive into "The Mind Games of Money" and decode the psychology of pricing. 

We're constantly asked questions about pricing – which is why we talk about it every 6-8 weeks. This time we're going to dive deeper into one of our unconventional approaches on pricing, because beneath the surface of numbers and decimal points lies a fascinating world of psychology that can make or break a sale.

*To make sure we didn't overload you with information we limited our list to the three below.

If you want the full list and a one-time, 30min, complimentary consultation on how to implement one of these strategies in your business - text "strategy" to 888.572.2017.

The Decoy Effect: How Comparison Shapes Choice

Ever wonder why companies often offer three pricing tiers? It's not just to cater to different budgets—it's to guide your choice. 

The Economist magazine once offered three subscription options:

• Web-only subscription for $59 
• Print-only subscription for $127 
• Web and print subscription for $127 

At first glance, option 2 seems pointless. Who would choose print-only when they could get web and print for the same price? But here's the kicker: the presence of option 2 made option 3 seem like a bargain, significantly boosting its sales. 

This principle, known as the "decoy effect," is used widely. Netflix, for instance, uses a three-tier pricing strategy that makes its standard plan seem like the best value, nudging customers away from the basic plan. 

Anchoring and Framing: The Power of Context

The way a price is presented can be just as important as the price itself. This is where anchoring comes into play. 

In a study published in the Journal of Marketing Research, researchers found that exposing consumers to a high anchor price for a product increased their willingness to pay by up to 50%. 

Apple masterfully employs this technique. When they launch a new iPhone, they often introduce the premium model first, anchoring a high price in consumers' minds. This makes the standard model seem like a bargain in comparison, even though it's still a premium-priced product. 

Charm Pricing: More Than Just Numbers

A study published in Quantitative Marketing and Economics found that using a $9 or $7 ending increased demand by more than 24% compared to a nearby price point. This phenomenon, known as "charm pricing," is so powerful that it even works when the 9 or 7-ending price is higher than a nearby round number.

While these psychological pricing techniques can be powerful tools, it's crucial to use them ethically. Manipulative pricing practices can damage trust and harm long-term customer relationships. 

The key is to use these insights to better communicate your value, not to deceive or manipulate customers.

Understanding these psychological principles - as a barber - gives you a powerful toolset and an advantage in your industry. Brainstorm on which of the strategies we discussed best fits your current business model.

Remember, the goal isn't to trick customers into spending more, but to present your pricing in a way that accurately reflects the value you offer.

Feel like you know were to go from here, but you'd feel more comfortable with a personalized plan of action? That's why we're here! Text "strategy" to 888.572.2017.