1642: How To Use Consumer Psychology And Pricing Mind Games To Increase Sales by Steve Chou of My Wife Quit Her Job

[00:00:00] This is Optimal Work Daily. How To Use Consumer Psychology And Pricing Mind Games To Increase Sales by Steve Chou of MyWife Quit Her Job dot com. Pricing your products effectively isn't just about assigning a set of numbers to items that you sell, it's also about managing perceptions and understanding consumer psychology.

[00:00:20] A common misconception is that customers shop primarily based on logical thinking. Especially with the advent of the internet and instant price comparisons, you might think that most purchasing decisions are made based on numbers and hard data. Make Your Customer Forget About The Percentages Prices are rarely evaluated in absolute terms. Instead, most people evaluate discounts based on the percentage savings off the overall retail price.

[00:00:47] To illustrate this fact, let's say you're shopping at a store that sells a particular item for $20. Would you drive to a different store 10 minutes away if that other store sold the same item for $5? My Asian blood would force me to do so. Now, in a different example, let's say the item cost $10,000. Would you bother making the same trip if the item was $9,985 at the other store? The decision becomes a little more difficult.

[00:01:13] You are saving $15 in both cases, yet driving your car to a store 10 minutes away feels more worthwhile when you are saving 75% than when you are saving a fraction of a percent. This discrepancy manifests itself because our perceptions of value are heavily influenced by percentages. Why is this important? It's valuable information because it tells you that you shouldn't even bother offering a discount if it's going to be perceived as insignificant to the customer.

[00:01:40] Instead of offering that small discount, give away an item for free instead or offer something else of value that is hard to quantify. A good example of this is when you buy a new car. Instead of giving you a couple of hundred bucks in discounts, which you won't perceive as very much, car dealers will make you feel better about your purchase by offering you free financing or free servicing of your car for a set period. The discounts are most likely equivalent either way, but seem more attractive because they are presented to you differently.

[00:02:09] Appeal to your customer in a good light A customer is likely to pay more for an item if they believe that they are purchasing the product from a company that is fundamentally perceived as good. For example, if your store donates a portion of the proceeds to charity, a customer will be more inclined to shop with you even if you have slightly higher prices.

[00:02:27] I'm seeing a lot of companies go green these days. Going green carries the connotation that a company really cares about the environment. Call me a cynic, but I personally think that many companies are going green to extract higher prices from customers. In any case, the gist of it is that if you can project an aura of compassion or good from your company, you will be able to extract higher pricing. This concept carries a very close analogy to establishing a good brand for your business. Provide different reference points

[00:02:57] Ever notice why there's always a wide variety of products for sale that span an entire gamut of prices? It's because we as customers are always trying to establish what we consider a reasonable reference price for a particular product. By skewing the prices of different styles of the same item, stores can heavily influence customers to purchase a more expensive product. This is best illustrated with an example.

[00:03:21] A study was conducted where two sets of customers were asked to select between models of flat panel television sets. One set of customers were asked to choose between two television sets priced at $700 and $1,000 respectively.

[00:03:34] The results of the study showed that customers were more likely to purchase the $1,000 model when presented with three choices rather than two. The majority of customers will stick to the middle of the road. By introducing additional high priced items to your mix, you can effectively push a customer to spend more money because their perceptions of the median will be skewed.

[00:04:01] Another technique that works well is to introduce a really expensive item and provide a deep discount off the overinflated price. 50% off of an item that retails for $100 sounds much more appealing than 10% off of an item retailing for $55. If you are selling products that don't have an established price, this technique can heavily sway buyers to make a purchase. Frame your incentive in a positive light. Avoid negativity when presenting your prices.

[00:04:29] Always present your product prices in terms of gains and not losses. Frame your prices in the most positive light possible. What exactly does this mean? Well, let's illustrate with an example. Which of these deals sounds better to you? Item A sells for $1,200 with an instant cash rebate of $200. Item B sells for $800 with an additional courtesy fee of $200. The deal for item A sounds infinitely more appealing to me.

[00:04:57] I personally detest getting nickel and dimed at a store. I hate being presented with a low price only to be beset with hidden fees at checkout. It's much better to present a higher initial price with incentives than it is to offer a lower price with an additional fee. Always present your prices in terms of gains and your customer will always feel better about the purchase. Taking advantage of consumer behavior. The tactics I just presented are by no means a replacement for having a strong, unique selling proposition for your online store.

[00:05:27] After all, if you are selling the same stuff that everyone else is, then customers will comparison shop and these strategies won't matter. However, if you sell unique products and you want to increase your profit margins, then the tactics mentioned in this post are great ways to do so in a more subtle fashion. Make sure you think twice and consider how you structure a promotion before it goes live to maximize your sales.

[00:05:48] You just listened to the post titled, How to Use Consumer Psychology and Pricing Mind Games to Increase Sales by Steve Chu of MyWifeQuitHerJob.com. And thank you to Steve. When his wife became pregnant and she planned to stay home with a baby, they knew that they were going to need to find more income. So they started a little online store called Bumblebee Linens.

[00:06:13] Well, in just a year, they were able to replace his wife's salary of $100,000 per year. And they started MyWifeQuitHerJob to document it all, including income reports. So eventually, Steve was able to leave his job too. And since then, he started the Sellers Summit. And you can learn more about that at SellersSummit.com. He's also gone on to do videos and you can find his work on YouTube and a lot more. So come by MyWifeQuitHerJob.com to check it all out. And thanks again to Steve for letting us share his work today.

[00:06:43] But that's going to do it for this episode. I thank you so much for being here with me and subscribing to the show. And hope you're having a great start to your week as well. And I'll see you back here tomorrow, where your optimal life awaits.