Most marketers have learned the basics of pricing strategy in their business classes—cost-plus pricing, penetrative pricing, premium pricing, price skimming, and the like.
Each was a solid theory on how to manage the tricky question of pricing one's wares in varying market conditions. They worked well, too, at a time when prices were not compared with the click of a button or the swipe of a finger.
Pricing has moved with the times
Smartphones, tablets, even desktops have forced marketers to move on from age-old pricing models. They have had to dig deeper into buyers' thought process to understand what persuades buyers.
It's not enough to be the cheapest anymore. Your consumers need to think they're getting an awesome deal by buying your product. That "deal" might be in straight-out monetary terms, or based on prestige-of-ownership or the fear of missing out—or a variety of hidden persuaders.
Sometimes factors as innocuous as the font size of the price tag or the color in which the price is mentioned, or even the presence/absence of the dollar sign, can mean the difference between a sale and a missed opportunity.
Pricing tools (like Wiser) are now widely used to test the impact of minute price variations on consumer demand and conversions. Analyzing how users respond to various elements of a pricing strategy helps brands zero in on the best combination that works for the consumer and brand alike.
This article will explore some creative ways of pricing products for the digital age, backed by some sound research and practical applications.
1. Men see red when they shop
Most stores don't put too much effort into color-coding their price tags. But the ones that do have seen a distinct difference in how men and women respond to color.
Men responded positively to prices that were advertised in red, perceiving them to be lower than prices printed in black, according to a study conducted by Dr. Rajneesh Suri and his team from Drexel University's LeBow College of Business in 2013. The use of red made men feel positive and made them believe that they were being offered a good deal.
Interestingly, female shoppers seemed to not be affected by a change in the color of price tags. Women tended to process price data more deeply, recollect old prices, and compare them minutely, irrespective of the color they were printed in.
The findings were confirmed by another independent study published in the Journal of Retailing. That study consisted of three experiments in which respondents looked at price tags and ads in different colors and scored them with respect to how much they would save on each item. In all three experiments, male respondents thought they would save as much as 85% more with items that carried red price tags than those which had black tags.
The bottom line: if you're selling men's wear or gadgets aimed at a male target audience, use red for your price data!
2. Size does matter
Marketers have a tendency to go bigger, bolder, brighter with everything that they work on. However, the "bigger is better" philosophy does not apply in all cases.
Consumers are sensitive to the text size of discounted prices on price tags and product advertisements, according to researchers Keith Coulter and Robin Coulter from Clark University and the University of Connecticut, respectively. They found that consumers perceive price to be significantly lower when the reduced price is printed in a smaller font than that of the original price.
The logic is that the size of the text acts as a guideline to the users' brain: The smaller font for the discounted price tells them that the new price is reduced and much lower than the original price. It helps push the users into taking action, telling them that this is a great deal that must not be passed up.
