This post was authored by Cansulta’s recommended WordPress Developer marketplace, Codeable.
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Online businesses struggle enough with SEO, marketplace competitors, and visibility without adding another layer of complexity. The worst thing an online store can do is compete with itself. If you feel like your online store – or services – are floating aimlessly without direction it’s time to anchor down your prices.
First and Foremost: What Is a Product’s Value?
The tricky thing with pricing your products and services is communicating both their inherent and market value. You may have heard the joke about the repairman who sent a $200 bill for a 30-second bang on the machine with a hammer. How was that worth $200? The repairman says it will be $5 for the 30 seconds it took to hit it with a hammer and $195 to know where to hit it with a hammer.
Digital products and services are hard to quantify, so they’re hard to value. Communicating this value properly so that you don’t undercharge means that you need to understand the psychology of the buyer as well as your own costs.
First, you have to decide what you really want to sell – and that, my friend, takes the exploration of both your financial books, market opportunity, and personal desires.
Now, What Is Price Anchoring?
Price anchoring is a psychological tactic to give a consumer context that one product is better and less expensive than another. This can be in comparison to other products or services or a comparison against another retailer or service provider.
If your WordPress agency really wants to sell a $500/month maintenance and website contract, then create a plan above and below. That helps people see the context – which helps narrow in on the value. You can then choose the one you’d most like to sell and list it first or most prominently.
Sometimes when buying a watch, they may choose Movado, but wait, that Versace Versus watch is $40 less expensive? Wow. Is the Versace a better watch? Perhaps it is, and perhaps it’s not. Although, it’s a brand that has more recognition for prestige (value). This is why there are often consumer-friendly tiers for luxury brands. It’s about perceived value for the price.
“Price anchoring is fixing a price point that customers can refer to when making decisions.”– Larissa Sielichoff
So without proper context, your products may seem expensive. Is your chocolate expensive? In comparison to generic chocolate bars, perhaps. Is it expensive when you consider the right vertical? No. The right use case (sculpture)? No. All pricing needs context.
How Does Price Anchoring Help With Decision Fatigue?
Before you read this article, how many decisions did you have to make today? You had to decide what time to set your alarm – unless you allowed Siri to decide that for you. Besides the alarm setting, you had to decide what to wear (undergarments, tops, bottoms, shoes, socks, if applicable, outerwear).
Are you taking a shower today? Are you washing your hair? Will you drink coffee at home or stop at Starbucks? Are you working from your home office or driving in? So many decisions are made before you even start your work day!
Now that you’re off work, you have even more personal decisions to make. What about business decisions, though?
“Price anchoring psychologically shifts your mind to a different decision. Instead of thinking about whether or not you want apple juice you are thinking about if you want 1 bottle or 3 bottles.”– Nathan Allotey
How Do You Incorporate Price Anchoring Into Your Business?
For many freelancers, price anchoring isn’t used, or it’s used incorrectly. Think of creating three packages. Now, which one do you want to sell the most of? If you said the highest price, that’s one strategy but also think of how much work the most expensive package takes. You want a few of those customers, sure, but you’ll probably want more of the moderately priced package sales. You know what they say, a fast nickel beats a slow dime. So you use price anchoring to drive sales to the suggested product or service.
Furthermore, AB Tasty suggests ordering your pricing with the most expensive plan first. You can always A/B Test your price anchoring, but the point is that it helps the consumer get a frame of reference.
“Participants spent more time reading about expensive plans and looked at the expensive plans quickly when they were placed on the left side of the table, listed first.”– Speero.com
Why Does Your E-Commerce Business Need to Use Price Anchoring?
If your products and services are listed without any context, they’re just floating aimlessly. You may notice that people question your prices which may cause you to even doubt your own pricing strategy. Don’t worry though, it happens to the best of us. Maybe your physical products need a comparison to other brands – but the risk of that is sending them elsewhere. That’s true, yet if the customer doesn’t value your 100% organic bamboo fiber tee, then let them buy the $7.47 shirt at Walmart. They’re not your customer.
Price anchoring can be done per vertical, per product, and per season. Even a sale uses price anchoring. For example, it was $197 but for a limited time it’s now $84. Discounting bundles also serve as a loss leader for a bigger package. If you buy ten months, I’ll give you two for free* – you get the point.
CANSULTA – E-Commerce Expertise Within Reach™
This article may have raised more questions than it answered – which is a good thing because now you’re thinking. The next step is connecting with an E-Commerce Expert.
Chatting with an expert consultant about your E-Commerce’s pricing strategy is within your reach. We’re the bridge that brings Expertise Within Reach™ so you can focus on building your online business and not finding and managing consultants on your own – or paying for some other company’s overhead. Get started with an E-Commerce expert today.